Institutional Organization and Performance Contract: the Experience of Dutch Passenger Railways

Institutional Organization and Performance Contract: the Experience of Dutch Passenger Railways


F Cheung, Ministry of Transport (AVV), NL



Passenger railway systems in many European countries are undergoing institutional changes to compile with the directives from the Commission of the European Union as well as to improve their competitive power in the face of growing challenge from other transport modes. In the case of the Netherlands, the Ministry of Transport has chosen to use contractual agreements to improve Netherlands Railway's operating efficiency and to ensure the customers are provided with improved services. It is also felt necessary to streamline the management structure and to change the institutional set-up as a means to reform the system.

On 21 September 2000, agreements were reached between the Dutch Ministry of Transport and Netherlands Railways in a Memorandum of Understanding on the outputs that could be expected. To ensure the agreed objectives would be achieved, the Minister had formulated a bonus-and-penalty system that would enhance the attainment of the performance targets. The two parties further agreed on 12 December 2000 that NS would have the exclusive right to operate the core railway network in the next 10 years.

Details of the agreement had been laid down and specified in the Provisional Performance Contract.

These intentions had been affected by a series of set-backs and the proposed institutional reorganisation had suffered from a lack of consensus regarding how best to reshape the relationships. The lack of clarity on the responsibilities and transparency on the duties between the rail authority, the infrastructure provider and the operating company had a negative effect on the effectiveness of the working relationship. The absence of instruments to enforce the contractual agreement led to the suspension of the bonus-and-malus agreement in 2002. The difficulties had led to a fundamental rethinking of the strategy and the introduction of new proposals to revitalise the rail services on the main routes.

As from 1 January 2003, a new organisation called Pro-Rail has taken over the responsibilities of the three task organisations. It is a separate company. New proposals have also been agreed between the Transport Ministry and Netherlands Railways with regards to what could be expected realistically from the operator. NS is required to present a Service Improvement Plan once every six months and the decision to offer NS exclusive concession for 10 years will be made in 2005 on the basis of steady improvement.

The paper will describe what lessons have been learnt from the practical experiences in the period since NS gained an independent status in 1995. At the same time, the new measures that have been proposed will be presented. The historical developments and the new undertakings will together provide a guide to other countries on the difficulties


Association for European Transport