Competitive Tendering in the Netherlands: 6 Lessons from 6 Years of Tendering
W Veeneman, D van de Velde, Delft University of Technology, NL
Authorities in Europe tender out PT in various ways. A major issue is balancing strong agreements with and flexibility over the concession period. The paper shows how flexibility can be build into various forms of tendering and contracts.
Fixing flexibility: the right balance between open and closed tendering and contracting for public transport in Europe
In various countries in Europe public transport authorities are tendering out services. They use the power of the market (by choosing between several bids) and combine it with strong public influence (by developing public goals into a clear set of requirements). Various authorities set the requirements at different levels, from requirements developed as general demands on the services to a complete set prescribed vehicles, routes, and time tables. To those different levels of requirements ask for different contracting strategies, with net-cost contracts being more obvious when the operator has a lot of freedom to develop services and gross-cost contracts when the authority largely decides what services should be delivered.
In the Netherlands, national regulation leaves a lot of room for the 18 regional transport authorities to experiment with various forms of tendering and contracting. That has resulted in a landscape of various forms of tendering.
The Dutch regional transport authorities have discovered a tension between a solid tendering phase on the one hand and a solid concession phase on the other. When they develop their demands and contract in the tendering phase they feel the need for clear and uncompromising requirements. They feel this need to thwart possible strategic overbidding by the operators: it has to be crystal clear what services they are expected to offer during the concession period. The contract needs a closed character.
In the concession phase, after the concession is awarded to an operator, they start feeling the need for flexibility to keep the services in line with changing demands, political priorities, changing funds and new spatial development. The caveat is that, due to the strong competition, the operators have entered bids at low prices, which significantly reduces their ability to accommodate the changing whishes of the authority. In that case the contract really would need an open character.
Many transport authorities have been searching for a good balance between fixing the right services in the tendering phase and allowing flexibility during the concession phase. Many authorities learn a dear lesson when they tendered for a closed contract, and during the concession period desire changes to the services provided.
The paper answers four main questions, especially relevant for European transport authorities who are (preparing for the) tendering out pubic transport services. These questions are:
- What various forms of tendering do we see in Europe?
- What contracting strategies fit those forms?
- What balance do tendering and contracting strike in terms of fixing the agreements in the tendering phase and allowing for flexibility during the concession period?
- How can an unbalance between the two be repaired, based on examples we have seen?
This paper was developed from a report written late 2006 for the Dutch Knowledge Platform for Traffic and Transport. It presents a typology of various forms of tendering including the most obvious ways of contracting. The original report focused on the Dutch tendering practice; however the typology of tendering forms is extended and enriched to include the various tendering forms used throughout Europe.
Association for European Transport