Long Term Value is a Short Term Issue



Long Term Value is a Short Term Issue

Authors

Rupert Ingham, Grant Thornton, Steven McMahon, Transport Scotland, Suzanne Moir, DWF

Description

Incentivising long term value generation in bids for public transport operating contracts is an important and realistic objective for public sector authorities.

Abstract

Incentivising long term savings in bids for public transport operating contracts is an important and realistic objective for public sector authorities.

Price is usually the most important criteria for selecting between compliant bidders for public transport operating contracts. However, initiatives to minimise price within a limited contract term are not necessarily conducive to minimising the cost to the public purse of operating the service over the longer term. Public sector authorities wishing to incentivise bidders to consider longer term value and cost efficiency may recognise that some traditional evaluation methodologies do not sufficiently incentivise bidders to deliver long term value beyond the contract term.

Between 2012 and 2014, Transport Scotland carried out the Scottish Government’s largest single procurement to re-let the operating franchise for the entire country’s passenger rail operations. The long term value for money of rail operations was an important policy objective to be reflected in the procurement strategy. It was explicitly addressed by the Invitation to Tender and evaluation methodology.

The paper provides an analysis of the challenge itself, surveys the key questions that arose during development and application of the ScotRail approach and reflects upon these in a wider context. It also argues that longer term value is an important and realistic objective for public sector authorities to promote when procuring public transport operating contracts and considers how the principles established through the ScotRail experience could be taken forward by other authorities wishing to do so. As an additional aspect, it also considers how features of industry structure may help or hinder.

The authors include the lead technical and legal advisors who developed the approach used in Scotland, as well as representatives of Transport Scotland, who led development and translation of rail policy manifest in the ScotRail Invitation to Tender.

Publisher

Association for European Transport