The term PTOM has started to be bandied about quite a bit as one of the major changes associated with PT that is happening over the next few years. However many people might not know what it s or why it is important, so with this post I wanted to look a little closer at it. In short it is a new way of planning and contracting out public transport services. The history of how we have got to this point can be a bit long so here is the short version.
In the early 90’s changes in regulation saw most of the public bus companies privatised. The network was split up into commercial and contracted services and a lot of the responsibility for planning was turned over to the various bus companies. Commercial services existed where the bus companies could provide a run commercially however where the local authorities wanted to run services that were not under a commercial agreement, they had to provide subsidies to do so. That might sound logical but it quickly became a problem as explained by this cabinet paper on PTOM from October 2011.
At the moment, public transport services are delivered through a mixture of commercial and contracted services. It is up to operators to identify what services they wish to provide on a commercial basis (ie without public subsidy). A commercial service can be a single timetabled service running from one point to another (for example the 10.48 am from Smithville to the city). Regional councils then determine what other services are necessary to the urban public transport network. These services are then ‘contracted around’ the commercial services to fill service gaps.
The practice of registering single timetabled services as commercial has hampered regional councils’ ability to provide an integrated public transport network and achieve network efficiencies, as these services are not under contract with the regional council and do not have to conform to service standards or fare standards. The presence of commercial registrations has also arguably contributed to poor tender outcomes (on average just over one bid per tender in Auckland and Wellington) and higher prices than in regions where competition is more robust. This has led to increased tensions between regional councils and operators.
Bus operators being able to cherry pick the best routes and times for commercial services while leave the rest to be subsidised was a recipe for disaster. It resulted in far more subsidies being paid than would have been needed otherwise and there have even be suggestions that some companies deliberately gamed the system for their own financial benefit. The 2008 PTMA legalisation sought to change this by giving the regional councils more control. However many of the operators complained about it and as a result the government reviewed the legislation before it came into effect. The result is PTOM which stands for the Public Transport Operating Model and it was developed between central and local government officials as well as representatives from various PT operators. But what does PTOM do.
Well firstly it recognises that to get the best out of our PT networks, they need to be planned centrally, in the case of Auckland that role falls to Auckland Transport. Perhaps the key part of it though is what are termed ‘units’ which can be one or more routes that are operated under a single contract. An operator can still choose to run services commercially but crucially they can only do so across an entire unit which is required to include a full timetable of all services that AT want to run. This prevents operators from cherry picking only the very best services while leaving the rest to be subsidised.
The PTOM contracts can be issued either by a tender process or directly negotiated with the operator and a mix of the two methods will be used in Auckland. Interestingly the length of the contract will vary depending on how the contract is issued with those issued via the tender process lasting for 9 years while directly negotiated contracts only for 6 years. Units registered as fully commercial will also have a contract length of 9 years. One aspect that will be interesting to see is that the contracts are likely to include revenue sharing between AT and the operator. The intention is to design the contracts so in such a way as to encourage and reward better performance of from the operators.
Monitoring of performance is a key aspect being introduced as part of PTOM. The regional council (AT) will monitor patronage growth, subsidy levels, customer satisfaction and a range of other criteria for each PTOM unit. From there a performance score will be determined and all units will be ranked in an annual league table that will make it easy to see which units are performing the best. Over time the league tables will serve another function in helping to determine which units can be renegotiated directly or which units need to be put out to tender. It is not clear whether the league tables will released publicly but if they aren’t, we will be doing our best to get hold of them.
There are a couple of areas that might cause some concern however. The first is in an area known as exempt services. These are services not considered as part of the core PT network and as such don’t come under the various PTOM requirements such as having their fares regulated. In Auckland this includes the Airbus and many of the ferry services. The second is that as we transition to PTOM there will be some units that will be subject to a special transition contract term of 12 years to compensate operators for giving up their existing commercial routes. Not all units will have this but it serves as a reminder that this transition will take some time to fully complete.
Here is a summary of the various aspects of PTOM
And here is a high level look at all of the proposed PTOM units in Auckland, a full list of each route and what unit it belongs to is included in the RPTP. The plan is to roll out the new PTOM contracts as the new network is rolled out.
Lastly here are the registered exempt services.
- Waiheke ferry
- Devonport ferry
- Stanley Bay ferry
- Great Barrier Island ferry
- Kawau Island ferry
- Airbus Express
All up PTOM represents quite a big change in how we plan and manage our PT network. I know some people would like to see all services under a gross contract or even operated internally but given where we have come from, I think that this is a fairly decent compromise. Perhaps the most positive aspect is it should help to give us much better confidence that we are getting value for money out of our PT services.