Follow us on Twitter

What is PTOM?

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

PTOM Summary

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.

PTOM Units

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.

21 comments to What is PTOM?

  • Mr Anderson

    How can the Devonport ferry be an exempt service when it is so obviously a core part of the PT network? What if AT want better all day frequencies on the Devonport route? How will that be possible if its exempt status means it’s basically beyond any of their influence?

    • Harvey Specter

      They dont get exclusivity so they could use that as a negotiating point?

      • Watch Fullers run at high speed to complain to the government at any suggestion of AT or anyone else doing a Devonport service that might undermine them.

        • Harvey Specter

          Aren’t they foreign owned?

          Government should leave it to the market/AT to decided. Having said that AT shouldn’t be stupid about it.

        • Greg N

          I think that AT should contract in some alternative operator on the Devonport ferry run to keep Fullers honest.

          Fullers can always “Commercialise” the service under PTOM, which means they fall under the AT control banner if they feel threatened but get exclusivity in return.

          Let them complain if they feel hard done by but the PTOM rules are pretty clear and set by The Govt.

          Fullers can chose (like all other PT operators in NZ) to be either: outside the tent getting rained on – or inside the tent keeping dry, but they can’t do both.
          To allow this will put all other PT operators at a disadvantage (commercially, and ethically).
          So it would be a very slippery slope for any Govt that allowed Fullers special rights here.

  • Keir

    Why is a “compromise” that would have been seen as wildly radical thirty years ago a fairly decent? Don’t misunderstand, I’m all for better contracting by councils to get value for money, and in the short run this is a good move, I’m sure, but it still doesn’t fix the fundamental brokenness of privatising core public services.

    • I think the horse has bolted on the private vs public ownership argument. I think there are much more important things to solve before tackling the issue of who should own the buses.

      • Keir

        That’s a bit of a circular response isn’t it? This is a good compromise because it’s a good compromise?

        (Also, uh, I would quibble about “who owns the buses” being a minor matter; certainly compared to the precise contractual relationships involved in outsourcing.)

  • Publius

    MattL, can you elaborate more on revenue sharing?

    • Harvey Specter

      Also, those contracts are very long – 6-12 years. Who bears the risk if the demand falls? Can the bus companies opt out without penalties or is the a mechanism to raise the subsidy?

    • My understanding is that with HOP, AT will own the float so all of the fare revenue will be going to them along with all of the patronage data. For commercially run services AT would then pass on the appropriate revenue however for the subsidised services, AT would pay for them like a gross contract i.e. pay the costs of providing it. The revenue sharing relates to things like KPI’s so if a unit performs better than expected e.g. higher patronage, then the AT will share some of that extra revenue with the operator. It is intended as an incentive for the bus companies to provide more than just the minimum level of service

  • How can we [or Brewer, or Kaye] ever expect the ferries to play a significant role in the transport mix if their fares are not integrated? They will remain an expensive lifestyle option not meaningful contributors to movement and productivity.

  • Many of those numbers coincide with the old trolley bus route numbers.

    1 was Herne Bay
    2 was Ponsonby Rd

    (the link buses go along parts of those former trolley routes)

    3 was Richmond Rd
    6 was Avondale (via New North Road)
    7 was Owairaka (via Sandringham Rd)
    8 was Dominion Road
    9 was Three Kings (via Mt Eden Rd)
    10 was Onehunga (via Manukau Rd)
    12 was Meadowbank (via Remuera Rd)

    Spooky!

  • Oh and 4 was Westmere (which went along Great North Rd.

    5 (missing from the series above) was Pt Chevalier (also via Gt Nth Rd)

  • Given that the numbers up to 12 match the long-gone route numbers of the trolley buses that plied the same roads, they certainly aren’t arbitrary. The more I think of it, the more I am certain this is deliberate and done by someone who remembers those numbers!

    Even the absence of 11 in the series looks deliberate — 11 was to have been the Victoria Ave trolley bus, but Victoria Ave ended up not being wired for trolleys and became the 11 diesel bus.

  • I agree that it is crazy that some of those services should be exempt, especially the Devonport Ferry. I feel Airbus should really be included as well.

  • Dave Smith

    The whole funding system needs review. Did not realise the Stagecoach founders have been involved with H&E since 2008.

    http://www.stuff.co.nz/waikato-times/business/8547075/Secrecy-hides-transport-flaws-from-scrutiny

Leave a Reply