Potential cost implications of contracting risks – the views of bus operators in South Africa

Abstract: In South Africa, like many countries internationally, public transport contracting costs are continuously being scrutinised in the light of tight economic circumstances. In designing public transport contracts it is important that an appropriate risk-share dispensation be considered to ensure that the relevant entity (the authority and/or operator) carries the risk that it is best suited to manage. Inappropriate risk-sharing arrangements can result in additional costs being factored into contract bids by operators thus increasing the overall cost of public transport for the authority. In addition, the design of the contract e.g. net cost versus gross cost (and associated risk apportionment) could have a bearing on the ultimate cost of the contract. This paper explores the risk views of 15 contracted bus operators representing 4950 buses in South Africa, based on their experiences of such contracts over several years of public transport contracting. The lessons learned from this research will assist contracting authorities in understanding how operators respond and view risks associated with various controllable and uncontrollable risks related to public transport contracting as it is the South African government’s intention to embark on the next round of public transport contracting in 2018