Current evidence suggests that private firms can operate urban transit service at about one-half to two-thirds the costs experienced by typical publicly owned regional authorities. Competition appears to be critical in disciplining labor and management, and hence a means of achieving such low cost is to have private firms bid competitively for contracts to operate service. A public agency would retain control over what service is provided and act as a service sponsor engaged in planning, finance, and contracting with private service operators. Contracting service to private firms has already begun in many metropolitan areas; in smaller systems all services are often contracted, and in larger systems contracting has been used for services for which the cost savings are expected to be especially large.

Economics of private operator service

The continuing increase in public transit costs must be checked in order for transit to control deficits and thereby maintain affordable fares, usable service levels and ridership. There is no surplus of public funding for transit; urban areas are, on the contrary, characterized by great mobility needs. Deficit control is the most critical issue facing public transportation today. Gaining control of deficits requires substantial changes. Public transit must become more open to innovative and cost effective service alternatives, and less committed to the product forms and delivery mechanisms of the present, or its decline will continue. Private transportation operators are characterized by low costs, and are being effectively used in public transportation service in many localities. The savings achieved through contracting are substantial. Through contracting, public transit agencies can reduce deficits, while continuing to provide service to the community. The public, which pays the cost in fares, taxes and service reductions, is entitled to obtain full value for that cost. It is entitled to an unencumbered consideration of cost effective transit alternatives, including service contracting.

W Cox

Papers

Deficit control through service contracting