Second bus contract: UK firm Go-Ahead gets the nod

SINGAPORE – Another British-based bus operator has clinched the second bus routes package put up by the Government for tender, beating seven rival bids with the lowest asking price that the Land Transport Authority (LTA) described today (Nov 23) as an “important decisive factor”.

The entry of Go-Ahead  — the largest bus operator in London which is making its first foray into Asia— would further shake up the bus industry and intensify the competition, joining fellow United Kingdom-based operator Tower Transit and local incumbents SBS Transit (SBST) and SMRT as the major players. Tower Transit had won in May the first package of bus routes awarded under the new bus contracting model. 

From the third quarter of next year, Go-Ahead will start running 25 services, including three new routes, in the Punggol and Pasir Ris areas for the next five years. It will also manage the Punggol and Pasir Ris bus interchanges, and the upcoming Loyang bus depot.
 
Go Ahead’s asking price of S$497.7 million for the Loyang package was the lowest by some margin – it was 6.5 per cent lower than homegrown Woodlands Transport Holdings’ second-lowest bid of S$532.5 million. 

While some analysts were sceptical about the operator’s ability to attract bus drivers and provide quality service, the company rejected such concerns. As London’s oldest bus operator, it is used to competing and offering attractive pay packages, and it would not be compromising on quality despite its lower bid price, Go Ahead’s representatives said. 

The firm had submitted the highest asking price - out of 11 bidders - for the tender of the first package of routes. Go-Ahead Chief Executive Officer David Brown said: “We have had longer to understand the market and risks, and therefore price accordingly. It’s no more than a learning curve, but we have been able to make sure we can still provide the quality that we are offering.” He added: “There are specifications set by the LTA... And we offer other things beyond that, so we have not compromised on quality.” 

Operators under the bus contracting model will be assessed annually on bus service reliability, punctuality of their first and last buses, and maintenance of bus operating assets. Those which meet LTA’s standards will receive an additional payment while those that do not will have its fees deducted. 

LTA chief executive Chew Men Leong said the quality of proposals submitted in this round were “so closely matched that price became an important decisive factor”. He said: “We saw the change and improvement in terms of quality (compared to the first round), and we are getting a better sensing in terms of the overall pricing required to run (bus packages).”

National University of Singapore transport researcher Lee Der Horng said he has “some very strong reservations” over Go-Ahead’s ability to offer attractive pay packages for its staff, including bus drivers. Nevertheless, Professor Lee noted that the company has a strong reputation and track record in London. “But it is still a bit too early for us to say they are able to transplant their successful experiences to Singapore,” he said. “Public transport, at the end of the day, is still something very localised.”

SIM University adjunct associate professor Park Byung-Joon said he was “surprised” by Go-Ahead’s asking price. “It was a huge change in position (from the first round)… If they want to offer attractive pay packages, they really have to find other ways to cut costs somewhere.” Noting that SMRT did not win the first contract despite submitting the lowest asking price, Dr Park felt the Government was serious about shaking up the industry with new entrants. Agreeing, transport economist Walter Theseira from the Nanyang Technological University said: “While foreign operators are not the only ones who can innovate, they have the freedom to propose new practices as they are unencumbered by legacy operations.”

SBST, which currently operates all 22 routes under the Loyang package, said it will work with the LTA, the National Transport Workers’ Union and Go-Ahead for a “smooth transition” of the routes.

Under the bus contracting model, three packages — making up about 20 per cent of routes — will be tendered out first. Mr Chew said details about the third bus package will be revealed in the first half of next year. 

The remaining 80 per cent of routes will be grouped into nine packages and run by SBST and SMRT on negotiated contracts under the contracting model for about five years, after their Bus Service Operating Licences expire on Aug 31 next year. Commenting on the outcomes of the two tenders so far, Mr Chew said: “We will have a better benchmark to refer to when we move into negotiating the contracts... with the two incumbents.”