SBS Transit snags Seletar bus package with S$480m bid

SBS Transit snags Seletar bus package with S$480m bid
TODAY file photo
Published: 6:02 PM, April 19, 2017
Updated: 6:48 AM, April 20, 2017

SINGAPORE — SBS Transit (SBST) beat nine others to clinch the third bus package put up for tender by the Government, making it the first time that a Singapore bus operator has won since the Land Transport Authority (LTA) started using the new bus contracting model.

SBST’s bid for the five-year Seletar bus package was more than S$480 million — the lowest among its competitors. SMRT Buses was the next lowest bidder at more than S$510 million, and Woodlands Transport Holdings put in the highest bid for more than S$580 million.

Under the bus contracting model, operators will be paid a fee to operate the services, while the LTA will determine the bus services to be provided and set service standards. London-based Tower Transit won the Bulim package in May 2015, operating services in the western part of Singapore, while British bus operator Go-Ahead bagged the second contract in November that year to run in areas such as Changi, Pasir Ris and Punggol. 

The latest bus contract, which may see a two-year extension, allows SBST to operate 26 bus services primarily in the Ang Mo Kio and Yishun areas. It will kick off in five phases from next March. 

This means SBST will operate and maintain the Ang Mo Kio and Yio Chu Kang bus interchanges, as well as the new Seletar Depot.

In a briefing on Wednesday (April 19), LTA said that SBST won the contract because of its high-quality proposal as well as its low bid price.

All tender submissions were evaluated through a two-envelope process for quality and price, with more weight given to the quality of the proposals submitted by the tenderers. Mr Ngien Hoon Ping, chief executive officer of LTA, said that “all the bid proposals were of high quality”, but SBST won on account of its vast experience, good understanding of the ground conditions, strong competencies in terms of bus scheduling, and best value for money “in terms of both price and quality”. 

In pitching for this deal, Mr Gan Juay Kiat, chief executive officer of SBST, said that the company capitalised on its scale of operations and the resources that it has. 

He added that commuters can expect improved facilities and services such as mobile-phone charging points, water coolers, and extra seats at the bus interchanges, as well as more ventilation at non-air-conditioned interchanges. Bus services in terms of frequency and reliability will be improved as well. 

At present, the routes that come under this new package are run by both SBST and SMRT Buses, with a total of 380 bus workers.

The National Transport Workers’ Union estimated that more than 100 bus workers from SMRT would be involved. As a safeguard for employees’ welfare, SBST is bound by the new contract to offer all affected employees a job, for instance. The workers can choose to join SBST, or be re-deployed by SMRT.

SMRT Buses’ managing director Tan Kian Heong said that the company would work towards “a smooth transition” in close partnership with LTA and the union on this matter. 

Mr Gan said that more than 750 bus drivers would be needed when SBST starts services for this package. It has started recruiting 260 new bus drivers, and the rest would be a mix of existing bus drivers and those affected by the new contract, he added.

Transport analysts are of the opinion that SBST had an edge over its competitors in the latest bid due to its familarity with the costs on the routes, and the economies of scale it offers.

Professor Lee Der Horng, a transport researcher at the National University of Singapore, said: “SBS is currently operating these routes in the Seletar package, so they know better than others the average cost per km. Given its price and other bidders’ price offers, I am of the opinion that SBS won this tender at the ‘lower than cost’ price.”

However, this was because SBS, based on its market share here, would have had the ability to ‘cross-subsidise’ within its services, something that the other bidders would not have, Prof Lee pointed out.

Assistant Professor Terence Fan of the Singapore Management University noted that the low bid would enable LTA to save costs, given that there is talk of a potential fare hike. Hopefully, he said, this would translate into lower-than-expected fare increases.

As for SMRT, this is its third straight loss in bidding for any bus package. Prof Fan is of the opinion that it does not mean the operator is out of the game yet, since there are more packages to come. This would push SMRT to be more competitive, learn from the attempts, and “get their act together” for upcoming bids, he said.

On Wednesday, LTA also announced that the fourth package under the bus contracting model, the Bukit Merah package, will be released for tender next week.