Bus contract sums based on performance standards, operational requirements

We refer to Mr Goh Kian Huat’s letter “How did LTA determine sum for bus routes not put up for tender?” (Aug 20).

Bus contracting brings significant benefits to commuters and bus captains. With the Government owning the buses, we will be able to respond more quickly to changes in ridership and commuter needs.

Shorter contract periods mean that operators must operate services more efficiently in order to secure a contract renewal.

Furthermore, with the bus contracting model, bus captains’ wages have risen in addition to better welfare and training.

The bus packages will be put up for tender gradually to allow for a smoother transition to the new model for commuters, drivers and operators.

It is necessary to stage this alongside the completion of supporting infrastructure such as new depots.

The different durations for the negotiated contracts took into account the interplay of these developments.

The contract sums for SBS Transit and SMRT Buses were determined through negotiations with the operators, based on performance standards and operational requirements similar to those in the first two tendered packages.

This allows us to refer to past tender prices, while considering circumstances unique to the operators and their packages, for example, differences in the age profile of buses, and geographical and route profiles.

Transitioning to bus contracting is necessary for a more sustainable public bus industry. Under the old model, operators were either losing money or earning very low returns.

While the contracting model may result in a higher public subsidy initially, the greater competition should yield cost efficiencies over time.

Ultimately, the degree of subsidy also depends on whether fares are set appropriately.

Regular fare adjustments will still be required for general cost increases as well as for service and capacity improvements. But we will work with the Public Transport Council to ensure that fares remain fair and affordable.