How did LTA determine sum for bus routes not put up for tender?

I refer to the report “Govt to pay SMRT, SBS Transit S$7b to run bus routes” (Aug 12).

SBS Transit and SMRT Buses will be paid S$5.32 billion and S$1.87 billion, respectively, to run the remaining bus routes that have not been put up for competitive tendering.

How these sums are determined between the Land Transport Authority (LTA) and the bus operators is a concern, as the amount of money involved is large, especially compared with the contracts awarded to the two new operators, Tower Transit and Go-Ahead.

How did the LTA ensure that they did not overpay SBS Transit and SMRT Buses to run the bus routes?

How much in fare revenue is the LTA expected to collect? Will bus fares be raised if there is a significant short-fall?

There is the need to phase in competitive tendering to minimise the risk of service disruption for commuters, but the LTA also has a duty to ensure that taxpayers’ money is spent efficiently via open tenders.

Furthermore, of SBS Transit’s eight packages, only the Bukit Merah package runs for two years. The others have tenures ranging between five and 10 years.

Meanwhile, SMRT Buses’ three contracts range between four and seven years. Under the competitive tendering process, the bus contracts are only for five years.

Why were the two bus operators given the negotiated contracts with tenures exceeding five years?

At this stage, there is no proof that the bus contracting model works better than the previous model. As such, it remains to be seen if there are compelling reasons to ensure a complete transition to the new model.

The possible downsides of competitive tendering include having too many small players with duplicated resources, such as human resources functions, entering the industry.

There is also little incentive for bus operators to continue investing in the training of workers, as there will be uncertainty upon the expiry of the contract.

Amid all these considerations, if the LTA needed more time to refine and improve how contracts should be managed, as well as the tendering and handover processes, the existing bus operators’ licences for all packages of routes could have been extended first, before putting them up for tender.