Quality Contracts

1. Quality Contract Criteria

   Go North East – embracing change for improvement but not the ‘Quality Contracts’ model.

   In order for a ‘Quality Contract’ to be introduced, The Local Transport Authority  (in this case, the Tyne and Wear Integrated Transport Authority) is required to demonstrate the ‘public interest’ criteria are met in order that a Quality Contract model is adopted.

   In the 2008 Transport Act, the criteria for adopting ‘Quality Contracts’ was changed and now stipulates that LTAs have to demonstrate the following public interest in order that a ‘Quality Contracts’ model may be adopted:

   1. The proposed scheme will result in an increase in the use of bus services in the area to which the proposed scheme relates;
   2. The proposed scheme will bring benefits to persons using local services in the areas to which the proposed scheme relates, by improving the quality of those services;
   3. The proposed scheme will contribute to the implementation of the local transport policies of the LTA;
   4. The proposed scheme will contribute to the implementation of those policies in a way that is economic, efficient and effective; and
   5. Any adverse effects of the proposed scheme on operators will be proportionate to the improvement in the well-being of persons living or working in the area to which the proposed scheme relates.

2. Will the proposed scheme will result in an increase in the use of bus services in the area to which the proposed scheme relates; Specifically, supporters of ‘Quality Contracts’ have asked about….

   Standard timetables on core routes e.g. operating from 0600-2300

   How can such a commitment be funded economically without excessive additional public funding even in the more urban parts of Tyne and Wear, let alone significantly more rural areas such as Western Gateshead. There is no evidence of social need for such a rigid, formulaic approach. Demand patterns vary geographically, by day and by time, and by direction of travel. If a rigid formula applying everywhere at all times were the right way forward, why has Nexus not applied this to its own bus services or to Metro?

   Irrespective of timetabling, will the routes designed meet the needs of the people of Tyne and Wear rather than the needs of Metro finances? Nexus’ strategy talks of more integration with Metro yet there are already numerous services serving Metro stations and integrated ticketing. The suspicion must be that routes will return to the failed policies of the past whereby passengers from further afield are forced to travel to Metro stations and change to Metro, rather than continue their journeys into the cities by bus as many clearly prefer to do – after all they have the choice now on many routes.

3. Will the proposed scheme bring benefits to persons using local services in Tyne and Wear? Specifically, supporters of ‘Quality Contracts’ have asked about…

   Punctuality/reliability contractually enforced and actively monitored

   The extent to which operators can directly and independently make significant inroads on punctuality and reliability will vary but the most significant factor is invariably external highways conditions.

   Money wisely invested in the highways infrastructure will deliver improvements in bus performance regardless of whether there is a contract with the operator or not.

   Punctuality and reliability is the customer’s number one priority, but moving to ‘Quality Contracts’ alone does not move it forward unless significant additional public funds are invested over and above the costs of moving to ‘Quality Contracts’ and maintaining them.

   A simplified fare range with tickets valid on any bus regardless of operator

   Regional authorities and the bus operators have already invested millions in a project to deliver multi operator ticketing across the region (see NESTI). This is being progressed now without a ‘Quality Contract’.

   That said, why is it suggested that customers want less choice in public transport rather than more? Customers have individual needs, and objectives, they want to pay for things in different ways, and they want price point alternatives to choose from. We all see this in every walk of life. Why should this be denied to customers when it comes to using bus services?

   If Nexus considers it so important to simplify to a ‘one size fits all’ approach to pricing and ticketing, why does it offer so much variety on the Metro and in its own bus services? The reality is that we all know it is the least that customers expect.

   Multi-operator tickets

   Currently Go North East and other bus operators offer low fares (tickets) for their own services as well as multi-operator tickets (like those the Competition Commission wishes to see more of it in its recent Bus Market Inquiry Report). Currently, the multi-operator tickets are more expensive because they, at Nexus’ insistence, include Metro travel, even where the passenger does not want or need it.

   Go North East (and we believe other bus operators serving Tyne and Wear) are keen to offer multi-operator ‘bus only’ tickets as there is passenger demand for them. The ITA has the statutory power to end Nexus’ insistence on Metro travel options compulsorily included in multi-operator tickets, with the result that they could be sold at a cheaper price.

   Real-time passenger information on all buses

   This is in no way dependent upon a ‘Quality Contract’, unless facilitated by additional significant funding. Is that realistic or affordable in the foreseeable future?

   Operators are building real-time capability on the back of their investments in new technologies such as the smart ticketing equipment and newer radio systems. The region wide approach to delivering a real time system does not have a good track record. It has been tried in recent years and has failed expensively. Combining operator investment with public sector funding with clear separation of roles and responsibilities is the way to push the real time agenda forward faster and more cost-effectively.

   Service changes only on pre-agreed dates, and with long lead-time

   Operators have moved towards this in recent years and we already have fixed dates agreed in Tyne and Wear. We have extended lead times ourselves, introduced consultation that we are not required to, and are willing to move further. We are exploring the recommendations of the Competition Commission on longer lead times and have no issue with moving forward on that basis. Like so many items on this list, progress is not exclusively the preserve of ‘Quality Contracts’ – far from it.

   Better vehicle standards – low-floor vehicles, highest emission standard

   The only way to ensure continued investment in further improvements in vehicle standards is to encourage the conditions that promote investment: profitability, freedom to innovate and competition are all driving investment in the North East’s bus market, not stifling it.

   A five year maximum vehicle life contract regime, as in London, has to be paid for from the public purse. London bus subsidies are huge and simply unaffordable in the North East.

   High-quality customer care and driving standards, single point for customer contact and complaints

   This is yet another benefit that is not exclusive to ‘Quality Contracts’, and, if anything, is less likely to be achieved under this model. How friendly do people find the bus drivers in London? How motivated are employees going to be to deliver excellent customer service if all their ownership and involvement is reduced to purely a contracted deliverer of a uniform utility?

   Local knowledge across the region is vital in delivering good after-sales service. Witness the difficulties of Traveline in delivering a consistently high-quality service for the whole region from one central location in Newcastle, let alone delivering it in an economically sustainable way. Nexus have given notice to withdraw this facility and revert to individual agreements with operators.

   The freedom of the market has led to the region providing some of the most effective and innovative customer communications in the country. Go North East’s use of social networking, mobile phone apps, and well developed customer consultation models are recognised as being among the best in the country.

   Simplified branding

   Our customers tell us they like individual brands - it helps them recognise their services instantly; they can relate to their local brands and even be involved in ways that are not possible with a standardised utility look. People with visual impairments, or learning difficulties have been particularly fulsome in their praise of the help that our colour coding of routes gives them. Motorists tell us they are now far more aware of our bus services as a result of the branding. No-one has told us they find it confusing, other than a few politicians and officers advocating the Quality Contract in Tyne and Wear.

4. Will the proposed scheme contribute to the implementation of the local transport policies of the LTA; Specifically.…

   Could the Governance process be changed to require the ITA to publicly approve network and fare changes including consultation with the public before amending routes and fares in their territories

   Does this approach allow for the need for dynamic changes as hospitals and schools move, and new businesses open? Does it allow for improvements to be made when needed? Or is it a recipe for ossifying the bus network as though it should remain static for long periods in a changing world? How are the inevitable cross boundary disputes to be decided? With the heavier volumes and revenues in Tyne and Wear, will Northumberland or Durham bus users, for example, have to settle for what is decided for them in Newcastle? And what about passengers having to suffer forced integration with the Metro when they would prefer to remain on their bus to complete their journey.?

   A Quality Contract in Tyne and Wear will ensure that the economics of providing the bus network are even more driven by the pressures of funding the Metro. In which case, will fares decisions be right for customers in Northumberland and Durham, or just right for those funding the Metro?

   Go North East already discusses proposals for fares in advance, for example, with the East Gateshead Partnership stakeholder board. The same is true of proposals to change the network and clear requirements for consultation in advance of decisions are written into the partnership agreement.

   Making punctuality/reliability and other data available

   We can do that now without a ‘Quality Contract’ and can evidence this within existing partnerships, for example in East Gateshead and South Tyneside. In the East Gateshead model we even pay a penalty upon ourselves into a service improvement fund which is at the disposal of the stakeholder board if we fall below the exacting standards that we ourselves have set.

    The opportunity for long-term network planning to be aligned to local authority strategies for housing and employment

   We all can and should be doing better on this now, with or without a formal partnership, and it certainly does not take a ‘Quality Contract’. This is simply about effective strategic communication – even a QC can’t guarantee that! The local authorities have it totally within their own existing powers to engage more effectively with bus operators on future development plans.

5. The proposed scheme will contribute to the implementation of those policies in a way that is economic, efficient and effective; Specifically…

   It will provide more control over how tax payers’ money is spent

   Nexus alleges (in the media and in stakeholder consultation meetings) that currently £62m annually is “given” to bus operators without Nexus (and therefore the taxpayer) having control over it. Yet it is only if stakeholders are allowed to review a breakdown of these figures that stakeholders will come to understand that this figure is so misleading. The figures for 2010/11 are broken down as follows (in 000’s):

   • Concessionary Travel Reimbursement: £39,222 – To say that Nexus has no control over this is misleading. It simply gets what it pays for here because it buys ‘free’ travel after 0930 for OAPs and disabled passengers. In fact, it gets a lot more than it pays for. Typically for every £1 worth of commercial adult fare, the equivalent journey made by a concessionary traveler card holder provides about 50 pence to the operator.
   • Secured service contracts: £6,856 – These are the services paid for by Nexus as they deem necessary in addition to the routes operated at the commercial risk of the operators. Nexus, therefore gets exactly what it pays for and has total control over these services. That is, it specifies what service it requires during a competitive tender process and bus operators that bid for and subsequently win the contracts must deliver the prescribed services to the letter, or risk being in breach of contract.
   • To put this figure into perspective, it represents less than 10 per cent of all services bus operators’ provide in Tyne and Wear. Since when, in a democracy, does paying for 10 per cent of something entitle you to control the other 90 per cent?
   • BSOG: £15,500 – This figure is nothing to do with Nexus. It comes direct from the the Government, bus operators having paid it to the Government in the first place as fuel duty. They simply give some of it back again to reduce the duty paid on fuel used in running registered local bus services and thus provide a beneficial effect for the end user by enabling lower fares or keeping service levels higher than they otherwise would be if the duty had all had to be paid in full. Trains and planes pay no fuel duty.

   Total: £61,578,000

   The opportunity for profitable services to be used to cross-subsidise unprofitable ones

   This happens now to a degree (journeys, times of day and even some related services). But don’t forget that operators of franchises (as per the QC model) still require a profit to sustain services, a higher profit to deliver newer vehicles and a still higher profit to sustain and contribute to pension funds.

   The opportunity for local authorities to influence where profits generated in their area are reinvested in the network

   There are opportunities for local authorities to influence network design now. There are many examples of where Go North East and local authorities have worked very effectively together in tackling a number of difficult service issues in the last few years and worked together on joint bids to attract funding to the region to benefit passengers.

   There is huge scope for developing this partnership approach further at little or no cost.

   To ensure the vast majority of the bus network is specified and market tested

   The secured network is market tested now through competitive tendering. The dynamics will change with a QC in Tyne and Wear. Will this create more local operators interested in tendering? We suggest exactly the opposite: the QC will eliminate some operators from the local market altogether, as they won’t be able to survive on what business is left over if they are not among the successful few in Tyne and Wear.

   The commercial network is market tested with the ultimate examiner – the consumer – every single day.

   The potential for ‘Quality Contracts’ to open up the wider North East market, bringing new competitors and better potential value for money

   That may be so for the big Tyne and Wear contracts, but will that only be so if it means unfair competition from state-funded European based competitors, and/or it means reducing the terms and conditions of employees, and putting their pensions at risk. Our 2000 employees are acutely aware of these risks.

   What of outside of Tyne and Wear? Will Northumberland and Durham and elsewhere, face the risk of services becoming less rather than more economical to run as present larger operators see significant holes blown in their businesses in Tyne and Wear?

   And what of the smaller operators who have both contracts in Tyne and Wear and in Northumberland and Durham? What will become of them if their businesses are damaged by loss of contract opportunities in Tyne and Wear due to all services being fitted into fewer but much larger scale contracts?

   The entry cost of setting up a new specialised business is high, requiring specialised equipment and facilities even before the cost of supplying a new fleet and recruiting a new workforce. New participants will only come if they can do this cost effectively and with the prospect of a significant return via significant profits to justify the risk.

6. What are the options for improving services and value for money without ‘Quality Contracts’?

   Go North East continually strives to improve the service it provides passengers as service improvements results in more passengers travelling (something that independent passenger figures evidence that we are successfully achieving).

   We are committed to delivering further service improvements through innovation, investment and via closer working relationships with our public and private sector partners.

   We are not arguing for the status quo.

   Through the Charter for Positive Change we are commited to working in partnership with our customers, local businesses and local authorities. This is an ongoing process of positive improvement in what we offer and how we do things.