The whole duty of government is to prevent crime and to preserve contracts.Lord Melbourne, former UK Prime Minister, 1779–1848
It is generally accepted that private vehicle operators are most likely to maintain a high quality of service if their contract includes the right incentives to provide a continuous high quality of service. A “quality of service” contract, also known as a “quality incentive” contract is an effective mechanism to encourage operators to deliver excellence in service on an ongoing basis. A quality of service contract stipulates how an operator’s performance is tied to its financial compensation. If an operator fails to perform properly in certain aspects of its service, then the firm will incur penalties or deductions in its payments. Likewise, a firm that exceeds service expectations can be rewarded with a bonus payment. Normally this service quality is measured by metrics agreed upon in the contract and monitored by the government authority or a third party auditor.
Quality of service contracting is increasingly popular in higher-income economies with privately contracted transit service providers. Of the BRT systems in higher-income economies, several of them have private operators with a contract that includes some quality of service elements. The Amsterdam R-Net BRT, for instance, has a contract with its operator that includes bonuses and fines for failure to meet or exceed key performance indicators. These indicators include punctuality, information, cleanliness, and driver friendliness. An independent organization carries out a monitoring regimen with twenty indicators in the field every three months. The Nantes BRT is also operated by a company under a quality of service contract. The level of service is specified in the contract and measured by fifteen indicators, with a specific level that the operator has to reach for each indicator. An external firm conducts the audits, and if the operator does not reach the required global level, the operator has to pay a penalty to Nantes Métropole. Still, many private sector operators in higher-income economies are not operating under any sort of quality of service provisions in their contracts, and there is significant room for improvement in much of the higher-income economies.
In lower-income economies, quality of service contracting was all but unknown prior to its introduction into the TransMilenio operating contracts in Bogotá. Since then, many of the quality of service elements in Bogotá’s BRT system have been emulated in other cities, such as Guangzhou, Johannesburg, Cape Town, and Ahmedabad.
In the case of Bogotá’s TransMilenio system, poor performing operators can experience revenue reductions of up to 10 percent of the operator’s monthly income. Further, in extreme cases, an operator can even lose the concession for consistently unacceptable services.
Since TransMilenio operators are paid based upon the number of kilometers travelled, penalties for poor performance are imposed by reducing the number of kilometers assigned to the operator. The basis for fines and penalties are explicitly set out in the initial contract. Areas covered in the quality incentive contract include maintenance practices, customer service, driver safety, administrative practices, and environmental performance. Table 13.4 summarizes the types of infractions and their associated penalties.
| Area | Type of infraction | Penalty |
|---|---|---|
| Maintenance / vehicle deficiencies | Alteration of / damage to the vehicle interior or exterior: Unauthorized advertisements, nonfunctional signal lights, unclean bus, or damaged seating | 50 kilometers |
| Maintenance / vehicle deficiencies | Failure to follow predetermined schedules for maintenance, repair, or inspection | 50 kilometers |
| Maintenance / vehicle deficiencies | Nonfunctional doors or worn tires | 100 kilometers |
| Maintenance / vehicle deficiencies | Alteration of or damage to the GPS system or the radio communication system | 250 kilometers |
| Customer service / operations | Stopping at a different station than the assigned station or not stopping at an assigned station | 25 kilometers |
| Customer service / operations | Stopping for a longer period than requested | 25 kilometers |
| Customer service / operations | Blocking an intersection | 25 kilometers |
| Customer service / operations | Use of stereos, driver’s mobile devices | 50 kilometers |
| Customer service / operations | Parking bus in an unauthorized location | 60 kilometers |
| Customer service / operations | Changing route without authorization | 60 kilometers |
| Customer service / operations | Delaying system operation without a valid reason | 60 kilometers |
| Customer service / operations | Over-passing another bus with the same route without authorization | 60 kilometers |
| Customer service / operations | Operating during unauthorized hours | 175 kilometers |
| Customer service / operations | Permitting the boarding or alighting of customers in places other than stations | 250 kilometers |
| Customer service / operations | Operating bus on streets different than the formal trunk lines without authorization | 250 kilometers |
| Customer service / operations | Abandoning a bus without a valid reason | 250 kilometers |
| Consistency of driver performance | Performance difference between best operator and other operators, < 20 percent | 0 kilometers |
| Consistency of driver performance | Performance difference between best operator and other operators, 20 – 25 percent | 30 kilometers |
| Consistency of driver performance | Performance difference between best operator and other operators, 25 – 30 percent | 75 kilometers |
| Consistency of driver performance | Performance difference between best operator and other operators, > 30 percent | 120 kilometers |
| Administrative / institutional | Failure to send reports required by TransMilenio | 50 kilometers |
| Administrative / institutional | Impeding the work of inspectors from TransMilenio SA | 50 kilometers |
| Administrative / institutional | Hiding information or providing incorrect information | 50 kilometers |
| Administrative / institutional | Inappropriate administrative or accounting procedures | 100 kilometers |
| Administrative / institutional | Abuse of power in relations with staff | 100 kilometers |
| Environmental | Fuel / oil leaks and spillages | 25 kilometers |
| Environmental | Noise and air pollutant levels above the levels stipulated in the bid contract | 50 kilometers |
| Environmental | Mishandling of hazardous materials | 50 kilometers |
| Security | Any security violations not in compliance with contractual obligations | 100 kilometers for each day in violation |
Source: TransMilenio SA
In some instances where public safety is compromised, TransMilenio SA will also directly impose penalties upon the drivers in addition to fining the operating company. Thus, violations such as driving at excessive speeds or disobeying traffic signals can result in driver suspensions or termination of employment (Table 13.5).
| Action | Penalty to driver | Penalty to operating company |
|---|---|---|
| Lack of driver’s license of bus registration document | Suspension (next day) | 100 kilometers |
| Failure to provide first aid | One-day suspension | 100 kilometers |
| Refusal to provide customer with information | One-day suspension | 100 kilometers |
| Accident between two TransMilenio vehicles | Penalty depends upon investigation | 100 kilometers |
| Running red light | Immediate suspension | 100 kilometers |
| Backing up while on a trunk line | One-day suspension | 50 kilometers |
| Possession of a firearm | Immediate suspension | 100 kilometers |
| Disobeying police instructions | One-day suspension | 200 kilometers |
| Driving while under the influence of alcohol or other prohibited substances | Immediate suspension | 200 kilometers |
| Accident resulting from an irresponsible action | One-day suspension | 200 kilometers |
| Improper approach to station platform | Three times in a single day results in a one-day suspension | 50 kilometers |
| Excess velocity | One-day suspension | 100 kilometers |
| Encroachment onto pedestrian crossing | 100 kilometers | |
| Mechanical problems that are not resolved in less than one hour | 50 kilometers | |
| Verbal or physical aggression to customers | Immediate suspension | 100 kilometers |
| Conducting fare collection on board vehicle | Immediate suspension | 200 kilometers |
| Disobeying instructions from Control Center or traffic authorities | Immediate suspension | 100 kilometers |
Source: TransMilenio SA
The public company, TransMilenio SA, is responsible for monitoring and evaluating compliance with contractual norms. Inspections occur both randomly and within periodic schedules. Some violations can also be detected through the GPS system. Control center staff can record average speeds and vehicle movements, and thus staff can determine when speeding or other vehicle violations occur.
TransMilenio SA collects 90 percent of the fines and penalties in the “Fines and Benefits Fund,” while the remainder is retained by TransMilenio SA. The “Fines and Benefits Fund” is then periodically distributed to the highest-performing operator. Thus, the scheme provides a double incentive to avoid poor performance by first penalizing poor quality service and then rewarding excellence. In addition, since the penalized operators also forfeit a certain number of kilometers serviced, the well-performing operators also gain by receiving increased service allocations.
Penalized operators do have some recourse to contest unwarranted fines. If the operators feel that the penalties have been imposed unfairly, an appeal can be presented during the weekly meetings that take place between the operators and TransMilenio SA. If the other operators and TransMilenio SA concur that the fines were unwarranted, then the amount of the fine is returned.
Once this quality of service contract was developed in Bogotá, it was modified and usually simplified in other countries. In Guangzhou, the operating contracts with the private operators include a system of penalties linked to penalty points, as shown in the Table 13.6.
| No | Evaluate Item | Points | Evaluate Content and Scoring Methods | Score Deduction |
|---|---|---|---|---|
| 1 | First and last bus punctuality | 10 points | For each delay, deduct 0.5 points from score | 0.5 points/incident |
| 2 | Number of vehicle breakdowns per thousand bus kilometer in BRT corridor | 30 points | In BRT corridor, for each vehicle breakdown that happens per thousand bus kilometer, deduct 1 point from score | 1 point per incident per thousand bus kilometer |
| 3.1 | The number of accidents per million bus kilometer | 30 points | General accident | Both at fault: 0.5 point each incident per million bus kilometer; ; Bus driver mostly at fault: 1 point each incident per million bus kilometer; ; Bus driver at fault: 1.5 point each incident per million bus kilometer; |
| 3.2 | The number of accidents per million bus kilometer | 30 points | Serious accident | Both at fault: 1 point each incident per million bus kilometer; ; Bus driver mostly at fault: 2 point each incident per million bus kilometer; ; Bus driver at fault: 3 points each incident per million bus kilometer; |
| 4 | The number of complaints per million bus kilometers | 20 points | If one complaint happens per thousand trips, and the operators need to be responsible for it, one point will be deducted from the score. If one operator is complained about 30 times, all the points will be deducted from the score | 1 point per incident per thousand trips |
| 5.1 | Adherence to tasks given to operators by the government | 10 points | Poor completion about the tasks given by the government (such as vehicle preparation is not timely, not in place) | 1 point per incident |
| 5.2 | Adherence to tasks given to operators by the government | 10 points | Does not perform the tasks given by the government | 2 points per incident |
Cape Town developed an extensive set of penalties that not only included a long list of performance metrics but also placed the onus for monitoring conformity with the performance metrics on the operator. This included stiff penalties if the information was found to be fraudulent.
When applied fairly, a system of quality incentive contracts provides a powerful tool in motivating high-quality service from operators. By selecting the appropriate measures and following up with a rigorous inspection regimen, operators will be given the right level of incentives to remain focused on providing a quality product.