This document contains the following 6 deliverables
1. Delivery Presentation
2. Trainer Manual
3. Participant Manual
4. Pre-Training Questionnaire
5. Post-Training Questionnaire
6. Group Activity
Outsourcing for Senior Managers
P resentation title[To edit, c lick View > Slide Master > Slide Master]
©2019 Deloitte Shared Services India LLP 1
Delivery Presentation
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EFFICIENT AND SUSTAINABLE CITY BUS SERVICES PROJECT (INDIA)EFFICIENT AND SUSTAINABLE CITY BUS SERVICES PROJECT (INDIA)
OUTSOURCING FOR SENIOR MANAGERS
MINISTRY OF HOUSING AND URBAN AFFAIRS, GOVERNMENT OF INDIA
Consultancy Services for Design and Development of Training Programme for City Transport Professionals
December 2020
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Preface
The Efficient and Sustainable City Bus Services (ESCBS) project was introduced to improve the efficiency and attractiveness of city
bus transport in India. ESCBS project has three major components, which includes, National Capacity Building (NCB); Regulatory,
Institutional and Fiscal Analysis; and City Demonstration. This engagement falls under the purview of the NCB component of the
ESCBS project. The objective of this engagement is to design and develop training programme for city transport professionals, and
involves undertaking pilot testing, implementation, evaluation, and suitable modification of the training programme.
As a part of this engagement, eight training areas have been identified, and prioritized by the Ministry of Housing and Urban Affairs
(MoHUA).
Policy Advocacy for
Senior Managers
Outsourcing for Senior
Managers
Monitoring and
Evaluation for Senior
Managers
Network Planning for
Middle Managers
Operations Planning for
Middle Managers
Outsourcing for Middle
Managers
Bus Operations for
Middle Managers
ITS and MIS for Middle
Managers
1 2 3 4
5 6 7 8
For each training area, a total of three modules have been prepared:
A. Participant’s Notes: Detailed reference notes containing links to more readings to be circulated before trainings.
B. Trainer’s Notes: Detailed notes for trainer’s reference containing focus points, questions for discussion, etc.
C. Delivery PPT: Brief presentation containing infographics, videos, group activities, etc. to be displayed on screen
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About the Module
This training on “Outsourcing of Bus Operations” provides guidance on the decisionmaking process for outsourcing activities and selection of an appropriatecontractual model for Senior Managers. This section discusses the intricacies,parameters, and issues that must be evaluated by Senior Managers beforeoutsourcing and deciding upon the appropriate contractual model. The moduleexplains in detail that the Authorities may consider outsourcing portions of or theentire bus operations to one or more contractors, as alternative to in-houseoperations. In addition, the training content will enable participants to formulatestrategies needed for executing and monitoring of contracts of outsourced busoperations.
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1 Identifying segments of bus operations which can be outsourced
2 Taking decision on whether or not to outsource the identified segments or services
3 Selecting appropriate / suitable contractual model suitable as per the requirements
4 Overview of key contractual parameters
5 Appreciating the two-way relationship between the client and the supplier
6 Understanding the contours of bid process management
Learning Objectives
7 Appreciating the importance of monitoring and developing a monitoring framework
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Contract Formulation
A. Key parameters in a typical outsourcing contract
B. Risks associated with outsourcing and allocation of risks
C. Deciding on the appropriate length of the outsourcing contract
D. Conditions precedent for the authority and operator
E. Key considerations in an outsourcing contract related to buses
F. Key considerations in an outsourcing contract related to infrastructure
G. Key considerations in an outsourcing contract related to performance standards
H. Key considerations in an outsourcing contract related to payment
I. Dispute resolution and contract flexibility
J. Early termination of contract
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Decision on Outsourcing
A. Objective of the authority
B. Activities that can be outsourced
C. Decision for outsourcing
D. Infrastructure Analysis
E. Skilled Manpower Analysis
F. Financial Capacity Analysis
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Contract Model
A. Various models for outsourcing bus operations
B. Summary of different types of Contract Models
C. Selection of the most appropriate Contract Model
2
Table of Contents
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Contract Formulation
K. Operator and Authority Default
L. Transition Planning
M. Developing client supplier relationship
N. Contract Management Capacity
3
Evaluation and Selection A. Evaluation of bids5
Contract MonitoringA. Developing a comprehensive monitoring framework
B. Key Performance Indicators (KPIs) and their Outcomes
C. Monitoring the daily services provided by the bus operator
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Table of Contents
Annexure 1 A. Selection of Appropriate Contract7
RFQ and RFP IssuanceA. Standard RfP Provision
B. Bid Process Management4
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Deciding on outsourcing
Questions for Audience
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Q1. Why think of outsourcing at all?
Q2 What all activities can be outsourced in a bus transport
organization?
Q3. What all activities will necessarily have to be be
outsourced for urban bus transport?
Q4. What all factors should a senior manager look at before
deciding to outsource an activity?
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Deciding on outsourcing
Objective of the authority - Elements of City Bus Transport
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Route Planning Time table
designing
Fleet and Crew
Scheduling
Operations of
Services
Assessment of the prevailing practices used in planning and designing bus
operations and related aspects
Assessment of the prevailing practices used in planning and designing bus
operations and related aspects
Planning Framework
Monitoring Framework
• Readiness assessment
• Service Level Benchmarking
• Evaluation
• Reporting and Finding
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Deciding on outsourcing
Objective of the authority for providing bus operations
Authority’s objective is not to run the buses but to see
that the buses run.
The objectives should be very specific and clear
before outsourcing.
This objective should be explained to the private
operator before outsourcing
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
The primary objective is to be citizen centric. At the same time, the overall
objective of the Authority includes:
• Optimal modal share of public transport
• Decreasing the congestion in the city
Citizen Centric
Objectives
Environmental Objectives
Social Objectives
Adequacy
Regularity and Reliability
Comfort and Convenience
Affordability
Accessibility
7
6
54
3
2
1
Refer to “Policy
Advocacy” for details
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2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Time allocation:
• Completing the Chart – 40 minutes
• Presentation of the Chart – 15 minutes (each group)
Group Activity
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Deciding on outsourcing
Activities that can be outsourced
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
S.No. Activity Mechanism
Activities that can be outsourced and the respective mechanisms
Authority:
Specialist:
Private Operator:
Authority may perform the activity in-house
Authority may hire a specialist to complete the task
Authority may outsource the activity to Private Operator (Contract)
1 Route Planning Authority / Specialist
2 Infrastructure Planning Authority / Specialist
3 Passenger fare Authority / SpecialistPla
nn
ing
Bu
ses 4 Procurement Authority / Private Operator
5 Ownership Agency procuring the buses
6 Operation and Maintenance Private Operator
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Deciding on outsourcing
Activities that can be outsourced
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Activities that can be outsourced and the respective mechanisms
12 Construction of Control Center Specialist / Private Operator
13 Procurement of equipment Authority / Private Operator
14 Ownership of Control Center Authority
15 Operation and Maintenance of Control Center Private Operator
16 Ownership of ITS equipment Authority / Private Operator
17 Operation and Maintenance of ITS equipment Private Operator
In
frastr
uctu
re
Mon
itorin
g
7 Land Acquisition Authority
8 Construction Specialist / Private Operator
9 Procurement of equipment Authority / Private Operator
10 Ownership Agency procuring the equipment
11 Operations and Maintenance Private Operator
S.No. Activity Mechanism
Authority:
Specialist:
Private Operator:
Authority may perform the activity in-house
Authority may hire a specialist to complete the task
Authority may outsource the activity to Private Operator (Contract)
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Deciding on outsourcing
Deciding on Outsourcing – Case Study
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Seoul: Outsourcing of Bus Services
Context
• Prior to 2004, the bus system in Seoul was mostly deregulated.
• Private bus companies were allowed to provide services on any routes they deemed
commercially viable, subject to obtaining an easily available license from the public
authority.
• The Seoul Metropolitan Government (SMG) had very little control over the system
aside from setting fare levels.
Problem
• Highly inefficientand disorganized system with many overlapping routes.
• Low service levels in some areas and excessive supply in others.
• Poor integration between the various bus routes and other transport modes.
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Deciding on outsourcing
Deciding on Outsourcing – Case Study
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Seoul: Outsourcing of Bus Services
Action
• The major change in this regard was to switch from a mostly deregulated market to
a 'semi-public' or 'quasi-public' system.
Impact
• All decisions regarding route planning, schedules, fare levels, and overall
system design are now under the control of the SMG.
• The private bus companies have to participate in a competitive tendering process.
• Bus companies that succeed in winning tenders provide services according to strict
contractual specifications stipulated by the SMG.
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Deciding on outsourcing
Deciding on Outsourcing – Case Study
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Chandigarh Transport Undertaking (CTU): Outsourcing of Bus Maintenance
Action
• The Chandigarh Transport Undertaking (CTU) decided to recruit employees for
various branches through outsourcing mode.
• It was also decided to outsource the maintenance of two depots of the CTU, which
would soon float tenders for the same. The department had already outsourced the
maintenance of Depot No. 4. Under the agreement, the company looks after the
maintenance of buses and provides all kinds of spare parts.
• Except electricity and water charges, all maintenance, including expenditure on
account of tyres, replacement of batteries, bus charging stations, spare parts,
suspension, running, and major and minor repairs of the buses during the period of
the contract has been made the responsibility of the successful bidder.
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Deciding on outsourcing
Deciding on Outsourcing – Case Study
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Chandigarh Transport Undertaking (CTU): Outsourcing of Bus Maintenance
Impact
• The quality of maintenance activity has improved considerably after making the
decision to outsource. It is because the private party brings in innovative mechanisms
and experience.
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Deciding on outsourcing
Decision for outsourcing an activity
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
In order to make the decision to outsource an activity or conduct it in-house, the
authority needs to look at two important factors. They are as follows:
Available Infrastructure Skilled People
Business mind should never be outsourced. It must be developed by the authority.
Outsourcing should be availed from an organization / person with a reputation risk.
It is highly recommended that the authority should have a transaction advisor to
facilitate a balanced view.
The organization may choose to outsource entire or certain aspects of bus
operations, even when it has in-house capacity to deliver the same.
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Deciding on outsourcing
Infrastructure
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
S.No. Activity Responsibility
INFRASTRUCTURE – Bus depot, Bus terminal, Bus stop, Control Center
1 Land Acquisition Authority
2 Construction Specialist / Private Operator
3 Procurement of equipment Authority / Private Operator
4 Ownership Agency procuring the equipment
5 Operations and Maintenance Private Operator
The authority should assess the existing infrastructure in place and then make
necessary amendments before outsourcing bus operations.
Conducting as-is assessment would cover:
• Understanding Current and Future services needed.
• Understanding availability of infrastructure for services identified.
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Deciding on outsourcing
Skilled manpower
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
BEST Undertaking stopped recruitment of employees for several years. When
the recruitment began, the new recruiters were unskilled, while the existing
skilled manpower was about to retire. This created an age gap in employees
suggesting that the HR policy was not implemented properly.
Recruit / Train
Outsource
Skilled manpower must be readily available for deployment. If absent then:
Skilled manpower (such as Data Analytics expert) must be retained.
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Deciding on outsourcing
Financial Capacity
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
The authority should understand that the money has to be paid by them. However, the
authority may chose to pay it up-front or pay it on an annual basis with the interest rate.
Financial assessment helps authorities in identifying the constraints within which
they need to operate.
Assessment include analyzing financial statements such as income statement,
balance sheet etc.
Organizations can assess revenue and cost breakdowns to identify key revenue and
cost parameters, respectively.
Further, financial constraints can be assessed through various KPIs, such as:
• Operating cost per passenger-km,
• Fare-box Ratio,
• Operating cost per passenger,
• Revenue per passenger, etc.
This training material discusses Operations and Management activities.
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Contract Models
Questions for Audience
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Q1. What type of contract arrangements exists for
outsourcing activities of operations and management in
bus transport?
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Contract Models
Models for outsourcing bus operations
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Four Contract Models
Hybrid Net Cost Contract
Gross Cost Contract
Hybrid Gross Cost Contract
Net Cost Contract
1
3 4
2
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Models for outsourcing bus operations: Hybrid GCC – Adelaide
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
The Hybrid GCC Contract Model (Adelaide)
Incentives linked to increased ridership
a. Operator’s payment is divided into two components - a fixed monthly sum
and a patronage-related incentive amount.
b. Area-based contracts gives operators’ exclusive rights.
c. Contract awarded through competitive bidding process.
d. Prescription of a set of minimum service standards.
e. With an initial contract term of five years, contract renewal can be
negotiated for another five years in cases of satisfactory performance.
f. The contracted operator made responsible for developing proposals for
service enhancements. Proposed changes need to be approved by the
transport authority.
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Models for outsourcing bus operations: NCC Indore
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Net Cost Contract – Indore (AICTSL)
• 18 routes with highest ridership in
the city outsourced.
• Technical and service specifications
prescribed by AICTSL.
• Fleet procured and owned by
private operator.
• 90% of revenue from
advertisements on buses available to
the operator.
• First Right of refusal with operator
for additional requirement of fleet due
to demand increase.
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Case Study – Delhi Cluster Bus Operations
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Context
Outcome
Critical Success Factors
• Procurement, monitoring, and management done by DIMTS.
• Greater focus on service quality.
• Robust performance management system.
• 100% electronic ticketing and deployment of special ticket checking squad.
• GPS installation in all cluster buses which are monitored.
1948-1992
Owned and operated by the Delhi
Transport Undertaking (DTU).
1992-2001
New scheme launched under Stage
Carriage Permits.
Successful operations of more than 2400 buses under the cluster scheme which carries a total of 10.6 lakh passengers every day.
2011-Onwards: Private operator running the buses
alongside DTC in the ratio of 60:40.
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Summary of different types of Contract Models
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Parameter GCC Hybrid GCC NCC Hybrid NCC
Suitability of
the contract
• Authority has
maximum
control
• Authority has
more control
and intends that
operator shares
some revenue
risk
• Operators have
more control
• Higher revenue
risk for operator
• Limited
competition on
routes
• Operators have
more control, but
less than NCC
• Revenue risk for
operator is lower
than NCC
• Limited competition
on routes
Revenue risk
• Authority Shared:
• Base cost by
authority
• Ridership
increase by
operators
• Operator • Operator, subsidy
by authority on un-
viable routes
Degree of
operator’s
incentive to
increase
ridership
• Nil
• Fixed
payment
irrespective
of ridership
• Moderate
• Bonus on
increase in
ridership
• High
• Revenue directly
linked to
ridership
• High
• Revenue directly
linked to ridership
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Summary of different types of Contract Models
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Parameter GCC Hybrid GCC NCC Hybrid NCC
Monitoring and
penalty regime
• Requires
strong and
consistent
monitoring
with penalty
for service
below
benchmark
performance
• Higher level of
monitoring than
GCC because of
greater
economic
incentive for
performance
• Less monitoring
• Only service
quality
parameters
monitored
• Level of monitoring
is higher than NCC.
• In addition to
service level
parameters,
monitoring of
movement of bus
on un-viable routes
Access to
Finance
• Guaranteed
income with
reduced
credit risk
• Part of income
assured; lower
risk
• Increases credit
risk especially if
no track record
or demand is
uncertain
• Risk should be
quantified
• Reduces revenue
risk as non-
commercial routes
are supported.
• Improves credit-
worthiness, but
lower than GCC
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Moving to a new bus contracting model - Lessons from London - Video
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
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Questions for Audience
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Q1. When and Why should a public transport agency
consider “outsourcing”?
Q2. How do you select the most appropriate contract
out of GCC / NCC / and their Hybrids?
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Selection of the most appropriate contractual model
Rating Weight Score
Low 4% 1
Med. 10% 2
High 18% 3
Total Score Type of Model
Equal & Above
210
Gross Cost Contract
Between 150 &
210
Depends on inflection
points
Equal and Below
150
Net Cost Contract
Contract Models
• Service Plan
• Financial Capacity
• Institutional Capacity
Based on the Total Score, most
appropriate Contractual Model is
selected.
Selection Parameters
01
Calculating Scores
03
Selecting Contractual Model
04
Assigning Rates and Weights
02
Refer to Annexure 1 for the detailing of
selection of appropriate contractual model
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
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Contract Formulation
Key parameters in a typical outsourcing contract
Part 1: Preliminary 2. Escrow Account
1. Definitions & Interpretations 3. Insurance
2. Performance Security 4. Accounts and Audit
3. Scope of Work Part 4: Force Majeure and Termination
4. Grant of Contract 1. Force Majeure
5. Conditions Precedent 2. Change of Scope
6. Obligations of the operator 3. Termination
7. Obligations of the authority 4. Transition phase
8. Representations and Warranties Part 5: Other Provisions
9. Disclaimer 1. Assignment and charges
Part 2: Operations 2. Change in Law
1. Buses 3. Liability and Indemnity
2. Bus Depot 4. Rights & title over project facilities
3. Entry of buses into commercial service 5. Dispute resolution
4. Operations 6. Disclosure
5. Maintenance 7. Redressal of Public Grievances
6. Monitoring of Operations & Maintenance 8. Miscellaneous
Part 3: Financial Covenants 9. Definitions
1. Payment to the Operator Part 6: Schedules
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
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Contract Formulation
Risks associated with outsourcing and allocation of risks
Commission Risk
Revenue Risk
Procurement Risk
Performance Risk
Force Majeure Risk
Change in Law Risk
Financial Risk
Operating Risk
Authority
Authority
Authority/Operator
Operator
Authority/Operator
Authority
Authority/Operator
Operator
RISK TYPE GCC NCC
Authority
Operator
Authority/Operator
Operator
Authority/Operator
Authority
Authority/Operator
Operator
Risk allocation to be decided by Authority depending on their capacity to manage it.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
33
Contract Formulation
Risks associated with outsourcing and allocation of risks
Commission Risk Revenue Risk Procurement Risk
Performance RiskForce Majeure
RiskChange in Law
Risk
Financial Risk RISKS Operating Risk
Analyzing these risks would avoid consequences such as increased costs, delayed time etc.
Risk is best allocated to the party which can manage that risk.
To identify them and assess their likely impact (Degree of Risk).
To conduct an assessment of likelihood (Likelihood).2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
34
Contract Formulation
Risks associated with outsourcing and allocation of risks
Insignificant
CatastrophicMajor
ModerateMinorDegree of
Risk
Almost certain
RareUnlikely
PossibleLikely Likelihood
Retained
Risks
Less degree
Less likelihood
Shared
Risks
Transferred
Risks
High degree
High likelihood
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
35
Contract Formulation
Risks associated with outsourcing and allocation of risks
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
36
Contract Formulation
Length of the outsourcing contract
Ideally, the length of the contract should be equal to economic life of buses.
Ensures timely commencement of services and generates interest among the
operators.
Length of contract should be suitable to its objectives and requirements.
The contract length should be long enough for the operator to cover investment
costs.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
37
Contract Formulation
Length of the outsourcing contract
Pros of short-term contract
Provides an opportunity to test market
prices frequently.
Private operators remain motivated to
maintain high performance standards.
Increases competition and the authority
may re-tender the project frequently to
get the best price.
Cons of short-term contract
Short contracts are costly and disruptive and may
not deliver anticipated benefits.
The interest of contractors for building the
business may deteriorate.
The value for money or lifecycle cost may not meet
the expectations of the authority. Not suitable if
operator is required to invest in infrastructure.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
38
Contract Formulation
Length of the outsourcing contract in Bogota (Columbia)
Features
• The regular operation period of the contract for TransMilenio (Bogota – Columbia) is
when average mileageof fleet usage reaches 850,000 kilometers.
• A higher mileage every year leads to a shorter contract while smaller mileage allows
for longer contracts giving the private operator time to recoup its investment.
Inference
• Length of the contract term is aligned with the asset life of the vehicle.
• Achieving higher mileage would require good maintenance of buses which would
ensure high quality service. In Bogota, a bus approximately runs 235 kms a day
which makes 85,000 kms a year making a general contract length of 10 years.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
39
Contract Formulation
Conditions precedent for the authority and operator
Conditions Precedent
1Authority’s conditions precedent
Depot license, bus permit, grant approval / authorization,
escrow account, utilities (water, sewage, electricity)
Operator’s conditions precedent
Signing agreement, bank guarantee, certify warranties,
deliver buses according to schedule2
Conditions precedent are the items and obligations the respective parties must
fulfil prior to the contract coming into effect.
Provision to extend if either party is unable to fulfil the conditions (liable to penalty)
Right to terminate if conditions are not fulfilled even within extended period
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
40
Contract Formulation
Key considerations in an outsourcing contract related to buses
Buses
Who shall procure and
what shall be the
timeframe?
Who shall select the
type and number of
buses?
Who shall set the
technical
specifications?
Decision related to fleet procurement impact the efficiency of operations,
financials, service level, environment, etc.
Technical specifications set should not be manufacturer specific, such that it limits the
availability of fleet due to the specified design with limited manufacturers.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
41
Contract Formulation
Key considerations in an outsourcing contract related to infrastructure
• The bus depot operated by Prasanna Purple was encountering a drainageproblem due to which the buses were not maintained properly.
• Since drainage was unaccounted for, there was a delay in fixing the problem.
• As a result, only 12 out of 35 buses were running on the roads.
Infrastructure
Bus Terminal
Bus Depot Facilities
Bus Stop
IT Systems
1
3 4
2
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
42
Contract Formulation
Key considerations in an outsourcing contract related to performance
Performance standards (Service level benchmarks)
• Establish performance metrics in line with the authority’s objectives.
• Create clear incentives which are specific, achievable, and consistent.
• Inclusion for service quality improvement, reasonable targets, and bonuses
• Performance metrics should include minimum threshold of service
qualities and penalties for failing to meet thresholds.
Performance standards comprise of Minimum Service Level (MSL) benchmarks.
Exceeding these benchmarks / falling below these benchmarks may result in
incentives / penalty as per the contract.
• Penalty is a corrective measure for deviant behaviour, not a revenue source
• If the penalty has to be applied, it should be equitable.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
43
Contract Formulation
Performance linked incentives – Transport for London (TFL)
Transport for London – Performance linked incentives
• GCC contracts are subject to financial incentives based on the quality of
service. For example, incentive for reliability.
• Every contract specifies a 'Minimum Performance Standard' and
percentage of on-time arrivals and departures.
• Bus companies are eligible for a bonus equivalent to 1.5% of the contract
price for every 2% improvement in on-time percentage.
• Similarly, they may face a 1% deduction for every 2% reduction in on-time
performance below the Minimum Performance Standard.
• Similar incentives exist for percentage of;
• Scheduled bus kilometers operated,
• Vehicle condition,
• Driver performance, and
• Customer service.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
44
Contract Formulation
Performance linked incentives – TraffiQ (Frankfurt)
TraffiQ (Frankfurt, Germany) – Environment linked incentives
• TraffiQ, (Frankfurt) tendered a 6-year Gross Cost Contract with
environmental incentives for a sub-network (3.3 million timetable-km/year).
• Policy aim was reduction of air pollution by demanding high anti-
pollution standards to fulfil the European anti-pollution regime.
• The operator of this bundle now uses vehicles already fulfilling the EEV-
standards for gas emission.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
45
Contract Formulation
Key considerations in an outsourcing contract related to payment
Net Cost Model in Santiago (Chile) - Payment Mechanism
• Payment is linked to number of passengers carried.
• Further, the authority provides guaranteed payment for reduction in demand.
• The operator receives a drop (or increase) in their income representing 10%
of the demand change.
• Thus, a 10% drop in user charges would impact operator’s revenue by 1%.
Fare box revenue (User charges)
Availability payment (Fee per km)
Quality performance payments (Incentives)
Non dare box revenues (Advertisements, grants, etc.)
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
46
Contract Formulation
Dispute resolution and contract flexibility
Indore – Contract Flexibility
• Initially, each operator is required to operate minimum two buses on each route
assigned to them.
• Once they exceed the capacity in terms of passenger kilometers served, there is
provision for increase in number of buses.
• In such a case, the first opportunity to deploy buses is given to the existing operator. In
case they refuse, opportunity will be given to a new entity.
The contract needs to contain certain conditions that enable actions to address
changes in operating environment such as varying demand, such as:
Flexibility to assign vehicles across network
Adjusting fleet size to meet travel demands
Fare adjustment in case of increased competition
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
47
Contract Formulation
Dispute resolution and contract flexibility
Dispute resolution is required so that disagreements can be aired and resolved
amicably. It can be resolved through:
Conciliation
Arbitration
Adjudication
2
1
3
The person identified for the above should not be related to either party.
Dispute Resolution2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
48
Contract Formulation
Early termination of contract
The termination of contract may arise due to force majeure, due to default or
at the convenience of the authority. This termination clause enables
management of various risks and concerns of parties to the contract.
• During the implementation of the contract, a situation may arise when it
becomes necessary for the parties to terminate the contract. The termination
of contract may arise due to force majeure, due to default.
• The contract clause should define the specific conditions on fulfilment of which
the above termination situations will be initiated. The clause will also list the
consequences for the contracting parties once the contract is terminated.
• One very important component of the termination of contract is the rights and
obligations of the parties at termination. The obligation of the private
operator on termination is usually to hand over the project back to the
authority in a specified condition.
A transition plan is required to be in place to deal with a situation when thecontract’s term is completed, or it is terminated prematurely.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
49
Contract Formulation
Questions for Audience
Q1. Why is there a need to develop professional
relationship between the private operator and the
authority?
Q2. How can a contract ensure achieving a good
professional relationship between the private operator
and the authority?
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
50
Contract Formulation
Developing client supplier relationship
1
2
3
Shared risk – assigning of risk to where it can be best-
managed
Contracts to be drafted based on financial
viability for both parties
Aiming for a win-win outcome – commitment is
honoured
The adherence to contract formulation parameters may be ensured by setting a
professional client supplier relationship. Fostering a professional relationship
improves the sustainability of performance of the overall bus operations.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
51
Contract Formulation
Developing client supplier relationship
The Operator should respect and share updates on a regular
basis. A monthly meeting to share information would foster the
mutual partnership.✔
The Authority should pay the Operator as per the contract. The
motive of the Operator is to make a profit in order to sustain the
operations and a delay in payment may impact the sustainability
of operations and deteriorate quality of service.✔
The Authority should understand that Operators are partners,
and should discuss the possibilities of corrections prior to
taking actions. The Authority and the Operator must honor their
commitment made at the time of signing the contract.✔
Below are some tips for the authority and the operator for developing a good
client-supplier relationship:
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
52
Contract Formulation
Assessment of Contract Management Capacity – Market Sounding
‘Market sounding’ exercise can be used by the authority to test the level of interest and
availability of potential private operators. It can be done in the following ways:
Key Takeaways
• The Authority must ensure that the views of stakeholders are incorporated while formulating contract.
• Market Sounding ensures that RfP is accepted by the bidders and you receive competitive bids.
EOIExpression of Interested can
be issued to identify firms that
are interested in bidding.
WorkshopA workshop can be conducted
to capture the inputs of various
stakeholders, such as, private
operators, vendors, transport
department, etc.
Road ShowsOrganizing road shows to display
the authority’s perspective and
vision for bus transport.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
53
Contract Formulation
Assessment of Contract Management Capacity
The Authority should understand their commitment to operators, commuters, vendors, etc.
by taking the responsibility to ensure bus services run in the city.
Parameters to assess Contract Management Capacity
• The Authority must have a plan to ensure sources of revenue from fare box, non fare box, and operational subsidy from government.
• To honor the financial commitment, payments are to made to private operators, sub-consultants, PMCs, other contracts such as monitoring, fare collection etc.
• Authority must plan for the necessary infrastructure facilities required for smooth bus systems.
• These include bus depot (for maintenance and parking), terminals and bus stops (with shelters).
• Authority must strengthen its capacity to monitor and control bus operations.
• ITS and MIS is an important tool to strengthen the capacity of monitoring and control.
Monitoring and ControlInfrastructure PlanningFinancial Planning
The Senior Manager must be aware about its strength and capability to honor the contract.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• Draft Guidelines for City Bus Private Operations - MoHUA
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
54
RFQ and RFP Issuance
Questions for Audience
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
Q1. Why should the authority hire a transaction advisor
for managing bid process?
Q2. What type of bid process is recommended to be
followed for outsourcing (one stage, two stage, etc.)?
55
RFQ and RFP Issuance
Standard RfP Provision
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
It is strongly recommended to engage a transaction advisor considering the
scale of the project. Transaction advisor:
The Authority and the bidders are entering into high value and long
term commitments involving reputation risks apart from other risks.
Provides various skills such as legal, PPP, Bus operations, finance and feasibility
Is well equipped to handle high price contracts and provide innovation
Provides unbiased opinion on viability and responsibility of both parties
56
RFQ and RFP Issuance
Standard RfP Provision – Sample calculation
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
Number of Buses: 100 buses
Daily assured kilometers: 100 km/bus
Annual assured kilometers: 36,00,000 kilometers (considering 360 days in a year)
Length of Contract: 8 years
Per kilometer O&M Fee: INR 50/km (operation and maintenance)
O&M Fee escalation: 10% per year
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Annual O&M Fee (in crores)
18.0 19.8 21.8 24.0 26.4 29.0 31.9 35.1
Total Outlay in contract period ~ 205 crores
Cost of buses ~ 40 crores
Cost of finances ~ 40 crores
Bank charges, depot lease change, other charges ~ 20 crores
Authority’s perspective
Private operator’s perspective
57
RFQ and RFP Issuance
Bid Process Management
• Provides
transparency
• Can be one or
two stage
Competitive Bidding
• Single-stage process (RfP)
• Two-stage process (RfQ +
RfP)
Bid Processing
• Quality cum Cost Based
Selection
• Least cost method
Bid evaluation
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
The distribution of Technical to Financial score is generally kept 70:30, but should be considered in detail for evaluating bids.
Since a typical 8 year contract costs ~305 crores (As per the calculation on the
previous slide), comprehensive planning for RfP is recommended.
58
RFQ and RFP Issuance
Bid Process Management – Case study (Outsourced fleet maintenance by DTC)
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
Increase in electronic
content in buses mademaintaining vehicles by DTC
difficult.
NEED FOR OUTSOURCING
For consistent performance,
maintenance wasoutsourced to the supplier.
OUTSOURCINGOF MAINTENANCE OF BUSES
Multi-year contract
negotiated with existingmanufacturers to maintain
buses supplied by them.
NEGOTIATION
OF CONTRACT THROUGH
NON-COMPETITIVE PROCESS
59
Evaluation and Selection
Questions for Audience
Bid evaluationA
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
1. Deciding on outsourcing
3. Contract Formulation
2. Contract Models
Q1. What should be the division of marks between
technical and financial evaluation?
Q2. What happens when you increase or decrease the
weightage of either of them?
60
Evaluation and Selection
Evaluation of bids
Bid evaluationA
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
1. Deciding on outsourcing
3. Contract Formulation
2. Contract Models• Stringent criteria ensures that only serious bidders qualify, but not so high
that only few bidders qualify.
• Relevant experience (recommended to be within previous 3-5 years).
Technical Qualification
• Sufficient bidder capability to undertake financial burden of the project.
• Checked on the basis of average annual turnover and net worth.
• Authority should consider turnover from experience and other services.
Financial Qualification
The technical qualification takes into consideration not only bus operators but transport operators
capable of running buses (such as trucks and taxis). Furthermore, it analyses the operators based
on the capacity of the buses, number of vehicles and number of months of operations.
The operator must score the minimum evaluation to qualify for next round.
61
Contract Monitoring
Questions for Audience
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
Q1. How should the authority monitor activities which
are outsourced for operations and management?
62
Contract Monitoring
Developing a comprehensive monitoring framework
The monitoring framework should be comprehensive and should consider allissues that might arise in the project lifecycle, with due provision for reviewand update at any point of time.
Collection and analysis of information
1Evaluate existing
processes and tools
2
Set the output requirements, design KPIs
3
Design the performance monitoring mechanism
4
Review and update the
performance monitoring
system
5
During the development of the contract During the monitoring period
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Authority should understand that a task which is not monitored properly is never completed.
Daily service monitoring C
63
Contract Monitoring
Developing a comprehensive monitoring framework
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
Monitoring by Strathclyde Partnership for Transport (SPT) (Third Party Inspection)
Action
• SPT Compliance Inspectors monitor bus services noting potential violations of
traffic regulations and preparing reports for the Traffic Commissioner.
• Nearly 3,000 vehicle checks were undertaken.
• SPT’s Compliance Inspectors also carry out monitoring and report instances of non-
compliance, including engine idling, parking issues or missing information.
• This ensures the service being provided by operators meet expected standards.
Impact
• There has been a significantly reduced level of non-compliance recorded since SPT’s
ComplianceInspectors started work. (Third Party Inspection)
• The high level of compliance is reflected by the very low number of breaches found and
specific monitoring is undertaken after complaints have been received.
64
Contract Monitoring
Key Performance Indicators and Outcomes
Outcomes
Customer’s perspective
Operator’s perspective
Financial perspective
City’s perspective
Community’s perspective
Quality of service• Regularity • Punctuality
Customer value• Frequency• Journey time• Behavior of crew• Comfortability• Skipping bus
stops• No. of services
per route defined
Efficiency of
service• Fleet utilization • Vehicle utilization• Crew utilization• KMPL of fuel• Tyre
consumption
Effectiveness of service• Reliability• Rate of incident• Rate of
breakdown• Rate of fatality
Quantitative • Cost/Kms• Variable cost• Fixed cost• Depreciation• Insurance• Taxes• Overhead
• Traffic revenue /kms
Economic viability• Operating ratio• Cost /kms• Earning / Kms• Profit / Loss
Adequacy of service• No. of public
transport buses per lakh population
• Organized bus transport share
• Availability of bus transport
• Service coverage of bus transport
Quality of service• Average waiting
time for bus transport users
Pollution• Reduction in
Pollution
Road • Congestion• Safety compared
to other modes
Women safety
Vehicle Ownership• Average no. of
vehicles per head (ownership)
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
65
Contract Monitoring
Key Performance Indicators and Outcomes
The Key performance indicators have to be analyzed before implementation. The trainingmaterial on “Monitoring and Evaluation” details out the Key Performance Indicators. Belowis a template in which the KPIs should be Benchmarked.
<Enter outcome here><Enter KPI here>
<Enter formula here>
Level of Service (LoS)
Interval Level of Service (LoS)
Slab 1 <1, 2, 3, 4, etc.>
Slab 2 <1, 2, 3, 4, etc.>
Slab 3 <1, 2, 3, 4, etc.>
Slab 4 <1, 2, 3, 4, etc.>
Frequency of Monitoring
Who is going to monitor Frequency
Operator<Daily / Weekly / Fortnightly / Monthly
/ Every 2 months / Quarterly / Semi
Annually / Annually>Middle Level
Senior Manager
Failure and Back End Causes
Assignable Causes Non Assignable Causes
1. Cause 12. Cause 23. …
1. Cause 12. Cause 23. …
Service Performance tools <Enter the method to measure this KPI here>
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
Refer to Training Material on “Monitoring and Evaluation” for more details.
66
Contract Monitoring
Monitoring the services provided by the bus operator
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
Control procedures
Vehicle breakdown response
Emergency or accident response
Malfunctions and technical support for support systems
Safety and security protocols and response
procedures
Reporting procedures
Quality inspection
procedures
Inspection and audit of contract
items
Disciplinary procedures
Monitoring and evaluation is covered in detail in the training session of Monitoring & Evaluation.
67
Contract Monitoring
Monitoring and supervision in London - TFL
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
Monitoring and supervision London (GB): Financial incentives in GCC
Monitoring for Gross Cost Contract for buses is done by TfL as follows:
• The “Quality Incentive” contract payments are based on a monitoring regime that
primarily measures the reliability of the buses. The contract dedicates an entire detailed
section to reliability. It states for example at which location and what frequency
monitoring will take place.
• In addition, customer satisfaction surveys are carried out, measuring waiting time
and riding, driving standard, cleanliness, information at bus stops, etc.
• Other monitoring mechanisms include: Mystery travelers, driving standards
reporting, accident and incident reporting, and environmental reporting.
• Operator league tables are published for reliability and excess wait time. Other
quality indicators are reported at network level only.
• Presently, monitoring is undertaken manually with a hand held device. However, TfL
is in the process of introducing GPS in the future. This tracking system would have
additional benefits, such as passenger information.
68
Thank You !
Time for Discussion
69
Annexures
70
Selection of contractual model based on service plan, financial capacity and institutional capacity
Parameters Description Score Weightage (%)
Max. Score
Parameter Max Score
A Service Plan Key questions to answer before assigning ratings
1 Average load factor What is the average load factor cumulatively on all the routes?
18 3 54
• Below 30% 3
• Between 30% and 60% 2
• More than 60% 1
2 Overlap of routes Are there significant overlap of routes? 10 3 30
• More than 20% 3
• Between 10% and 20% 2
• Less than 10% 1
• No overlap 0
3 Authority's control over network and service plan
Should the authority have more control over frequency, headway, selection and modification of routes? If yes, rate 3 or else 0
4 3 12
4 Integration of different modes Is there a need to achieve seamless integration between different modes (metro, BRTS, water transport, trains etc.)? If yes, rate 3 or else 0.
4 3 12
5 Competing Modes Is there significant competition from other modes? If only one mode then give 1 score, two modes then give 2 score and three or more modes then give 3 score.
10 3 30
• Metro/Mono rail
• IPTs
• Any other
Annexure 1
Below is the detailed table for selecting the most appropriate contract based on service plan, financial capacity and institutional capacity. For further
reading, please refer to “Model Contract Guidelines for City Bus Transport – MoHUA”
Go Back to Slide 23 (Selection of
Contractual Model)
71
Selection of contractual model based on service plan, financial capacity and institutional capacity
Annexure 1
Parameters Description Score Weightage (%)
Max. Score
Parameter Max Score
B Financial Capacity
1 Fund Allocation for Project Has the authority budgeted money for the entire duration of the contract? If yes, rate 3 or else 0.
10 3 30
2 Provision of dedicated funding Is there any provision for funding for the project created such as Urban Transport Fund and/or is there a resolution from the Urban Local Body/State Govt. for funding? If yes, rate 3 or else 0.
18 3 54
3 Credit Rating What is the credit rating of the authorities financing the project?
4 3 12
• BBB and above 3
• Between B and BBB 2
• Less than B 1
• No rating 0
C Institutional Capacity
1 Creation of SPV Is there a SPV created for this project? If yes rate 3, else score 0.
4 3 12
2 Adequacy of Staff for Bus Transport
Are there bus transport staffs dedicated to administer and monitor the project? If yes, rate high or else low.
18 3 54
• More than 10 employees 3
• Between 5 and 10 employees 2
• Between 2 and 5 employees 1
• Less than 2 employees 0
Max. Score (A+B+C) 300Go Back to Slide 23 (Selection of
Contractual Model)
72
Reference table
A. 7-10
B. 11-16
C. 17
D. 18
E. 19
F. 20
A. 8-12
B. 13-15
C. 16
D. 17-18
E. 19
F. 20
A. 7-8
B. 9-11
C. 12
D. 13
E. 14
F. 15-16
Delivery
PPT
Trainer
manual
Participant
Manual
A. 21-24
B. 25-28
C. 29-30
A. 21-24
B. 25-27
C. 28-29
A. 17-19
B. 20-23
C. 24-25
Contract
Model
A. Various models for outsourcing bus operations
B. Summary of different types of Contract Models
C. Selection of the most appropriate Contract Model
2
Deciding on
outsourcing
A. Objective of the authority
B. Activities that can be outsourced
C. Decision for outsourcing
D. Infrastructure Analysis
E. Skilled Manpower Analysis
F. Financial Capacity Analysis
1
Contract
formulation
A. Key parameters in a typical outsourcing contract
B. Risks associated with outsourcing and allocation of risks
C. Deciding on the appropriate length of the outsourcing contract
D. Conditions precedent for the authority and operator
E. Key considerations in an outsourcing contract related to buses
F. Key considerations in an outsourcing contract related to infrastructure
G. Key considerations in an outsourcing contract related to performance
standards
H. Key considerations in an outsourcing contract related to payment
I. Dispute resolution and contract flexibility
3
A. 31
B. 32-35
C. 36-38
D. 39
E. 40
F. 41
G. 42-44
H. 45
I. 46-47
A. 30-32
B. 33-35
C. 36-37
D. 38-39
E. 40
F. 41
G. 42-44
H. 45-46
I. 47
A. 26
B. 27-29
C. 30-31
D. 32
E. 33
F. 34
G. 35-36
H. 37-38
I. 39
73
Reference table
J. 48
K. 48
L. 48
M. 49-51
N. 52-53
J. 48-49
K. 48-49
L. 48-49
M. 50-52
N. 53-54
J. 40
K. 40
L. 40
M. 41-42
N. 43-45
Delivery
PPT
Trainer
manual
Participant
Manual
A. 54-56
B. 57-58
A. 55-58
B. 59-60
A. 46-47
B. 48-49
A. 61-63
B. 64-65
C. 66-67
A. 62-65
B. 66-67
C. 68-69
A. 51-52
B. 53-54
C. 55-57
Contract
formulation
J. Early termination of contract
K. Operator and Authority Default
L. Transition Planning
M. Partnership
N. Contract Management Capacity
3
RFQ and RFP Issuance
A. Standard RfP Provision
B. Bid Process Management4
Evaluation and
SelectionA. Evaluation of bids5
Contract
Monitoring
A. Developing a comprehensive monitoring framework
B. Key Performance Indicators (KPIs) and their Outcomes
C. Monitoring the daily services provided by the bus operator
6
Annexure 1 A. Selection of Appropriate Contract7
A. 59-60 A. 61 A. 50
A. 69-71 A. 71-73 A. 59-61
74
Bibliography• DTTILLP. 2016, Final Guidelines for City Bus Private Operations, Ministry of Housing and Urban Affairs (MoHUA) and Sustainable Urban
Transport Project (SUTP) - http://mohua.gov.in/upload/uploadfiles/files/GuidelineCityBus.pdf, Accessed in April 2019
• PADECO Co., Ltd., 2008. Guidelines for Bus Service Improvement: Policy and Options. Ministry of Housing and Urban Affairs (MoHUA)
and Asian Development Bank
• UNDP, 2013. Toolkit on Finance and Financial Analysis of Urban Transport Projects. Institute of Urban Transport and MoHUA
• https://www.pppinindia.gov.in/toolkit/, Accessed in April 2019
• Urban Mass Transit Company Limited and CEPT University. Urban Bus Specifications Urban Bus Specifications – II. MoHUA
• https://ppiaf.org/sites/ppiaf.org/files/documents/toolkits/UrbanBusToolkit/assets/home.html, Accessed in April 2019
• UNDP. Training Module – Contracting in Urban Transport. Institute of Urban Transport and MoHUA
• Pucher, J., Park, H., Kim, M.K., and Song, J. 2005. Public Transport Reforms in Seoul: Innovations Motivated by Funding Crisis. Journal
of Public Transportation 8(5)
• Kim, H.J., 2007. “Seoul Public Transportation Reform: Experience & Current Initiatives”. Presented at Asia Clean Energy Forum:
Regional Policy and Finance Solutions for Energy Security and Climate Change. Organized by Asian Development Bank. 26-28 June
2007, Manila, Philippines. Retrieved: August 2008.
• Transport for London, London’s Bus Contracting and Tendering Process
• MoHUA provides model contracts for different types of Contract Models. These contracts need to be modified as per the organiz ation’s
requirements.
• GCC – http://mohua.gov.in/upload/uploadfiles/files/ModelGrossCost.pdf
• Hybrid GCC – http://mohua.gov.in/upload/uploadfiles/files/ModelHybrid.pdf
• NCC – http://mohua.gov.in/upload/uploadfiles/files/ModelNetCost.pdf
• Hybrid NCC – http://mohua.gov.in/upload/uploadfiles/files/ModelNetCostHybrid.pdf
P resentation title[To edit, c lick View > Slide Master > Slide Master]
©2019 Deloitte Shared Services India LLP 1
Trainer Manual
1
December 2020December 2020
MINISTRY OF HOUSING AND URBAN AFFAIRS, GOVERNMENT OF INDIA
Consultancy Services for Design and Development of Training Programme for City Transport Professionals
EFFICIENT AND SUSTAINABLE CITY BUS SERVICES PROJECT (INDIA)EFFICIENT AND SUSTAINABLE CITY BUS SERVICES PROJECT (INDIA)
TRAINER’S NOTES – OUTSOURCING FOR SENIOR MANAGERSTRAINER’S NOTES – OUTSOURCING FOR SENIOR MANAGERS
2
PrefaceThe Efficient and Sustainable City Bus Services (ESCBS) project was introduced to improve the efficiency and attractiveness of city
bus transport in India. ESCBS project has three major components, which includes, National Capacity Building (NCB); Regulatory,
Institutional and Fiscal Analysis; and City Demonstration. This engagement falls under the purview of the NCB component of the
ESCBS project. The objective of this engagement is to design and develop training programme for city transport professionals, and
involves undertaking pilot testing, implementation, evaluation, and suitable modification of the training programme.
As a part of this engagement, eight training areas have been identified, and prioritized by the Ministry of Housing and Urban Affairs
(MoHUA).
Policy Advocacy for
Senior Managers
Outsourcing for Senior
Managers
Monitoring and
Evaluation for Senior
Managers
Network Planning for
Middle Managers
Operations Planning for
Middle Managers
Outsourcing for Middle
Managers
Bus Operations for
Middle Managers
ITS and MIS for Middle
Managers
1 2 3 4
5 6 7 8
For each training area, a total of three modules have been prepared:
A. Participant’s Notes: Detailed reference notes containing links to more readings to be circulated before trainings.
B. Trainer’s Notes: Detailed notes for trainer’s reference containing focus points, questions for discussion, etc.
C. Delivery PPT: Brief presentation containing infographics, videos, group activities, etc. to be displayed on screen
3
About the Module
It is strongly recommended that participant’s manual is referred prior to the training session.
This training on “Outsourcing of Bus Operations” provides guidance on the decision making process foroutsourcing activities and selection of an appropriate contractual model for Senior Managers. Thissection discusses the intricacies, parameters, and issues that must be evaluated by SeniorManagers before outsourcing and deciding upon the appropriate contractual model. The moduleexplains in detail that the Authorities may consider outsourcing portions of or the entire bus operations toone or more contractors, as alternative to in-house operations. In addition, the training content will enableparticipants to formulate strategies needed for executing and monitoring of contracts of outsourced busoperations.
4
Learning Objectives
✓ Identifying segments of bus operations which can be outsourced
✓ Taking decision on whether or not to outsource the identified segments or services
✓ Selecting appropriate / suitable contractual model suitable as per the requirements
✓ Overview of key contractual parameters
✓ Appreciating the two-way relationship between client and supplier
✓ Understanding the contours of bid process management
✓ Appreciating the importance of monitoring and developing a monitoring framework
5
Note for Trainers
Questionnaire, 20 min
Tea Break, 30 min
Discussion, 30 min
Group Activity, 100 min
Content Dissemination,
180 min
Lunch, 60 min
Session BreakupTotal 7 hours (420 min)
Key points for Trainers
✓ The trainers shall make sincere efforts to make the
training session interactive.
✓ The trainers shall adhere to the time given for a particular
module. Some time for discussions should be kept aside at
the end of the session.
✓ The trainers are requested to circulate the pre and post
training questionnaire at the beginning of the training
session.
✓ A group activity has been planned for each training
session. The trainers are requested to circulate the same
as per the power point presentation (Delivery
presentation).
✓ It is recommended that the trainer refers to the module-
wise notes. They provide the objective of that module,
along with notes and questions for discussion during the
training session.
Part 1 Part 2Lunch
10:00 AM to 1:00 PM
1:00 PM to 2:00 PM
2:00 PM to 5:00 PM
Tea break 1 Tea break 2
Structure of the training
6
Table of Contents
Contract Model
A. Various models for outsourcing bus operations
B. Summary of different types of Contract Models
C. Selection of the most appropriate Contract Model
2
Deciding on outsourcing
A. Objective of the authority
B. Activities that can be outsourced
C. Decision for outsourcing
D. Infrastructure Analysis
E. Skilled Manpower Analysis
F. Financial Capacity Analysis
1
Contract formulation
A. Key parameters in a typical outsourcing contract
B. Risks associated with outsourcing and allocation of risks
C. Deciding on the appropriate length of the outsourcing contract
D. Conditions precedent for the authority and operator
E. Key considerations in an outsourcing contract related to buses
F. Key considerations in an outsourcing contract related to infrastructure
G. Key considerations in an outsourcing contract related to performance standards
H. Key considerations in an outsourcing contract related to payment
I. Dispute resolution and contract flexibility
3
7
Table of Contents
Contract formulation
J. Early termination of contract
K. Operator and Authority Default
L. Transition Planning
M. Developing client supplier relationship
N. Contract Management Capacity
3
RFQ and RFP IssuanceA. Standard RfP Provision
B. Bid Process Management4
Evaluation and Selection A. Evaluation of bids5
Contract MonitoringA. Developing a comprehensive monitoring framework
B. Key Performance Indicators (KPIs) and their Outcomes
C. Monitoring the daily services provided by the bus operator
6
Annexure 1 A. Selection of Appropriate Contract7
8
Deciding on outsourcing
Notes for Trainer
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Time allocated for this module
Approximately 40 minutes.
Module Notes
This module provides information on the key factors a senior manager should look at before
deciding to outsource an activity of the bus transport organization.
Focus point for trainer
The trainer should focus on the fact that the Authority should play the role of a regulator. The
trainer should make the senior managers realize that the responsibility of the authority is not
to run the buses but to see that the buses run.
Questions for Discussion
• What all activities can be outsourced in a bus transport organization?
• What all activities should never be outsourced for a bus transport organization?
• What all activities should be outsourced for a bus transport organization?
• What all factors should a senior manager look at before deciding to outsource an activity?
9
Deciding on outsourcing
Objective of the authority - Elements of City Bus Transport
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
The city bus system comprises of the following elements:
Route Planning
Using ICT systems to improve route planning
methodology
Time table designing
Designing the time table on the basis of demand
on planned routes and
bus availability
Fleet and Crew
Scheduling
Mapping fleet and crew as per the time table
designed
Operations of Services
Operating the buses on the basis of planned
routes, timetable, and scheduled data
Assessment of the prevailing practices used in planning and designing bus operations and related aspectsAssessment of the prevailing practices used in planning and designing bus operations and related aspects
Planning Framework
Monitoring Framework
Monitoring of bus services should be based on the following indicators:
• Readiness assessment (Setting the baseline)
• Service Level Benchmarking (Benchmarking various elements)
• Evaluation (Evaluating the elements based on benchmarks)
• Reporting and Finding (Reporting actual value & deviation from benchmarking in order to take necessary action)
10
Deciding on outsourcing
Objective of the authority for providing bus operations
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• Guidelines for Bus Service Improvement – ADB
The authority should understand that it’s objective is not to run the buses
but to see that the buses run.
The objectives should be very specific and clear before outsourcing an activity.
This objective should be explained to the private operator before
outsourcing the activity
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
The primary objective of bus transport organizations is to manage bus transport system i.e., satisfying the
demand of the citizens. At the same time, the overall objective of the Authority include:
• Generate/Sustain/Increase modal share of public transport• Decreasing the congestion in the city
Citizen Centric
Objectives
Environmenta
l Objectives
Social
Objectives
Adequacy
Regularity
and Reliability
Comfort and
Convenience
Affordability
Accessibility
7
6
54
3
2
1
11
Deciding on outsourcing
Objective of the Authority; Activities to outsource; Decision to outsource
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Notes for Trainer: Decision on Outsourcing (Objective of the Authority)
• Focus on setting the objectives of the organization as per the demand of the customers. (This is
explained in detail in Policy Advocacy training material)
• The objective may vary as per the city route / area. Example: On one route, the passengers may
demand comfortable services, and on other they may demand affordable bus services.
• Focus on setting this objective straight before taking the decision on whether to outsource or not.
Notes for Trainer: Decision on Outsourcing (Activities to be outsourced)
• The mechanism may vary as per the organization type. Example: SPV and SRTC.
• Focus on the fact that activities to be outsourced require brainstorming and detailed analysis.
• Note that all of these activities are equally important. Operations and Maintenance of buses is just one
aspect of running an efficient bus service in a city.
• Seoul Case study: The Seoul case study focuses on decision of outsourcing because of the problems
listed. Note that the SMG shifted it’s role from operations to monitoring after taking the decision to
outsource. This shift in organization’s day to day activities needs to be focused upon.
Notes for Trainer: Decision on Outsourcing (Decision on Outsourcing)
• Focus on the detailed assessment of these two parameters for outsourcing any particular activity.
• Example: In operations and maintenance of buses, the available infrastructure would include depot,
terminal, and bus station. Skilled manpower would include drivers, conductors, artisans, etc.
• The key focus of this slide is on recruiting a transaction advisor to help draft the contracts and include
necessary agreements. Note that the shift in organization structure from operations role to monitoring
role would require two key aspects – concession agreement formulation and monitoring skills.
12
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Time allocation:
• Completing the Chart
– 40 minutes
• Presentation of the
Chart – 15 minutes
each group
Group Activity
Notes for Trainer
Participants are from different cities and often more than one participant report from the same city, so
following is a prerequisite:
1. Formation of groups –
a) It is ideal to have a group of size of 04-06 participants; based on no. of participants, estimate
how many groups are required.
b) Identify the team leaders (voluntarily) for the groups and inform the other participants to join
the team leader. Ensure to create heterogeneous groups.
2. Now allot the group activity sheet.
3. On completion of group activity by each team, inform the participants to share the challenges they are
facing and what are the current practices they are following.
13
Deciding on outsourcing
Activities that can be outsourced
S.No. Activity Mechanism
1 Route Planning Authority / Specialist
2 Infrastructure Planning Authority / Specialist
3 Passenger fare Authority / Specialist
4 Procurement Authority / Private Operator
5 Ownership Agency procuring the buses
6 Operation and Maintenance Private Operator
7 Land Acquisition Authority
8 Construction Specialist / Private Operator
9 Procurement of equipment Authority / Private Operator
10 Ownership Agency procuring the equipment
11 Operations and Maintenance Private Operator
12 Construction of Control Center Specialist / Private Operator
13 Procurement of equipment Authority / Private Operator
14 Ownership of Control Center Authority
15 Operation and Maintenance of Control Center Private Operator
16 Ownership of ITS equipment Authority / Private Operator
17 Operation and Maintenance of ITS equipment Private Operator
Activities that can be outsourced and the respective mechanisms are provided below:
Pla
nnin
gB
uses
Infr
astr
uctu
reM
onit
ori
ng and
Contr
ol
Authority:
Specialist:
Private Operator:
Authority may perform the activity in-house
Authority may hire a specialist to complete the task
Authority may outsource the activity to Private Operator
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
14
Deciding on outsourcing
Deciding on Outsourcing – Case Study
Seoul – Outsourcing of Bus Services
Context
• Prior to 2004, the bus system in Seoul was mostly deregulated.
• Private bus companies were allowed to provide services on any routes they deemed commercially viable,
subject to obtaining an easily available license from the public authority.
• The Seoul Metropolitan Government (SMG) had very little control over the system aside from setting fare
levels.
Problem
• Most significantly, the SMG played no role in route or system planning.
• Since there was no overarching organization of the bus network, this resulted in a highly inefficient and
disorganized system with many overlapping and circuitous routes, low service levels in some areas and
excessive supply in others, and poor integration between the various bus routes and other transport
modes.
Action
• The major change in this regard was to switch from a mostly deregulated market to a 'semi-public' or
'quasi-public' system.
Impact
• Under this new approach, private bus operators continue in their role as service providers, but all decisions
regarding route planning, schedules, fare levels and overall system design are now under the control of
the SMG.
• The private bus companies have to participate in a competitive tendering process in order to win the right to ply
specific routes.
• Bus companies that succeed in winning tenders provide services according to strict contractual specifications
stipulated by the SMG.
• The Seoul bus system transitioned from a 'passive franchise' model to a 'proactive planning with service
contracts' model.
For further reading, kindly refer to the following material
• https://wrirosscities.org/sites/default/files/Bus%20Karo%20-%20Guidebook%20on%20Planning%20and%20Operations.pdf
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
15
Deciding on outsourcing
Deciding on Outsourcing – Case Study
Chandigarh Transport University (CTU) – Outsourcing of Bus Maintenance
Action
• The Chandigarh Transport Undertaking (CTU) decided to recruit employees for various branches through
outsourcing mode.
• It was also decided to outsource the maintenance of two depots of the CTU, which would soon float tenders for
the same. The department had already outsourced the maintenance of Depot No. 4. Under the agreement, the
company looks after the maintenance of buses and provides all kinds of spare parts.
• Except electricity and water charges, all maintenance, including expenditure on account of tyres, replacement
of batteries, bus charging stations, spare parts, suspension, running, and major and minor repairs of the
buses during the period of the contract has been made the responsibility of the successful bidder.
Impact
• The quality of maintenance activity has improved considerably after making the decision to outsource. It is
because the private party brings in innovative mechanisms and experience.
For further reading, kindly refer to the following material
• https://www.tribuneindia.com/news/chandigarh/ctu-to-hire-staff-on-outsourcing-basis-40769
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
16
Deciding on outsourcing
Decision for outsourcing an activity
*The organization may choose to outsource entire or certain aspects of bus operations, even when it has in-house capacity to deliver the same. Example: The Authority may decide that operator may operate busesmore efficiently, the decision of in-house does not align with the vision of the authority (SPV), etc.
In order to make the decision to outsource an activity or conduct it in-house, the authority needs to look at
two important factors. They are as follows:
Infrastructure – The authority should look at infrastructure availability for carrying out the
activity which is under consideration for outsourcing. Example: It should not happen that the
operations of buses in a particular region / route is outsourced without the availability and proper
functioning of the supporting infrastructure such as bus depot, bus shelters, etc.
Skilled People – The authority should look at availability of skilled people for conducting the
activity which is under consideration for outsourcing. Example: For equipping buses with ITS
system, availability of skilled people for data analytics and ITS experts is necessary.
✓ In order to make the decision to outsource, the authority should understand that the business mind
should never be outsourced. The responsibility for business decisions must lie with the authority and not
be assigned.
✓ The outsourcing should be availed from an organization / person with a reputation risk. This would
ensure effective outcome on the outsourced task no matter the situation.
✓ It is highly recommended that the authority should have a transaction advisor. In order to make the
decision for outsourcing, drafting the RfP and modifying as per the response from bidders, the
transaction advisor is highly recommended to facilitate a balanced view.
In the absence of the above elements to an appropriate level, the authority needs to develop on these
before making the decision to outsource any activity.
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
17
Deciding on outsourcing
Infrastructure; Skilled Manpower; Financial Capacity (Notes for Trainer)
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
Notes for Trainer: Decision on Outsourcing (Infrastructure)
• Under infrastructure, the as-is assessment is crucial. However, the future scope of provision of services
should also be considered.
• Example: while analyzing bus depot, the possibility of procuring more buses, possibility of including more
area for maintenance, etc. should be considered.
Notes for Trainer: Decision on Outsourcing (Skilled Manpower)
• Under skilled manpower, two things need to be analyzed simultaneously – manpower strength and
manpower skills.
• The strength and skills of manpower may be improved with recruiting and training respectively. However,
it is also possible to outsource the model to a private operator which already has skilled manpower.
• Furthermore, the focus must be on retaining the skilled manpower.
Notes for Trainer: Decision on Outsourcing (Financial Capacity)
• The trainer must ensure that the authority understands that by outsourcing, authority is still responsible
for payment of activities related to bus operations. It is a question of whether the authority chooses to
pay up-front (In-House) or by paying down the line (Outsourcing).
• In order to optimize the finance, the authority must utilize the current resources properly to ensure more
revenue (traffic and non-traffic revenue). There are various modes by which revenue can be earned,
example: monetization of data held by authority, proper marketing and advertising, and most
importantly, proper scheduling adherence and monitoring to ensure more ridership which will in-turn lead
to more traffic revenue. It is also suggested that the authority meet with experts regularly to take their
inputs and solve the problems on a regular basis.
18
Deciding on outsourcing
Infrastructure
The authority should assess the existing infrastructure in place and make the necessary amendments
before outsourcing bus operations. The infrastructure in bus transport consists of Bus Depot, Bus Terminal,
Bus Stops, and Control Center (for Monitoring and Evaluation).
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• Guidelines for Bus Service Improvement – ADB
S.No. Activity Responsibility
INFRASTRUCTURE
1 Land Acquisition Authority
2 Construction Specialist / Private Operator
3 Procurement of equipment Authority / Private Operator
4 Ownership Agency procuring the equipment
5 Operations and Maintenance Private Operator
An as-is assessment of the existing activities of the authority is conducted to identify gaps in services and
infrastructure. Example: the as-is assessment may include analysis on the availability of bus depot, bus
terminal, bus stops, control center; utilities in the infrastructure, issues in the current infrastructure, etc.
As part of gap identification, the following aspects should be covered:
• Understanding current and future service needs in bus operations
• Understanding availability of infrastructure for provisioning of services across, such as fleet, passenger
amenities, bus depots and bus terminals.
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
19
Deciding on outsourcing
Skilled manpower
Authorities should assess the availability of skilled manpower in the organization to deliver bus transport
services and facilitate decision making for outsourcing, training, and recruitment of staff.
Skilled manpower must be available for deployment, in the absence of which, the following steps can beundertaken to fill the gap.
Recruit / Train
This option should be explored when a long-term task is to be performedby the authority. The authority may recruit skilled manpower or train theexisting manpower to make them efficient in a particular task.
Outsource
This option should be explored when a difficult short-term task is to beperformed by the authority. This option may also be explored if theobjective of the authority would be to run on outsourcing model.
BEST Undertaking stopped the recruitment of employees for several years. When the recruitment began,
the new recruiters were unskilled, while the existing skilled manpower was about to retire. This created an
age gap in employees suggesting that the HR policy was not implemented properly.
The authority should understand the need for skilled manpower retention, which includes data analytics
expert, ITS expert, etc.
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
20
Deciding on outsourcing
Financial Capacity
An analysis of the financial status of bus transport organizations can help authorities identify the
constraints within which they have to operate their bus services. This analysis also allows decision makers
to understand the extent to which costs of public transport needs to be recovered from users and/or non-
users.
Analysis of financial capacity in a bus transport organization
• Assessing the financial capacity in a bus transport organization requires analyzing its financial statements such as
Income statement, Balance sheet, and Cash flow statement.
• Financial constraints can be further assessed by employing various Key Performance Indicators (KPIs).
• Organizations can assess revenue and cost breakdowns to identify key revenue and cost drivers, respectively. In
addition to these, there are certain KPIs which can aid the assessment of operational efficiency and fare levels.
• These KPIs include
• Operating cost per km, Operating cost per passenger-km, Operating cost per passenger
• Revenue per km, Revenue per passenger-km, Revenue per passenger
• Profit / Loss, Operating Ratio
• Traffic and Non-Traffic revenue as a % of Total Revenue
• Passengers per effective vehicle km
• Revenue earning kilometers
• Operating Cost components (such as fuel and lubricants, tyres and spares, and staff) as % of Total Cost
• Non-Operating Cost components (such as depreciation, interest, etc.) as % of Total Cost, etc.
While the authority has to bear the cost, it may choose to pay it up-front or pay it on an annual
basis with the interest rate to be recovered from the users.
This training material discusses Operations and Management activities through four Contract Models.
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
21
Contract Models
Notes for Trainer
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Time allocated for this module
Approximately 20 minutes.
Module Notes
This module provides information on various Contract Models that can be used for outsourcing
bus operations and management activities.
Focus point for trainer
The trainers should focus on selection of the most appropriate model for a particular city.
Questions for Discussion
• What type of Contract Models exists for outsourcing activities of operations and
management in bus transport?
• How do you select the most appropriate contract out of the above?
22
Contract Models
Models for outsourcing bus operations
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
Four types of Contract Models which may be used to outsource operations management activities are discussed in this training program.
Types of
Contract Models
Gross Cost Contract (GCC) Hybrid Gross Cost Contract (Hybrid GCC)
Net Cost Contract (NCC) Hybrid Net Cost Contract (Hybrid NCC)
• In GCC, the authority takes the major role ofmanaging the network, by contracting the operatorsand paying them to provide a set level of servicesunder set quality standards. The authority carries the
revenue risk, plans overall services, manages thecontract for Level of Service (LOS) and quality, and isresponsible for customer service.
• Under a hybrid GCC (a variant of the GCC), theauthority carries the prime responsibility forpassenger service outcomes and sets explicitMinimum Service Level (MSL). The authority also
incentivizes the operator through additional paymentfor ridership growth.
• In NCC, the authority performs a more regulatoryrole, and the operator carries the revenue risk.Service planning is mostly done by the operator,although Minimum Service Level and KPIs are set asconditions for awarding the NCC.
• In Hybrid NCC (a variant of the NCC), the authoritysupports non-commercial routes where service on theroutes needs to be provided as a public serviceobligation.
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
23
Models for outsourcing bus operations: Hybrid GCC – Adelaide
Contract Models
The Hybrid GCC Contract Model in Adelaide – Incentives linked to increased ridership
Key Features of Hybrid GCC Contract Model in Adelaide
a. Operator’s payment is divided into two components - a fixed monthly sum and a patronage-related
incentive amount, calculated according to the change in patronage from the base year, at a rate
of $0.50 per passenger boarding, plus $0.10 per passenger kilometer. Incentive component is typically
around 50% of contract payments.
b. The contracts are area-based giving operators’ exclusive rights within their service area and are
awarded through a competitive bidding process. A set of minimum service standards are
prescribed, both metropolitan-wide and specific to each contract area.
c. The initial term of the contract is five years which can be extended to another five years by way of
negotiations depending on performance satisfaction. The contracted operator has the primary
responsibility for developing proposals for service enhancements and variations. Any proposed
changes needs to be approved by the transport authority.
d. The fleet deployment plan is prepared by the transport authority. The operators had the
provision to submit a proposal, to amend the fleet deployment plan in accordance with their tactical
measures to improve services. However, proposals for these changes were subject to approval by
the authority.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
24
Models for outsourcing bus operations: NCC Indore
Contract Models
Net Cost Contract - Indore
Atal Indore City Transport Services Limited (AICTSL), an SPV formed by Indore Municipal
Corporation and Indore Development Authority, operates their buses under the Net Cost Contract.
Key features:
• 18 routes with highest ridership in the city
are outsourced.
• Technical and service specifications
prescribed by AICTSL.
• Fleet procured and owned by private
operator.
• 90% of revenue from advertisements on
buses available to the operator.
• First Right of refusal is given to the operator
for additional requirement of fleet due to
demand increase.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• http://www.citybusindore.com/images/tender/NITANDTENDERDOCSECONDCALL.pdf
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
25
Case Study – Delhi Cluster Bus Operations
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Context
Outcome
Critical Success Factors• GCC model has been adopted to ensure greater focus on service quality, which is also endorsed by the judicial system.
• Procurement, monitoring, and management of bus operations is now done by a professional agency called DIMTS (a joint venture of GNCTD and IDFC).
• DIMTS revamped the entire existing structure and re-grouped the 657 routes of Delhi into 17 clusters using digital models.
• In place is also a robust performance management system with incentives to reward or penalize the operator on the basis of quality of services delivered.
• 100% electronic ticketing through online ETM machines, deployment of special ticket checking squad, availability of real time tickets and traffic situation data, GPS installation in all cluster buses which are monitored in the control room.
1948-1992
Bus services in Delhi were
completely owned and operated by
the Delhi Transport Undertaking
(DTU).
1992-2001
To supplement DTC operations,
new scheme for private bus service
in Delhi was launched under Stage
Carriage Permits.
2011 Onwards
The bus transport market in Delhi
has transitioned from competition
‘in-the market’ to competition ‘for-
the-market’ through corporatization of private stage
carriage using the cluster approach.
Private operator running the buses alongside DTC in the ratio of
60:40.
Some of the key challenges during
their operations were high
operating costs, revenue
leakages, and inefficient
operations.
Key challenges were fierce
competition ‘in–the-market’
which led to negligent and rash
driving, leading to fatal accidents
and other operational weaknesses.
Successful operations of more than 2400 buses under the cluster scheme which carries
average daily passenger load of about 831 passengers per bus (a total of 10.6 lakh passengers every day)
26
Case Study - Delhi
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Delhi: Outsourcing of Bus Services
• The first modified GCC with corporate sector operators
• Began with a Designated Account maintained & managed outside the
Treasury by the city government’s Programme Manager (PM) company
(private company).
• Its function defined as IM (Integrated Mechanism) which manages the entire
service, including FCM (Fare Collection Management), payment to Bus
Service Concessionaires & other vendors
• The Designated Account case itself bears a brief mention as it has stood the
rigors of audit scrutiny (both central & state/UT level) on the grounds that
the fare paid by pax is a user-charge and is a government receipt (not
revenue) which is meant to remunerate the service-provider.
• Made creative use of the MV Act, 1988 as it was in 2009-10 & not only
withstood judicial scrutiny but got strong judicial endorsement of the
Business Model and the method of its operation, monitoring & control.
27
Summary of different types of Contract Models
Parameter GCC Hybrid GCC NCC Hybrid NCC
Suitability of the
contract
• Authority has
maximum control
• Authority has more
control and intends
that operator shares some revenue risk
• Operators have more
control
• Higher revenue risk for operator
• Limited competition
on routes
• Operators have more
control, but less than
NCC• Revenue risk for
operator is lower than
NCC
• Limited competition on routes
Revenue risk
• Authority Shared:
• Base cost by
authority• Ridership increase by
operators
• Operator • Operator, subsidy by
authority on un-viable
routes
Degree of
operator’s incentive
to increase ridership
• Nil
• Fixed payment
irrespective of ridership
• Moderate
• Bonus on increase in
ridership
• High
• Revenue directly
linked to ridership
• High
• Revenue directly linked
to ridership
Monitoring and
penalty regime
• Requires strong
and consistent
monitoring with penalty for
service below
benchmark
performance
• Higher level of
monitoring than GCC
because of greater economic incentive
for performance
• Less monitoring
• Only service quality
parameters monitored
• Level of monitoring is
higher than NCC.
• In addition to service level parameters,
monitoring of movement
of bus on un-viable
routes
Access to Finance
• Guaranteed
income with
reduced credit risk
• Part of income
assured; lower risk
• Increases credit risk
especially if no track
record or demand is uncertain
• Risk should be
quantified
• Reduces revenue risk as
non-commercial routes
are supported. • Improves credit-
worthiness, but lower
than GCC
Contract Models
Access to finance (Bankability) should not be the sole criterion for selection of a business model. Hence, extreme caution must be adopted while considering access to finance as one of the key parameters.
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
28
Selection of the most appropriate contract model
Rating Weight Score
Low 4% 1
Med. 10% 2
High 18% 3
Total Score Type of Model
Equal & Above 210 Gross Cost Contract
Between 150 & 210 Depends on inflection points
Below 150 Net Cost Contract
Contract Models
• Service Plan identifying the role of the
authority vis-à-vis the operators.
• Financial Capacity that deals with financingarrangements of contracting authorities for
operations.
• Institutional Capacity that captures the
ability of contracting authority to manage the
contract.
• Based on the Total Score, most appropriate
Contract Model is selected.
• Each of the above parameters may be rated
Low, Medium or High based on their relativeimportance in contract selection and
accordingly assigned a weight.
• Each parameter is further scored on a
1-3 point scale based on theassessment for that parameter.
Selection Parameters
Calculating Scores
Assigning Rates and Weights
Selecting Contract Model
01 02
03 04
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
Refer to Annexure 1 for the detailing of
selection of appropriate contract model.
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
29
Selection of the most appropriate contractual model – Notes for Trainer
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Notes for Trainer: Contractual Model (Selection of the most appropriate contractual model)
• The trainer should focus on finalizing the selection parameters. The details of the same are provided in
Annexure 1.
• The assigning of weights on these parameters and calculating the score helps in finalizing which
contractual model is best for their city.
30
Contract Formulation
Notes for Trainer
Time allocated for this module
Approximately 60 minutes.
Module Notes
• This module provides information on some of the important contractual parameters in a
typical outsourcing contract.
• Furthermore, it provides information on the importance of change required in the
relationship between the authority and the operator (Client-Supplier relationship).
Focus point for trainer
The trainers should focus on the importance of developing a good client-supplier relationship
and understanding the needs of both the parties.
Questions for Discussion
• What are some of the important clauses in a typical outsourcing contract for operations
and management?
• Why is there a need to develop a professional relationship between private operator and
authority?
• How can you achieve a good professional relationship between the private operator and the
authority?
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
31
Contract Formulation
Key parameters in a typical outsourcing contract
Part 1: Preliminary
1. Definitions & Interpretations
2. Performance Security
3. Scope of Work
4. Grant of Contract
5. Conditions Precedent
6. Obligations of the operator
7. Obligations of the authority
8. Representations and Warranties
9. Disclaimer
Part 2: Operations
1. Buses
2. Bus Depot
3. Entry of respective lot of buses into commercial service
4. Operations
5. Maintenance
6. Monitoring of Operations and Maintenance
Part 3: Financial Covenants
1. Payment to the Operator
2. Escrow Account
3. Insurance
4. Accounts and Audit
Part 4: Force Majeure and Termination
1. Force Majeure
2. Change of Scope
3. Termination
4. Transition Phase and Handback of Project Facility
Part 5: Other Provisions
1. Assignment and charges
2. Change in Law
3. Liability and Indemnity
4. Rights and title over the project facilities
5. Dispute Resolution
6. Disclosure
7. Redressal of Public Grievances
8. Miscellaneous
9. Definitions
Part 6: Schedules
Covered in this training
session
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• http://mohua.gov.in/cms/model-citybus.php - Draft contract template
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
32
Contract Formulation
Key contractual parameters; Risk assessment; Contract length (Notes for Trainer)
Notes for Trainer: Contractual Formulation (Key Contractual Parameters)
• The key contractual clauses are highlighted and discussed in this section.
Notes for Trainer: Contractual Formulation (Risk assessment and allocation)
• Trainer should discuss the definition of each risk and the need to allocate them properly.
• The allocation matrix is depicted in the next slide.
• A particular risk should be rated on two parameters, namely, “Degree of Risk” and “Likelihood of
occurrence”.
• The risk with less degree and less likelihood is generally retained by the authority.
• The trainer should focus on the importance of conducting the activity of risk allocation properly.
✓ Risk assessment and allocation
✓ Length of the contract
✓ Conditions precedent
✓ Buses
✓ Infrastructure
✓ Performance Standards
✓ Payment Mechanisms
✓ Contract Flexibility
✓ Dispute Resolution
✓ Termination
✓ Operator and Authority Default
✓ Transition Plan
Notes for Trainer: Contractual Formulation (Length of the contract)
• The trainer should focus on setting the appropriate contract length, and the methodology for extension of
contract if the authority wishes to extend it due to the above benchmark services.
• In this case study, the trainer should focus on setting the contract length equivalent to the asset life of
the vehicle.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
33
Contract Formulation
Risks associated with outsourcing and allocation of risks
The main tasks in managing and mitigating risks are:
• To identify them and assess their likely impact (consequence).
• To conduct an assessment of likelihood (how likely is the occurrence of such an event).
Analyzing these risks would help in avoiding or dealing with consequences such as increased costs, delayed
time etc. Risk is best allocated to the party which can manage that risk.
Risk Explanation Consequence
Commissioning Risk Risk that the authority or the operator, or both, might not receive allapprovals needed to provide the services
• Additional Costs
• Delayed Service
Revenue Risk Risk which affects the overall profitability or viability of services, orthe level of public subsidy required to support services
• Losses
• Reduced revenue
Procurement Risk Risk that the buses are not delivered on time or as per specification • Delayed Service
Financial Risk Risk that the project isn’t able to raise debt or achieve financialclosure
• Additional Funding Costs
• Delayed Service
Operating Risk Risk that adversely affects the day-to-day operations • Reduced revenue
• Losses
• Additional Costs
Performance Risk Risk that the operator is not able to meet availability andperformance standards
• Deficient services
• Reduced revenue
• Losses
Force Majeure Risk Risk that unanticipated acts delay the project or destroy the assets ofthe project
• Additional Costs
• Reduced Revenue
• Losses
Change in Law Risk Risk that legal framework of the project will be affected • Cost of compliance withnew regulations
For further reading, kindly refer “Model Contract Guidelines for City Bus Transport – MoHUA”
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
34
Contract Formulation
Risks associated with outsourcing and allocation of risks
Commission Risk
Revenue Risk
Procurement Risk
Performance Risk
Force Majeure Risk
Change in Law Risk
Financial Risk
Operating Risk
Authority
Authority
Authority/Operator
Operator
Authority/Operator
Authority
Authority/Operator
Operator
RISK TYPE GCC NCC
Authority
Operator
Authority/Operator
Operator
Authority/Operator
Authority
Authority/Operator
Operator
Risk allocation to be decided by Authority depending on their capacity to manage it.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
35
Contract Formulation
Risks associated with outsourcing and allocation of risks
The risks so identified need to be classified into retained risks (with the authority), transferable risks
(transferable to the operator), and shared risks (shared by both parties).
These risks then need to be detailed and categorized as per “Degree of Risk” and “Likelihood”. For example:
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
AS 4360:1999 Qualitative measure of CONSEQUENCE
LEVEL DESCRIPTOR DESCRIPTION
1 InsignificantLittle negative impact on system
operation or image
2 Minor
Affects reliability and convenience
of passengers as well as system
reputation
3 ModerateA compromise on service quality
and systemcredibility
4 Major
Major event requiring urgent
attention; threatens system
integrity
5 Catastrophic
Affects total system with massive
financial or political impact, or
future of operations
AS 4360:1999 Qualitative measure of LIKELIHOOD
LEVEL DESCRIPTOR DESCRIPTION
A Almost certain Expectedto occur
B LikelyWill probably occur during normal
circumstances
C PossibleCould occur under certain
circumstance
D UnlikelyWould not be expected to occur
under most circumstances
E RareCould occur under unusual
circumstances
The risks which are of lesser degree and lesser
likelihood are generally retained by the
authority. An indicative matrix is depicted in the
adjacent figure. The risk needs to be distributed
as per the risk appetite.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
36
Contract Formulation
Length of the outsourcing contract
• Determining the contract period not only ensures timely commencement of services but also generates interest among the operators.
• The authority should decide upon the length of the contract which is most suitable to its objectives and
requirements, such as availability of bidders, recovery of costs, and favorable investment horizon.
• Ideally, the length of the contract should be equal to the economic life of buses (as shown in the case
study on the next page) since prior to that the maintenance cost of the bus would increase. (Additional
charges related to change and maintenance of buses that become old and causes more discomfort to
passengers should be included in the new contract, etc.)
Pros of short-term contract
Shorter contracts provide an opportunity to test market prices frequently, to inject new blood and renew the fleet and
technology
Private operators remain motivated to maintain high standards of performance and maintain the fleet
Increases competition and the authority may re-tender the project frequently to get the best price
Cons of short-term contract
Short contracts are costly, disruptive, as operators change often, and may not deliver anticipated benefits. Short term contracts
are less attractive from operators’ perspective and results in few bidders
The interest of contractors towards building the business may deteriorate if they do not see themselves as long-termoperators
The value for money or lifecycle cost may not meet the expectations of the authority. Not suitable if operator is required to
invest in infrastructure
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
37
Contract Formulation
Length of the outsourcing contract in Bogota (Columbia)
Contract length in Bogota, Colombia
The term of contract for TransMilenio in Bogota (Colombia) depends on the time the operator takes to recoup
its investment. The regular operation period of the contract is between the start of regular operation as determined
by TransMilenio S.A. and the time at which average mileage of fleet usage reaches 850,000 kilometers. A higher
mileage every year leads to a shorter contract while smaller mileage allows for longer contracts giving the
private operator time to recoup its investment.
Inference: A traditional approach for the length of the contract term is to align it with the asset life of the vehicle.
Achieving higher mileage would require good maintenance of buses which would ensure high quality service. In
Bogota, a bus approximately runs 235 kms a day which makes 85,000 kms a year making a general contract length
of 10 years.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
38
Contract Formulation
Conditions precedent for the authority and operator
Conditions Precedent
1Authority’s conditions precedent
• Execute depot license agreement with the operator
• Procure water, sewage, electricity at bus depot / parking space
• Procure bus permits
• Grant approvals, permissions, and authorization within competence of
the authority
• Execution of Escrow Accounts
• Handing over the bus depot
Operator’s conditions precedent
• Sign the agreement within specified days of letter of acceptance
• Submit a performance guarantee in the form of a bank guarantee
• Certify that all representations and warranties are true and correct
• Deliver the initial lot of buses according to the bus delivery schedule
2
• Conditions precedent are the items and obligations the respective parties must fulfil prior to the contract coming into
effect.
• These typically have a material impact on the effectiveness of the contract and could include necessary permissions,
availability of facilities, necessary preparation, etc.
If either party is unable to fulfil the conditions precedent, there is a provision to extend the period to fulfil conditions
precedent. However, the party failing to achieve conditions precedent is liable to a penalty. Further, if the party is not
able to fulfil the conditions precedent even within the extended period, the other party has the right to terminate the
contract.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
39
Contract Formulation
Conditions precedent; Buses; Infrastructure (Notes for Trainer)
Notes for Trainer: Contractual Formulation (Conditions precedent)
• The instructor should focus on inclusion of conditions precedent in the contract for both the Authority and
the Operator. Both parties should fulfil certain conditions prior to the commencement of the contract.
Notes for Trainer: Contractual Formulation (Buses)
• The instructor should focus on key considerations related to buses.
• The details include asking questions such as “Who shall set technical specifications”, “Who shall select the
type and number of buses”, “Who shall procure the finalized buses”, etc.
Notes for Trainer: Contractual Formulation (Infrastructure)
• The instructor should focus on analyzing the infrastructure and setting necessary clauses.
• Within each infrastructure, utilities should be finalized properly, such as drainage, electricity and power
backup, water facilities, etc.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
40
Contract Formulation
Key considerations in an outsourcing contract related to buses
Buses
• Authority shall use the latest bus specifications prepared by MoHUA
• Ticketing equipment specification set by the authority
• Authority to identify fleet size based on demand and service requirements
• Authority to select bus type suitable to service design and passenger expectations
• Investment on buses made either by the authority or the private operator
• Defined time period set in contract for delivery of buses
• Defined time period set in contract for commencement of bus services
Who shall procure and what shall be the timeframe?
Who shall select the type and number of buses?
Who shall set the technical specifications?
Decisions related to fleet procurement are key to provisioning of bus services. These decisions impact theefficiency of operations, financials, service level, environment, public service objective of bus operations,etc.
It should be noted that technical specifications should not be manufacturer specific since it
limits the availability of fleet due to the specified design with limited manufacturers.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
41
Contract Formulation
Key considerations in an outsourcing contract related to infrastructure
Successful bus operations and contract viability are reliant on availability of key infrastructure facilities.
• All bus contracts require the specification of
a bus depot to manage the functions of
parking, fleet repair and scheduled
maintenance, fueling, washing and cleaning
administration, and management of
operations, etc.
• Bus depots are generally provided by the
authority. Utilities used in operations and
maintenance should be brought by the
operators.
• The location and size of bus terminals are determined on
the basis of route network structure and function
especially if multi-modal functions are needed, and are
usually at places where a number of routes and modes
converge or intersect.
• Ownership of terminal is under the authority. The
operation and maintenance may be outsourced to private
operator under a contract.
From an operator’s viewpoint, bus stops are an important
element in the contract because the revenue is directly
affected by the provision or lack of bus stops.
• Planning of bus stops: The authority should plan the
locations of bus stops, based on route assessment.
• Construction and maintenance of bus stops: This task can
be done by;
• Authority / Third party contract via authority’s
permission
• Private contractor / operator (operator received
incentive to maintain the bus stops)
• ITS helps authorities and operators control
and monitor the system to improve services
and the reliability and efficiency of operations.
• The construction and operation of control
center must lie with the authority. However,
the authority should share real time ITS
information with the operator.
Bus Depot Facilities
IT Systems
Bus Stop
Bus Terminal
01 02
03 04
Prasanna purple was having an issue with the maintenance of buses. The bus depot was encountering a drainage
problem due to which the buses were not maintained properly. Since the drainage problem was unaccounted for, there
was a delay in fixing the problem. As a result of this problem, only 12 out of 35 buses were running on the roads.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
42
Contract Formulation
Key considerations in an outsourcing contract related to performance
Performance standards comprise Minimum Service Level (MSL) benchmarks, which should cater to the basic
demands and requirements of the passengers. Further, exceeding these benchmarks / falling below these
benchmarks may result in incentives / penalty as per the contract. Specified performance parameters
enable standardization of performance among different operators within a city.
• The authority should understand that the penalty should not be considered a source of revenue. Itshould be applied as a corrective measure for deviant behaviour.
• If the penalty has to be applied, it should be equitable. Example: In a contract of INR 100 crores, apenalty of INR 1000 is not considered as equitable.
• While the penalty is important in performance standards, certain incentives should also be awarded forabove benchmark performance. An example for London performance standard is provided in the nextslide.
MoHUA provides service level benchmarking for urban transport and are available at
“http://mohua.gov.in/upload/uploadfiles/files/Service_level.pdf “
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
43
Contract Formulation
Performance linked incentives – Transport for London (TFL), TraffiQ (Frankfurt)
Transport for London – Performance linked incentives
• In London, the gross cost contracts are subject to financial incentives based on the quality of
service provided. For example, the reliability incentive.
• Every contract specifies a 'Minimum Performance Standard' which sets targets for service levels
and percentage of on-time arrivals and departures.
• Bus companies are then eligible for a bonus equivalent to 1.5% of the contract price for every 2%
improvement in on-time percentage.
• Similarly, they may face a 1% deduction for every 2% reduction in on-time performance below the
Minimum Performance Standard.
• Similar incentives exist for percentage of scheduled bus kilometers operated, vehicle condition,
driver performance, and customer service.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
TraffiQ (Frankfurt, Germany) – Environment linked incentives
• TraffiQ, the organizing authority responsible for local public transport services within the city of
Frankfurt, tendered a 6-year Gross Cost Contract with environmental incentives for a sub-
network (3.3 million timetable-km/year) in 2006.
• One main policy aim within the tendering procedures was the reduction of air pollution by
demanding high anti-pollution standards to fulfil the European anti-pollution regime.
• The operator of this bundle now uses vehicles already fulfilling the EEV-standards for gas emission.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
44
Contract Formulation
Performance standards, Payment, Dispute resolution/Contract flexibility (Notes)
Notes for Trainer: Contractual Formulation (Performance Standards)
• The trainer should focus on setting the performance standards for the operator to comply.
• The key point in this slide is that the penalty for non-compliance should not be used as a source of
revenue. This measure is only meant as a corrective measure for deviant behaviour. It is suggested that
non-compliance to the performance standard should be discussed with the operator and experts (if
required).
Notes for Trainer: Contractual Formulation (Performance Standards – Case study)
• These case studies focus on incentives for the operator.
• In London, the operator would receive incentives for quality of service by performing above “Minimum
Performance Standard”
• In Frankfurt, the operator would receive incentives for performing within environmental constraints and
contribution to reduction in air pollution by fulfilling the EEV standard.
Notes for Trainer: Contractual Formulation (Payment mechanism)
• The payment mechanism for the operator should be added carefully. This may be used to elaborate on
revenues other than fare box revenue.
Notes for Trainer: Contractual Formulation (Dispute resolution and Contract flexibility)
• The trainer should focus on inclusion of contract flexibility and dispute resolution in the contract.
• In the dispute resolution, the trainer should ensure that during the arbitration process the expert should
not be related to either party.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
45
Contract Formulation
Key considerations in an outsourcing contract related to payment
Payment Mechanisms
The payment mechanism in the contract acts as a primary motivator of operator behavior.
• Fare box revenue (User charges)
• Availability payment (Fee per km)
• Quality performance payments (Incentives)
• Non fare box revenues (Advertisements, grants, etc.)
A combination of these payment mechanisms are used in various Contract Models.
Illustrative Contract Models combining different payment mechanism
Hybrid GCC
• Fee per kilometer, to be paid by the authority• Part of fee/km is fixed and remaining is variable • Variable dependent on increase in ridership
Hybrid NCC
• Operator retains fare box revenue collected• System Management Fee payable to the authority or Grant payable to Operator• Bonus fee for certain non-commercial and unprofitable routes
GCC • Fee per kilometer, to be paid by the authority
NCC• Operator retains fare box revenue collected from passengers• System Management Fee payable to the authority or Grant payable to Operator
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
46
Contract Formulation
Key considerations in an outsourcing contract related to payment
Net Cost Model in Santiago (Chile) - Payment Mechanism
The payment is linked to the number of passengers carried (user charges). Further, the authority, in order to
reduce the operators’ risk, provides a guaranteed payment for reduction in demand. If actual demand differs from
the reference figure, the operators receive a drop (or increase) in their income representing 10% of the demand
change. Thus, a 10% drop in user charges would only impact operator’s revenue by 1%.
• The payment mechanism for the operator should be added carefully. This may be used to elaborate on
revenues other than fare box revenue.
• The bank should notify the authority in case the amount in escrow account is less than the amount
agreed to in the contract.
• The authority should pay as per the contract timeline. Authority must understand that if the payment
record is not as per the contract, then it may happen that the cost of bid goes high.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
47
Contract Formulation
Dispute resolution and contract flexibility
Contract Flexibility
The contract needs to contain certain conditions that enable actions to address changes in operating environment
such as varying demand. Some examples can be:
• Flexibility to assign vehicles across network
• Adjusting fleet size to meet travel demands
• Network expansion
• Fare adjustment in case of increased competition in the market affecting contract viability
Dispute Resolution
This contractual parameter is required so that disagreements can be aired and resolved amicably. A methodology
outlining how disagreements shall be resolved enable maintaining a good client-supplier relationship. The person
identified for the following should not be related to either party. Disputes may be resolved through:
• Conciliation – Either party may call upon the other to arrive at an amicable settlement thereof
• Arbitration – Held in accordance with the rules in Arbitration and Conciliation Act, 1996
• Adjudication – In case of constitution of a statutory Regulatory Authority or Commission with powers to
adjudicate upon disputes between the Operator and the Authority
Indore – Contract Flexibility
In Indore initially, each operator is required to operate minimum two buses on routes assigned to them. Once
they exceed the capacity in terms of passenger kilometers served, there is provision for increase in number
of buses. In such a case, the first opportunity to deploy buses is given to the existing operator. In case they refuse,
opportunity will be given to a new entity.
Germany – Contract Flexibility
In Elmshorn (Germany), the Authority can demand changes to the service up to an amount of 10% of the
contract volume. The price for the additional services is fixed in the contract.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
48
Contract Formulation
Early termination of contract; Operator and Authority Default; Transition Plan
Termination
During the implementation of the contract, a situation may arise when it becomes necessary for either partyto terminate the contract. The termination of contract may arise due to force majeure, due to default or atthe convenience of the authority. This termination clause enables management of various risks andconcerns of parties to the contract.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
Operator and Authority Default
• During the implementation of the contract, a situation may arise when it becomes necessary for the parties
to terminate the contract. The termination of contract may arise due to force majeure, due to default.
• The contract clause should define the specific conditions on fulfilment of which the above termination
situations will be initiated. The clause will also list the consequences for the contracting parties once the
contract is terminated.
• One very important component of the termination of contract is the rights and obligations of the
parties at termination. The obligation of the private operator on termination is usually to hand over the
project back to the authority in a specified condition.
Transition Plan
A transition plan is required to be put in place to deal with a situation where the contract’s term iscompleted, or it is terminated prematurely.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
49
Contract Formulation
Termination; Operator / Authority default; Transition Planning (Notes for Trainer)
Notes for Trainer: Contractual Formulation (Termination)
• The termination of contract contains guiding principles such as reason for triggering the decision of
termination, Operator’s and Authority’s default, and compensation provision.
Notes for Trainer: Contractual Formulation (Operator and Authority Default)
• The Operator’s and Authority’s default provides insight into the obligations for the operator and the
authority, both, if the contract is terminated.
Notes for Trainer: Contractual Formulation (Transition Planning)
• The mechanism for ordinary exit (completion of contract) and emergency exit (termination of contract)
should be focused upon.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
50
Contract Formulation
Developing client supplier relationship
The contractual parameters highlighted in this sub-module (3B-3L) must be honoured by both the
Authority and the Operator. It is to be noted that by entering into the agreement, both the Authority
and the Operator has made a commitment to deliver bus operations. Further, fostering a professional
relationship with your contractor (s) improves the sustainability of performance of the overall bus
operations.
The Authority must understand that the motive of the operator is to make profit in order to sustain
the operations. Example: In case there is a cause for penalty, to be imposed on the private operator,
the Authority must inform the private operator immediately, so that there is room for correction,
instead of conveying the message through penalty.
1
2
3
Shared risk – assigning of risk to where it can be best-managed
The risk needs to be assigned properly to the person / organization which
can best manage it. This exercise is explained in Section 3B of this module.
Contracts are financially viable for both parties
The contract should be drafted in a way which is viable for both
the Authority and the Operator.
Aiming for a win-win outcome
The purpose of forming a partnership is to ensure that commitments made
by both the Authority and the Operator are honoured.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
51
Contract Formulation
Developing client supplier relationship
The Operator should respect and share updates on a regular basis. A
monthly meeting to share information would foster the mutual
partnership.✔
The Authority should pay the Operator as per the contract. The
authority must understand that motive of the Operator is to make a
profit in order to sustain the operations. A delay in payment may impact
the sustainability of operations and deteriorate quality of service.✔
The Authority should understand that Operators are partners, and
should discuss the possibilities of corrections prior to taking actions
(Example: Imposing penalty). The Authority and the Operator must
honor their commitment made at the time of signing the contract.✔
Below are some tips for the authority and the operator that can aid them in developing a
good partnership.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
52
Contract Formulation
Developing client supplier relationship – Notes for Trainer
Notes for Trainer: Contractual Formulation (Client Supplier Relationship)
• The trainer must focus on the fact that the Authority and Private Operator run on a partnership basis and
must have mutual professional respect.
• A progressive client-supplier relationship ensures innovation and interest.
• Regular meetings ensure regular communication, which in turns keeps both the parties updated on
recent activities.
• The Authority must pay the operator as per the contract, so that the operator can recover its cost.
• The Authority must understand that the motive of the operator is not to run the buses, but to make a
profit.
• The Private Operator must share updates regularly with the Authority. Sharing of information ensures
fostering the mutual professional relationship.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
Notes for Trainer: Contractual Formulation (Contract Management Capacity)
• ‘Market sounding’ exercise can be used by the authority to test the level of interest and availability of
potential private operators. It can be done by issuing an EOI, conducting a workshop and conducting
road shows.
• The Authority should understand their commitment to operators, commuters, vendors, etc. by taking the
responsibility to ensure bus services run in the city. The Senior Manager must be aware about its
strength and capability to honor the contract. They can be assessed via financial planning, infrastructure
planning and planning for monitoring & control.
53
Contract Formulation
Assessment of Contract Management Capacity – Market Sounding
‘Market sounding’ exercise can be used by the authority to test the level of interest and
availability of potential private operators. It can be done in the following ways:
Key Takeaways
• The Authority must ensure that the views of stakeholders are incorporated while formulating contract.
• Market Sounding ensures that RfP is accepted by the bidders and you receive competitive bids.
EOIExpression of Interested can
be issued to identify firms that
are interested in bidding.
WorkshopA workshop can be conducted
to capture the inputs of various
stakeholders, such as, private
operators, vendors, transport
department, etc.
Road ShowsOrganizing road shows to display
the authority’s perspective and
vision for bus transport.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
54
Contract Formulation
Assessment of Contract Management Capacity
The Authority should understand their commitment to operators, commuters, vendors, etc.
by taking the responsibility to ensure bus services run in the city.
Parameters to assess Contract Management Capacity
• The Authority must have a plan to ensure sources of revenue from fare box, non fare box, and operational subsidy from government.
• To honor the financial commitment, payments are to made to private operators, sub-consultants, PMCs, other contracts such as monitoring, fare collection etc.
• Authority must plan for the necessary infrastructure facilities required for smooth bus systems.
• These include bus depot (for maintenance and parking), terminals and bus stops (with shelters).
• Authority must strengthen its capacity to monitor and control bus operations.
• ITS and MIS is an important tool to strengthen the capacity of monitoring and control.
Monitoring and ControlInfrastructure PlanningFinancial Planning
The Senior Manager must be aware about its strength and capability to honor the contract.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• Draft Guidelines for City Bus Private Operations - MoHUA
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
55
RFQ and RFP Issuance
Notes for Trainer
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
Time allocated for this module
Approximately 20 minutes.
Module Notes
This module provides information on bid process management.
Focus point for trainer
The trainers should focus on the fact that the activity of managing the bid process should be
done by a transaction advisor, which the authority dealing with outsourcing should temporarily
recruit.
Questions for Discussion
• Why should the authority hire a transaction advisor for managing the bid process?
• What type of bid process is recommended to be followed for outsourcing (one stage, two
stage, etc.)?
56
RFQ and RFP Issuance
Standard RfP Provision
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• Toolkit on Contracting Urban Transport – UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
It is strongly recommended to engage a transaction advisor considering the scale of the project. The
transaction advisor would be beneficial to the authorities because of the following reasons:
1. Transaction advisor provides different types of skill set such as legal, PPP, Bus operations, financial
modeling, feasibility assessment, etc., while drafting the contract. Therefore, hiring a transaction advisor is
highly recommended. Furthermore, the contract layout price is usually very high and the transaction
advisor would be well equipped to handle these projects.
2. The transaction advisor would be well equipped to handle high price contracts and would possess
demonstrable experience.
3. The transaction advisors would contribute to vendor knowledge and innovation in the bidding process.
Since the Transaction Advisor is a neutral party, he/she will provide unbiased opinion on the viability and
responsibility of both the authority and the private operator.
The Authority and the bidders are entering into high value and long term commitments involving
reputation risks apart from other risks.
57
RFQ and RFP Issuance
Standard RfP Provision
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
Number of Buses: 100 buses
Daily assured kilometers: 100 km/bus
Annual assured kilometers: 36,00,000 kilometers (considering 360 days in a year)
Length of Contract: 8 years
Per kilometer O&M Fee: INR 50/km (operation and maintenance)
O&M Fee escalation: 10% per year
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Annual O&M Fee (in crores)
18.0 19.8 21.8 24.0 26.4 29.0 31.9 35.1
Total Outlay in contract period ~ 205 crores
Cost of buses ~ 40 crores
Cost of finances ~ 40 crores
Bank charges, depot lease change, other charges ~ 20 crores
Authority’s perspective
Private operator’s perspective
58
RFQ and RFP Issuance
Standard RfP Provision; Bid Process Management (Notes for Trainer)
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
Notes for Trainer: RfQ and RfP Issuance (Standard RfP Provision)
• A transaction advisor is strongly recommended as it would bring an un-biased opinion on the viability and
responsibilities of the government and the operator.
• The transaction advisor would focus on getting the RfP details correct the first time, which saves a lot of
money.
• A dedicated person to manage the concession agreement would ensure smooth functioning of the
organization.
• Sample calculation for GCC: The trainer must focus on the outlay of the agreement in order to make the
Authority understand the thinking perspective of the Private Operator.
Notes for Trainer: RfQ and RfP Issuance (Bid Process Management)
• Under bid process management, the authority must understand the impact of setting the ratio of
technical to financial. Example, 70:30 ratio and 60:40 ratio have a huge impact financially.
59
RFQ and RFP Issuance
Bid Process Management
• Competition is
expected to
provide
transparency to
the process.
• The competitive
bidding process
can either be
one stage or
two stages.
Single-stage process (RfP)
• This process is appropriate for projects
when the scope of the project is well
defined, and there are relatively fewer
bidders.
Two-stage process (RfQ + RfP)
• This process is appropriate when the
project scope is not clear and
discussions are required to finalize the
service options, and the number of
bidders is large. This process is highly
recommended for the authority.
• Quality cum Cost Based Selection
(QCBS): This method scores technical
capacity, skill and experience of the bidder.
A minimum technical score is required for
the bid to be considered for financial bid
evaluation. This is used when quality is the
prime concern.
• Least cost method: This method is
preferred when cost is the prime concern
and the minimum standard required from
the bidders can be easily identified with no
differentiation among the bidders.
Competitive Bidding
Deciding between one stage and two stage bidding process
Types of bid evaluation
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
• Early market engagement in pre-procurement phase may bring perspective of prospective bidders,
relevant stakeholders (such as transport department, existing transport agencies, development authority,
etc.) and ensure that procurement process is successful.
• Multiple early market engagements ensures that the decision makers are clear on interest from potential
bidders and potential issues in later stages are discussed with potential bidders.
• Since a typical 8 year contract costs ~305 crores (As per the calculation on previous slide),
comprehensive planning for RfP is recommended.
6. Contract Monitoring
The distribution of Technical to Financial score is generally kept 70:30 (Technical is always higher). This isbecause the authorities should choose the best candidate in terms of delivering capability and then see thefinancial quotes of the operator. Example: If the authority chooses the operator with the lowest bid, it mayhappen that the quality of the bus operations reduces.
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
60
RFQ and RFP Issuance
Bid Process Management – Case study (Outsourced fleet maintenance by DTC)
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
With an increase in the
electronic content in busesand higher sophistication of
tools needed, it wasbecoming increasingly
difficult for DTC to maintainthe vehicles on their own.
NEED FOR OUTSOURCING
To ensure consistent
performance of buses onroad, the maintenance of
the buses were outsourcedto the supplier of buses.
OUTSOURCINGOF MAINTENANCE OF BUSES
Since specific tools and
parts can only be providedby specific bus
manufacturers. The multi-year contract was
negotiated with the existingmanufacturers to maintain
buses supplied by them.
NEGOTIATION
OF CONTRACT THROUGH
NON-COMPETITIVE PROCESS
61
Evaluation and Selection
Evaluation of bids
Bid evaluationA
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Technical Qualification
• The criterion has to be stringent enough to ensure that only serious bidders qualify, but not so high such
that only few bidders qualify. It should be depend on market appetite and should provide level playing
field and fair competition
• Relevant experience (recommended to be within previous 3-5 years) is a good qualifier especially having
performed similar services previously, or with a skill set that clearly qualifies their involvement.
Technical Qualification
Financial Qualification
• The bidder should have sufficient capability to undertake the financial burden of the project. The
financial capability would depend on the annual turnover (related to project value), turnover criteria for
last few years, etc.
• Usually, this is checked on the basis of average annual turnover and net worth.
• Authority should consider both turnover from relevant experience and other services, but higher
weightage should be given to turnover from relevant experience.
Financial Qualification
1. Deciding on outsourcing
3. Contract Formulation
2. Contract Models
The technical qualification takes into consideration not only bus operators but transport operators capableof running buses (such as trucks and taxis). Furthermore, it analyses the operators based on the capacityof the buses, number of vehicles and number of months of operations.
The operator must score the minimum evaluation score in order to be considered for the next round.
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
Notes for Trainer: Bid Evaluation
• The trainer should focus on setting
the criteria for technical and financial
evaluation.
• The crucial parameters within
technical and financial evaluation
should be explained
62
Contract Monitoring
Notes for Trainer
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
Time allocated for this module
Approximately 30 minutes.
Module Notes
This module focuses on the importance of monitoring activities which are outsourced. It is
recommended that monitoring is handed over to an independent agency.
Focus point for trainer
The trainers should focus on the importance of daily service monitoring and outsourcing the
activities of monitoring to an independent agency.
Questions for Discussion
• How should the authority monitor the activities which are outsourced for operations and
management?
63
Contract Monitoring
Developing a comprehensive monitoring framework
The monitoring framework should be comprehensive and should consider all issues that might arise in the projectlifecycle, with due provision for review and update at any point of time.
▪ Regular evaluation
of the monitoring
procedures, as well as the level of
monitoring, will
assist the
authority to assess its effectiveness
Review and update the performance
monitoring system
▪ ITS (or agreed
reporting structure)
should provide all necessary data to
enable sufficient
monitoring
▪ Regular meetings
of all concerned
officials (including private operator
and related parties)
must be conducted
at agreed intervals to discuss any
performance
related issues
Design the performance monitoring mechanism
▪ For managing a
contract to deliver
service quality, the main KPI aspects
are:
• Failure to
perform a
service;
• Compliance with
operating rules
and service specifications;
• Meeting vehicle standards of
cleanliness and
condition; etc.
Set the output requirements, design KPIs
▪ Decide the level of
monitoring which is
most efficient considering the
cost and availability
of resources
▪ Example: ITS
generated data,
physical inspection, etc.
Evaluate existing processes and tools
▪ Determine all
parameters on
which the private operator will be
evaluated for the
quality of the
project
▪ Consider:
• Which data
sources to use
• In what form is
information
available or to be specified
Collection and analysis of information 1 2 3
45
During the development of the contract During the monitoring period1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
Authority should understand that a task which is not monitored properly is never completed.
Daily service monitoring C
64
Contract Monitoring
Developing a comprehensive monitoring framework
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/254392/tendering-road-
passenger-transport-contracts.pdf
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
Monitoring by Strathclyde Partnership for Transport (SPT) (Outsourced Monitoring)
SPT undertakes a range of activities to keep the bus network under review.
Action
Monitoring activities include:
• SPT Compliance Inspectors monitor bus services noting potential violations of traffic regulations and
preparing reports for the Traffic Commissioner. Figures are presented on a monthly basis.
• SPT prepares reports for its Operations Committee. For example, reports are prepared including patronage,
scheduled versus actual mileage, passengers per mile and lost mileage. The report also details the trend of
four-weekly passenger patronage on SPT’s MyBus (Demand Responsive Transport) services.
• Nearly 3,000 vehicle checks have been undertaken. SPT’s Compliance Inspectors also carry out monitoring and
report instances of non-compliance, including engine idling, parking issues or missing information.
• The Compliance Inspectors work with drivers and draw to their attention whenever possible any failures that
are found. Based on these findings, reports are submitted to the Traffic Commissioner as and when required.
• MyBus services are monitored by SPT officers to ensure that the service being provided by operators meets
with the expected standards.
• Monitoring arising from local service complaints that the Compliance Inspectors are requested to investigate
are also included in these figures reported to the Operations Committee.
Impact
• There has been a significantly reduced level of non-compliance recorded since SPT’s Compliance Inspectors
started work. (Third party inspection)
• The high level of compliance is reflected by the very low number of breaches found and specific monitoring is
undertaken after complaints have been received.
65
Contract Monitoring
Monitoring framework; KPI; Daily monitoring (Notes for Trainer)
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
Notes for Trainer: Contract Monitoring (Monitoring Framework)
• The Authority should understand the importance of Monitoring and Evaluation.
• Since it is the duty of the Authority to ensure that bus services run efficiently in the city, the
responsibility of proper monitoring lies with the Authority.
• Case study of Strathclyde Partnership for Transport (SPT): In this case study, proper monitoring ensured
significant reduction in the level of non-compliance.
Notes for Trainer: Contract Monitoring (KPIs and their outcomes)
• This slide showcases the outcomes and the KPIs.
• The monitoring framework should focus on all these parameters to ensure efficient monitoring of the
private operator.
• This is a sample framework for a single KPI (Example: Outcome=Quality of Service, KPI=Regularity).
• The instructor should focus on what all the Authority has to look within a single KPI. Example: Level of
service, frequency of monitoring, monitoring tools, etc.
Notes for Trainer: Contract Monitoring (Daily service monitoring)
• The daily service monitoring covers crucial parameters such as breakdown response, malfunctioning,
emergency response, etc.
• Case study of TfL (London): In the case study, the monitoring structure of London bus services is
operated by TfL. The financial incentives linked in GCC contract is depicted in the case study.
66
Contract Monitoring
Key Performance Indicators and Outcomes
Outcomes
Customer’s perspective
Operator’s perspective
Financial perspective
City’s perspective
Community’s perspective
Quality of service• Regularity • Punctuality
Customer value• Frequency of
service• Average speed• Behavior of crew• Comfortability• Skipping bus
stops• No. of services
per route defined
Efficiency of service• Fleet utilization • Vehicle utilization• Crew utilization• KMPL of fuel• Tyre
consumption
Effectiveness of service• Reliability• Rate of incident• Rate of
breakdown• Rate of fatality
Quantitative • Cost/Kms• Variable cost• Fixed cost
• Depreciation• Insurance• Taxes• Overhead
• Traffic revenue /kms
Economic viability• Operating ratio• Cost /kms• Earning / Kms• Profit / Loss
Adequacy of service• No. of public
transport buses
per lakh population
• Organized bus transport share
• Availability of bus transport
• Service coverage of bus transport
Quality of service• Average waiting
time for bus transport users
Pollution• Reduction in
Pollution
Road • Congestion• Safety compared
to other modes
Women safety
Vehicle Ownership• Average no. of
vehicles per head (ownership)
From the customer’s perspective, the outcome “Quality of Service” is dependent on “Regularity” and“Punctuality”.
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
67
Contract Monitoring
Key Performance Indicators and Outcomes
The Key performance indicators have to be analyzed before implementation. The training material on“Monitoring and Evaluation” details out the Key Performance Indicators. Below is a template in which theKPIs should be Benchmarked.
<Enter outcome here><Enter KPI here>
<Enter formula here>
Level of Service (LoS)
Interval Level of Service (LoS)
Slab 1 <1, 2, 3, 4, etc.>
Slab 2 <1, 2, 3, 4, etc.>
Slab 3 <1, 2, 3, 4, etc.>
Slab 4 <1, 2, 3, 4, etc.>
Frequency of Monitoring
Who is going to monitor Frequency
Operator<Daily / Weekly / Fortnightly / Monthly
/ Every 2 months / Quarterly / Semi
Annually / Annually>Middle Level
Senior Manager
Failure and Back End Causes
Assignable Causes Non Assignable Causes
1. Cause 12. Cause 23. …
1. Cause 12. Cause 23. …
Service Performance tools <Enter the method to measure this KPI here>
Refer to Training Material on “Monitoring and Evaluation” for more details.
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
68
Contract Monitoring
Monitoring the services provided by the bus operator
Daily Service Monitoring:
• This enables timely identification of any variations from specifications by the authority and the operator.
• This task requires a Control Centre which (with ITS), can be abreast with the daily service performance.
• This Control Centre may also be involved in service planning, both strategic service plan (setting overall parameters) and may also govern the daily scheduled service.
• The Control Centre will have in place standard operating procedures to cover areas such as:
Control procedures
Vehicle breakdown response
Emergency or accident
response
Malfunctions and technical support for support systems
Safety and security protocols and response
procedures
Reporting procedures
Quality inspection
procedures
Inspection and audit of contract
items
Disciplinary procedures
Contract Management Procedures:
• For contract management, the authority will have to develop a comprehensive and agreed set of procedures and processes under which it will administer the control and management of the bus operator contract. It could be named as Contract Management Procedures Manual (CMPM).
• It would aim to provide explicit and clear guidance to reduce the amount of ad hoc and arbitrary decisions that need to be made with individual operators and to build confidence in the regulatory process.
• This manual would address control and monitoring issues not contained in the contract, and may be changed and adapted as new situations arise.
Monitoring and evaluation is covered in detail in the training session of Monitoring and Evaluation.
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
69
Contract Monitoring
Monitoring and supervision in London
Monitoring and supervision London (GB): Financial incentives in a Gross Cost Contract
Monitoring for Gross Cost Contract for buses is done by TfL as follows:
• The “Quality Incentive” contract payments are based on a monitoring regime that primarily measures
the reliability of the buses. The contract dedicates an entire detailed section to reliability. It states for
example at which location and what frequency monitoring will take place.
• In addition, customer satisfaction surveys are carried out, measuring waiting time and riding,
driving standard, cleanliness, information at bus stops, etc.
• Other monitoring mechanisms include: Mystery travelers, driving standards reporting, accident
and incident reporting and environmental reporting.
• Operator league tables are published for reliability and excess wait time. Other quality indicators
are reported at network level only.
• Presently, monitoring is undertaken manually with a hand held device. However, TfL is in the
process of introducing GPS in the future. This tracking system would have additional benefits, such as
passenger information.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
70
Thank You !
Time for Discussion
71
Annexures
72
Selection of contractual model based on service plan, financial capacity and institutional capacity
Parameters Description Score Weightage (%)
Max. Score
Parameter Max Score
A Service Plan Key questions to answer before assigning ratings
1 Average load factor What is the average load factor cumulatively on all the routes?
18 3 54
• Below 30% 3
• Between 30% and 60% 2
• More than 60% 1
2 Overlap of routes Are there significant overlap of routes? 10 3 30
• More than 20% 3
• Between 10% and 20% 2
• Less than 10% 1
• No overlap 0
3 Authority's control over network and service plan
Should the authority have more control over frequency, headway, selection and modification of routes? If yes, rate 3 or else 0
4 3 12
4 Integration of different modes Is there a need to achieve seamless integration between different modes (metro, BRTS, water transport, trains etc.)? If yes, rate 3 or else 0.
4 3 12
5 Competing Modes Is there significant competition from other modes? If only one mode then give 1 score, two modes then give 2 score and three or more modes then give 3 score.
10 3 30
• Metro/Mono rail
• IPTs
• Any other
Annexure 1
Below is the detailed table for selecting the most appropriate contract based on service plan, financial capacity and institutional capacity. For further
reading, please refer to “Model Contract Guidelines for City Bus Transport – MoHUA”
73
Selection of contractual model based on service plan, financial capacity and institutional capacity
Annexure 1
Parameters Description Score Weightage (%)
Max. Score
Parameter Max Score
B Financial Capacity
1 Fund Allocation for Project Has the authority budgeted money for the entire duration of the contract? If yes, rate 3 or else 0.
10 3 30
2 Provision of dedicated funding Have any funding provisions been created such as Urban Transport Fund and/or is there a resolution from the Urban Local Body/State Govt. for funding? If yes, rate 3 or else 0.
18 3 54
3 Credit Rating What is the credit rating of the authorities financing the project?
4 3 12
• BBB and above 3
• Between B and BBB 2
• Less than B 1
• No rating 0
C Institutional Capacity
1 Creation of SPV Is there a SPV created for this project? If yes rate 3, else score 0.
4 3 12
2 Adequacy of Staff for Bus Transport
Are there bus transport staffs dedicated to administer and monitor the project? If yes, rate high or else low.
18 3 54
• More than 10 employees 3
• Between 5 and 10 employees 2
• Between 2 and 5 employees 1
• Less than 2 employees 0
Max. Score (A+B+C) 300
74
Reference table
A. 7-10
B. 11-16
C. 17
D. 18
E. 19
F. 20
A. 8-12
B. 13-15
C. 16
D. 17-18
E. 19
F. 20
A. 7-8
B. 9-11
C. 12
D. 13
E. 14
F. 15-16
Delivery
PPT
Trainer
manual
Participant
Manual
A. 21-24
B. 25-28
C. 29-30
A. 21-24
B. 25-27
C. 28-29
A. 17-19
B. 20-23
C. 24-25
Contract
Model
A. Various models for outsourcing bus operations
B. Summary of different types of Contract Models
C. Selection of the most appropriate Contract Model
2
Deciding on
outsourcing
A. Objective of the authority
B. Activities that can be outsourced
C. Decision for outsourcing
D. Infrastructure Analysis
E. Skilled Manpower Analysis
F. Financial Capacity Analysis
1
Contract
formulation
A. Key parameters in a typical outsourcing contract
B. Risks associated with outsourcing and allocation of risks
C. Deciding on the appropriate length of the outsourcing contract
D. Conditions precedent for the authority and operator
E. Key considerations in an outsourcing contract related to buses
F. Key considerations in an outsourcing contract related to infrastructure
G. Key considerations in an outsourcing contract related to performance
standards
H. Key considerations in an outsourcing contract related to payment
I. Dispute resolution and contract flexibility
3
A. 31
B. 32-35
C. 36-38
D. 39
E. 40
F. 41
G. 42-44
H. 45
I. 46-47
A. 30-32
B. 33-35
C. 36-37
D. 38-39
E. 40
F. 41
G. 42-44
H. 45-46
I. 47
A. 26
B. 27-29
C. 30-31
D. 32
E. 33
F. 34
G. 35-36
H. 37-38
I. 39
75
Reference table
J. 48
K. 48
L. 48
M. 49-51
N. 52-53
J. 48-49
K. 48-49
L. 48-49
M. 50-52
N. 53-54
J. 40
K. 40
L. 40
M. 41-42
N. 43-45
Delivery
PPT
Trainer
manual
Participant
Manual
A. 54-56
B. 57-58
A. 55-58
B. 59-60
A. 46-47
B. 48-49
A. 61-63
B. 64-65
C. 66-67
A. 62-65
B. 66-67
C. 68-69
A. 51-52
B. 53-54
C. 55-57
Contract
formulation
J. Early termination of contract
K. Operator and Authority Default
L. Transition Planning
M. Partnership
N. Contract Management Capacity
3
RFQ and RFP Issuance
A. Standard RfP Provision
B. Bid Process Management4
Evaluation and
SelectionA. Evaluation of bids5
Contract
Monitoring
A. Developing a comprehensive monitoring framework
B. Key Performance Indicators (KPIs) and their Outcomes
C. Monitoring the daily services provided by the bus operator
6
Annexure 1 A. Selection of Appropriate Contract7
A. 59-60 A. 61 A. 50
A. 69-71 A. 71-73 A. 59-61
76
Bibliography• DTTILLP. 2016, Final Guidelines for City Bus Private Operations, Ministry of Housing and Urban Affairs (MoHUA) and Sustainable Urban
Transport Project (SUTP) - http://mohua.gov.in/upload/uploadfiles/files/GuidelineCityBus.pdf, Accessed in April 2019
• PADECO Co., Ltd., 2008. Guidelines for Bus Service Improvement: Policy and Options. Ministry of Housing and Urban Affairs (MoHUA)
and Asian Development Bank
• UNDP, 2013. Toolkit on Finance and Financial Analysis of Urban Transport Projects. Institute of Urban Transport and MoHUA
• https://www.pppinindia.gov.in/toolkit/, Accessed in April 2019
• Urban Mass Transit Company Limited and CEPT University. Urban Bus Specifications Urban Bus Specifications – II. MoHUA
• https://ppiaf.org/sites/ppiaf.org/files/documents/toolkits/UrbanBusToolkit/assets/home.html, Accessed in April 2019
• UNDP. Training Module – Contracting in Urban Transport. Institute of Urban Transport and MoHUA
• Pucher, J., Park, H., Kim, M.K., and Song, J. 2005. Public Transport Reforms in Seoul: Innovations Motivated by Funding Crisis. Journal
of Public Transportation 8(5)
• Kim, H.J., 2007. “Seoul Public Transportation Reform: Experience & Current Initiatives”. Presented at Asia Clean Energy Forum:
Regional Policy and Finance Solutions for Energy Security and Climate Change. Organized by Asian Development Bank. 26-28 June
2007, Manila, Philippines. Retrieved: August 2008.
• Transport for London, London’s Bus Contracting and Tendering Process
• MoHUA provides model contracts for different types of Contract Models. These contracts need to be modified as per the organiz ation’s
requirements.
• GCC – http://mohua.gov.in/upload/uploadfiles/files/ModelGrossCost.pdf
• Hybrid GCC – http://mohua.gov.in/upload/uploadfiles/files/ModelHybrid.pdf
• NCC – http://mohua.gov.in/upload/uploadfiles/files/ModelNetCost.pdf
• Hybrid NCC – http://mohua.gov.in/upload/uploadfiles/files/ModelNetCostHybrid.pdf
P resentation title[To edit, c lick View > Slide Master > Slide Master]
©2019 Deloitte Shared Services India LLP 1
Participant Manual
1
December 2020December 2020
MINISTRY OF HOUSING AND URBAN AFFAIRS, GOVERNMENT OF INDIA
Consultancy Services for Design and Development of Training Programme for City Transport Professionals
EFFICIENT AND SUSTAINABLE CITY BUS SERVICES PROJECT (INDIA)EFFICIENT AND SUSTAINABLE CITY BUS SERVICES PROJECT (INDIA)
PARTICIPANT’S NOTES – OUTSOURCING FOR SENIOR MANAGERSPARTICIPANT’S NOTES – OUTSOURCING FOR SENIOR MANAGERS
2
PrefaceThe Efficient and Sustainable City Bus Services (ESCBS) project was introduced to improve the efficiency and attractiveness of city
bus transport in India. ESCBS project has three major components, which includes, National Capacity Building (NCB); Regulatory,
Institutional and Fiscal Analysis; and City Demonstration. This engagement falls under the purview of the NCB component of the
ESCBS project. The objective of this engagement is to design and develop training programme for city transport professionals, and
involves undertaking pilot testing, implementation, evaluation, and suitable modification of the training programme.
As a part of this engagement, eight training areas have been identified, and prioritized by the Ministry of Housing and Urban Affairs
(MoHUA).
Policy Advocacy for
Senior Managers
Outsourcing for Senior
Managers
Monitoring and
Evaluation for Senior
Managers
Network Planning for
Middle Managers
Operations Planning for
Middle Managers
Outsourcing for Middle
Managers
Bus Operations for
Middle Managers
ITS and MIS for Middle
Managers
1 2 3 4
5 6 7 8
For each training area, a total of three modules have been prepared:
A. Participant’s Notes: Detailed reference notes containing links to more readings to be circulated before trainings.
B. Trainer’s Notes: Detailed notes for trainer’s reference containing focus points, questions for discussion, etc.
C. Delivery PPT: Brief presentation containing infographics, videos, group activities, etc. to be displayed on screen
3
About the Module
It is strongly recommended that participant’s manual is referred prior to the training session.
This training on “Outsourcing of Bus Operations” provides guidance on the decision making process foroutsourcing activities and selection of an appropriate contractual model for Senior Managers. Thissection discusses the intricacies, parameters, and issues that must be evaluated by SeniorManagers before outsourcing and deciding upon the appropriate contractual model. The moduleexplains in detail that the Authorities may consider outsourcing portions of or the entire bus operations toone or more contractors, as alternative to in-house operations. In addition, the training content will enableparticipants to formulate strategies needed for executing and monitoring of contracts of outsourced busoperations.
4
Learning Objectives
✓ Identifying segments of bus operations which can be outsourced
✓ Taking decision on whether or not to outsource the identified segments or services
✓ Selecting appropriate / suitable contractual model suitable as per the requirements
✓ Overview of key contractual parameters
✓ Appreciating the two-way relationship between the client and the supplier
✓ Understanding the contours of bid process management
✓ Appreciating the importance of monitoring and developing a monitoring framework
5
Table of Contents
Contract Model
A. Various models for outsourcing bus operations
B. Summary of different types of Contract Models
C. Selection of the most appropriate Contract Model
2
Deciding on outsourcing
A. Objective of the authority
B. Activities that can be outsourced
C. Decision for outsourcing
D. Infrastructure Analysis
E. Skilled Manpower Analysis
F. Financial Capacity Analysis
1
Contract formulation
A. Key parameters in a typical outsourcing contract
B. Risks associated with outsourcing and allocation of risks
C. Deciding on the appropriate length of the outsourcing contract
D. Conditions precedent for the authority and the operator
E. Key considerations in an outsourcing contract related to buses
F. Key considerations in an outsourcing contract related to infrastructure
G. Key considerations in an outsourcing contract related to performance standards
H. Key considerations in an outsourcing contract related to payment
I. Dispute resolution and contract flexibility
3
6
Table of Contents
Contract formulation
J. Early termination of contract
K. Operator and Authority Default
L. Transition Planning
M. Partnership
N. Contract Management Capacity
3
RFQ and RFP Issuance
A. Market Sounding
B. Assessing In-House Capacity
C. Standard RfP Provision
D. Bid Process Management
4
Evaluation and Selection A. Evaluation of bids5
Contract Monitoring
A. Developing a comprehensive monitoring framework
B. Key Performance Indicators (KPIs) and their Outcomes
C. Monitoring the daily services provided by the bus operator
6
Annexure 1 A. Selection of Appropriate Contract7
7
Deciding on outsourcing
Objective of the authority - Elements of City Bus Transport
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
The city bus system comprises of the following elements:
Route Planning
Using ICT systems to improve route planning
methodology
Time table designing
Designing the time table on the basis of demand
on planned routes and
bus availability
Fleet and Crew
Scheduling
Mapping fleet and crew as per the time table
designed
Operations of Services
Operating the buses onthe basis of planned
routes, timetable, and scheduled data
Assessment of the prevailing practices used in planning and designing bus operations and related aspectsAssessment of the prevailing practices used in planning and designing bus operations and related aspects
Planning Framework
Monitoring Framework
Monitoring of bus services should be based on the following indicators:
• Readiness assessment (Setting the baseline)
• Service Level Benchmarking (Benchmarking various elements)
• Evaluation (Evaluating the elements based on benchmarks)
• Reporting and Finding (Reporting actual value & deviation from benchmarking in order to take necessary action)
8
Deciding on outsourcing
Objective of the authority for providing bus operations
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• Guidelines for Bus Service Improvement – ADB
The authority should understand that it’s objective is not to run the buses
but to see that the buses run.
The objectives should be very specific and clear before outsourcing an activity.
This objective should be explained to the private operator before
outsourcing the activity
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
The primary objective of bus transport organizations is to manage bus transport system i.e., satisfying the
demand of the citizens. At the same time, the overall objective of the Authority include:
• Generate/Sustain/Increase modal share of public transport• Decreasing the congestion in the city
Citizen Centric
Objectives
Environmenta
l Objectives
Social
Objectives
Adequacy
Regularity
and Reliability
Comfort and
Convenience
Affordability
Accessibility
7
6
54
3
2
1
9
Deciding on outsourcing
Activities that can be outsourced
S.No. Activity Mechanism
1 Route Planning Authority / Specialist
2 Infrastructure Planning Authority / Specialist
3 Passenger fare Authority / Specialist
4 Procurement Authority / Private Operator
5 Ownership Agency procuring the buses
6 Operation and Maintenance Private Operator
7 Land Acquisition Authority
8 Construction Specialist / Private Operator
9 Procurement of equipment Authority / Private Operator
10 Ownership Agency procuring the equipment
11 Operations and Maintenance Private Operator
12 Construction of Control Center Specialist / Private Operator
13 Procurement of equipment Authority / Private Operator
14 Ownership of Control Center Authority
15 Operation and Maintenance of Control Center Private Operator
16 Ownership of ITS equipment Authority / Private Operator
17 Operation and Maintenance of ITS equipment Private Operator
Activities that can be outsourced and the respective mechanisms are provided below:
Pla
nnin
gB
uses
Infr
astr
uctu
reM
onit
ori
ng and
Contr
ol
Authority:
Specialist:
Private Operator:
Authority may perform the activity in-house
Authority may hire a specialist to complete the task
Authority may outsource the activity to Private Operator
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
10
Deciding on outsourcing
Deciding on Outsourcing – Case Study
Seoul – Outsourcing of Bus Services
Context
• Prior to 2004, the bus system in Seoul was mostly deregulated.
• Private bus companies were allowed to provide services on any routes they deemed commercially viable,
subject to obtaining an easily available license from the public authority.
• The Seoul Metropolitan Government (SMG) had very little control over the system aside from setting fare
levels.
Problem
• Most significantly, the SMG played no role in route or system planning.
• Since there was no overarching organization of the bus network, this resulted in a highly inefficient and
disorganized system with many overlapping and circuitous routes, low service levels in some areas and
excessive supply in others, and poor integration between the various bus routes and other transport
modes.
Action
• The major change in this regard was to switch from a mostly deregulated market to a 'semi-public' or
'quasi-public' system.
Impact
• Under this new approach, private bus operators continue their role as service providers, but all decisions
regarding route planning, schedules, fare levels, and overall system design are now under the control of
the SMG.
• The private bus companies have to participate in a competitive tendering process in order to win the right to ply
on specific routes.
• Bus companies that succeed in winning tenders provide services according to strict contractual specifications
stipulated by the SMG.
• The Seoul bus system transitioned from a 'passive franchise' model to a 'proactive planning with service
contracts' model.
For further reading, kindly refer to the following material
• https://wrirosscities.org/sites/default/files/Bus%20Karo%20-%20Guidebook%20on%20Planning%20and%20Operations.pdf
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
11
Deciding on outsourcing
Deciding on Outsourcing – Case Study
Chandigarh Transport University (CTU) – Outsourcing of Bus Maintenance
Action
• The Chandigarh Transport Undertaking (CTU) decided to recruit employees for various branches through
outsourcing mode.
• It was also decided to outsource the maintenance of two depots of the CTU, which would soon float tenders for
the same. The department had already outsourced the maintenance of Depot No. 4. Under the agreement, the
company looks after the maintenance of buses and provides all kinds of spare parts.
• Except electricity and water charges, all maintenance, including expenditure on account of tyres, replacement
of batteries, bus charging stations, spare parts, suspension, running, and major and minor repairs of the
buses during the period of the contract has been made the responsibility of the successful bidder.
Impact
• The quality of maintenance activity has improved considerably after making the decision to outsource. It is
because the private party brings in innovative mechanisms and experience.
For further reading, kindly refer to the following material
• https://www.tribuneindia.com/news/chandigarh/ctu-to-hire-staff-on-outsourcing-basis-40769
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
12
Deciding on outsourcing
Decision for outsourcing an activity
*The organization may choose to outsource entire or certain aspects of bus operations, even when it has in-house capacity to deliver the same. Example: The Authority may decide that operator may operate busesmore efficiently, the decision of in-house does not align with the vision of the authority (SPV), etc.
In order to make the decision to outsource an activity or conduct it in-house, the authority needs to look at
two important factors. They are as follows:
Infrastructure – The authority should look at infrastructure availability for carrying out the
activity which is under consideration for outsourcing. Example: It should not happen that the
operations of buses in a particular region / route is outsourced without the availability and proper
functioning of the supporting infrastructure such as bus depot, bus shelters, etc.
Skilled People – The authority should look at availability of skilled people for conducting the
activity which is under consideration for outsourcing. Example: For equipping buses with ITS
system, availability of skilled people for data analytics and ITS experts is necessary.
✓ In order to make the decision to outsource, the authority should understand that the business mind
should never be outsourced. The responsibility for business decisions must lie with the authority and not
be assigned.
✓ The outsourcing should be availed from an organization / person with a reputation risk. This would
ensure effective outcome on the outsourced task no matter the situation.
✓ It is highly recommended that the authority should have a transaction advisor. In order to make the
decision for outsourcing, drafting the RfP and modifying as per the response from bidders, the
transaction advisor is highly recommended to facilitate a balanced view.
In the absence of the above elements to an appropriate level, the authority needs to develop on these
before making the decision to outsource any activity.
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
13
Deciding on outsourcing
Infrastructure
The authority should assess the existing infrastructure in place and make the necessary amendments
before outsourcing bus operations. The infrastructure in bus transport consists of Bus Depot, Bus Terminal,
Bus Stops, and Control Center (for Monitoring and Evaluation).
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• Guidelines for Bus Service Improvement – ADB
S.No. Activity Responsibility
INFRASTRUCTURE
1 Land Acquisition Authority
2 Construction Specialist / Private Operator
3 Procurement of equipment Authority / Private Operator
4 Ownership Agency procuring the equipment
5 Operations and Maintenance Private Operator
An as-is assessment of the existing activities of the authority is conducted to identify gaps in services and
infrastructure. Example: the as-is assessment may include analysis on the availability of bus depot, bus
terminal, bus stops, control center; utilities in the infrastructure, issues in the current infrastructure, etc.
As part of gap identification, the following aspects should be covered:
• Understanding current and future service needs in bus operations
• Understanding availability of infrastructure for provisioning of services across, such as fleet, passenger
amenities, bus depots and bus terminals.
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
14
Deciding on outsourcing
Skilled manpower
Authorities should assess the availability of skilled manpower in the organization to deliver bus transport
services and facilitate decision making for outsourcing, training, and recruitment of staff.
Skilled manpower must be available for deployment, in the absence of which, the following steps can beundertaken to fill the gap.
Recruit / Train
This option should be explored when a long-term task is to be performedby the authority. The authority may recruit skilled manpower or train theexisting manpower to make them efficient in a particular task.
Outsource
This option should be explored when a difficult short-term task is to beperformed by the authority. This option may also be explored if theobjective of the authority would be to run on outsourcing model.
BEST Undertaking stopped the recruitment of employees for several years. When the recruitment began,
the new recruiters were unskilled, while the existing skilled manpower was about to retire. This created an
age gap in employees suggesting that the HR policy was not implemented properly.
The authority should understand the need for skilled manpower retention, which includes data analytics
expert, ITS expert, etc.
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
15
Deciding on outsourcing
Financial Capacity
An analysis of the financial status of bus transport organizations can help authorities identify the
constraints within which they have to operate their bus services. This analysis also allows decision makers
to understand the extent to which costs of public transport needs to be recovered from users and/or non-
users.
Analysis of financial capacity in a bus transport organization
• Assessing the financial capacity in a bus transport organization requires analyzing its financial statements such as
Income statement, Balance sheet, and Cash flow statement.
• Financial constraints can be further assessed by employing various Key Performance Indicators (KPIs).
• Organizations can assess revenue and cost breakdowns to identify key revenue and cost drivers, respectively. In
addition to these, there are certain KPIs which can aid the assessment of operational efficiency and fare levels.
• These KPIs include
• Operating cost per km, Operating cost per passenger-km, Operating cost per passenger
• Revenue per km, Revenue per passenger-km, Revenue per passenger
• Profit / Loss, Operating Ratio
• Traffic and Non-Traffic revenue as a % of Total Revenue
• Passengers per effective vehicle km
• Revenue earning kilometers
• Operating Cost components (such as fuel and lubricants, tyres and spares, and staff) as % of Total Cost
• Non-Operating Cost components (such as depreciation, interest, etc.) as % of Total Cost, etc.
While the authority has to bear the cost, it may choose to pay it up-front or pay it on an annual
basis with the interest rate to be recovered from the users.
This training material discusses Operations and Management activities through four Contract Models.
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
16
Deciding on outsourcing
Key Takeaway
2. Contract Models
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Objective of the AuthorityA
Activities that can be outsourcedB
Decision for OutsourcingC
Infrastructure analysisD
Skilled manpower analysisE
Financial capacity analysisF
• The objective of the authority should be in place before taking the decision to outsource.
• Before outsourcing an activity, the authority should be clear on the activities it needs to
outsource and the ones it may perform in-house.
• The decision to outsource is based on two parameters:
• Availability of existing infrastructure
• Availability of existing skilled manpower
• Apart from these, financial capacity analysis should also be performed.
Note that it is the responsibility of the authority to pay for bus transport services. Outsourcing
is an option for paying down the line instead of paying up-front.
17
Contract Models
Models for outsourcing bus operations
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
Four types of Contract Models which may be used to outsource operations management activities are discussed in this training program.
Types of
Contract Models
Gross Cost Contract (GCC) Hybrid Gross Cost Contract (Hybrid GCC)
Net Cost Contract (NCC) Hybrid Net Cost Contract (Hybrid NCC)
• In GCC, the authority takes the major role ofmanaging the network, by contracting the operatorsand paying them to provide a set level of servicesunder set quality standards. The authority carries the
revenue risk, plans overall services, manages thecontract for Level of Service (LOS) and quality, and isresponsible for customer service.
• Under a hybrid GCC (a variant of the GCC), theauthority carries the prime responsibility forpassenger service outcomes and sets explicitMinimum Service Level (MSL). The authority also
incentivizes the operator through additional paymentfor ridership growth.
• In NCC, the authority performs a more regulatoryrole, and the operator carries the revenue risk.Service planning is mostly done by the operator,although Minimum Service Level and KPIs are set asconditions for awarding the NCC.
• In Hybrid NCC (a variant of the NCC), the authoritysupports non-commercial routes where service on theroutes needs to be provided as a public serviceobligation.
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
18
Models for outsourcing bus operations: Hybrid GCC – Adelaide
Contract Models
The Hybrid GCC Contract Model in Adelaide – Incentives linked to increased ridership
Key Features of Hybrid GCC Contract Model in Adelaide
a. Operator’s payment is divided into two components - a fixed monthly sum and a patronage-related
incentive amount, calculated according to the change in patronage from the base year, at a rate
of $0.50 per passenger boarding, plus $0.10 per passenger kilometer. Incentive component is typically
around 50% of contract payments.
b. The contracts are area-based giving operators’ exclusive rights within their service area and are
awarded through a competitive bidding process. A set of minimum service standards are
prescribed, both metropolitan-wide and specific to each contract area.
c. The initial term of the contract is five years which can be extended to another five years by way of
negotiations depending on performance satisfaction. The contracted operator has the primary
responsibility for developing proposals for service enhancements and variations. Any proposed
changes needs to be approved by the transport authority.
d. The fleet deployment plan is prepared by the transport authority. The operators had the
provision to submit a proposal, to amend the fleet deployment plan in accordance with their tactical
measures to improve services. However, proposals for these changes were subject to approval by
the authority.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
19
Models for outsourcing bus operations: NCC Indore
Contract Models
Net Cost Contract - Indore
Atal Indore City Transport Services Limited (AICTSL), an SPV formed by Indore Municipal
Corporation and Indore Development Authority, operates their buses under the Net Cost Contract.
Key features:
• 18 routes with highest ridership in the city
are outsourced.
• Technical and service specifications
prescribed by AICTSL.
• Fleet procured and owned by private
operator.
• 90% of revenue from advertisements on
buses available to the operator.
• First Right of refusal is given to the operator
for additional requirement of fleet due to
demand increase.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• http://www.citybusindore.com/images/tender/NITANDTENDERDOCSECONDCALL.pdf
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
20
Case Study – Delhi Cluster Bus Operations
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Context
Outcome
Critical Success Factors• GCC model has been adopted to ensure greater focus on service quality, which is also endorsed by the judicial system.
• Procurement, monitoring, and management of bus operations is now done by a professional agency called DIMTS (a joint venture of GNCTD and IDFC).
• DIMTS revamped the entire existing structure and re-grouped the 657 routes of Delhi into 17 clusters using digital models.
• In place is also a robust performance management system with incentives to reward or penalize the operator on the basis of quality of services delivered.
• 100% electronic ticketing through online ETM machines, deployment of special ticket checking squad, availability of real time tickets and traffic situation data, GPS installation in all cluster buses which are monitored in the control room.
1948-1992
Bus services in Delhi were
completely owned and operated by
the Delhi Transport Undertaking
(DTU).
1992-2001
To supplement DTC operations,
new scheme for private bus service
in Delhi was launched under Stage
Carriage Permits.
2011 Onwards
The bus transport market in Delhi
has transitioned from competition
‘in-the market’ to competition ‘for-
the-market’ through corporatization of private stage
carriage using the cluster approach.
Private operator running the buses alongside DTC in the ratio of
60:40.
Some of the key challenges during
their operations were high
operating costs, revenue
leakages, and inefficient
operations.
Key challenges were fierce
competition ‘in–the-market’
which led to negligent and rash
driving, leading to fatal accidents
and other operational weaknesses.
Successful operations of more than 2400 buses under the cluster scheme which carries
average daily passenger load of about 831 passengers per bus (a total of 10.6 lakh passengers every day)
21
Case Study - Delhi
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Delhi: Outsourcing of Bus Services
• The first modified GCC with corporate sector operators
• Began with a Designated Account maintained & managed outside the
Treasury by the city government’s Programme Manager (PM) company
(private company).
• Its function defined as IM (Integrated Mechanism) which manages the entire
service, including FCM (Fare Collection Management), payment to Bus
Service Concessionaires & other vendors
• The Designated Account case itself bears a brief mention as it has stood the
rigors of audit scrutiny (both central & state/UT level) on the grounds that
the fare paid by pax is a user-charge and is a government receipt (not
revenue) which is meant to remunerate the service-provider.
• Made creative use of the MV Act, 1988 as it was in 2009-10 & not only
withstood judicial scrutiny but got strong judicial endorsement of the
Business Model and the method of its operation, monitoring & control.
22
Summary of different types of Contract Models
Parameter GCC Hybrid GCC NCC Hybrid NCC
Suitability of the
contract
• Authority has
maximum control
• Authority has more
control and intends
that operator shares some revenue risk
• Operators have more
control
• Higher revenue risk for operator
• Limited competition
on routes
• Operators have more
control, but less than
NCC• Revenue risk for
operator is lower than
NCC
• Limited competition on routes
Revenue risk
• Authority Shared:
• Base cost by
authority• Ridership increase by
operators
• Operator • Operator, subsidy by
authority on un-viable
routes
Degree of
operator’s incentive
to increase ridership
• Nil
• Fixed payment
irrespective of ridership
• Moderate
• Bonus on increase in
ridership
• High
• Revenue directly
linked to ridership
• High
• Revenue directly linked
to ridership
Monitoring and
penalty regime
• Requires strong
and consistent
monitoring with penalty for
service below
benchmark
performance
• Higher level of
monitoring than GCC
because of greater economic incentive
for performance
• Less monitoring
• Only service quality
parameters monitored
• Level of monitoring is
higher than NCC.
• In addition to service level parameters,
monitoring of movement
of bus on un-viable
routes
Access to Finance
• Guaranteed
income with
reduced credit risk
• Part of income
assured; lower risk
• Increases credit risk
especially if no track
record or demand is uncertain
• Risk should be
quantified
• Reduces revenue risk as
non-commercial routes
are supported. • Improves credit-
worthiness, but lower
than GCC
Contract Models
Access to finance (Bankability) should not be the sole criterion for selection of a business model. Hence, extreme caution must be adopted while considering access to finance as one of the key parameters.
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
23
Moving to a new bus contracting model - Lessons from London - Video
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
24
Selection of the most appropriate contract model
Rating Weight Score
Low 4% 1
Med. 10% 2
High 18% 3
Total Score Type of Model
Equal & Above 210 Gross Cost Contract
Between 150 & 210 Depends on inflection points
Below 150 Net Cost Contract
Contract Models
• Service Plan identifying the role of the
authority vis-à-vis the operators.
• Financial Capacity that deals with financingarrangements of contracting authorities for
operations.
• Institutional Capacity that captures the
ability of contracting authority to manage the
contract.
• Based on the Total Score, most appropriate
Contract Model is selected.
• Each of the above parameters may be rated
Low, Medium or High based on their relativeimportance in contract selection and
accordingly assigned a weight.
• Each parameter is further scored on a
1-3 point scale based on theassessment for that parameter.
Selection Parameters
Calculating Scores
Assigning Rates and Weights
Selecting Contract Model
01 02
03 04
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
Refer to Annexure 1 for the detailing of
selection of appropriate contract model.
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
25
Key Takeaway
Contract Models
Types of Contract ModelsA
B Summary of Contract Models
C Selection Criteria: Contract Models
1. Deciding on outsourcing
2. Contract Models
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
• The authority should be aware of various Contract Models and related features.
• Before finalizing the contract, the type of contract itself needs to be finalized
26
Contract Formulation
Key parameters in a typical outsourcing contract
Part 1: Preliminary
1. Definitions & Interpretations
2. Performance Security
3. Scope of Work
4. Grant of Contract
5. Conditions Precedent
6. Obligations of the operator
7. Obligations of the authority
8. Representations and Warranties
9. Disclaimer
Part 2: Operations
1. Buses
2. Bus Depot
3. Entry of respective lot of buses into commercial service
4. Operations
5. Maintenance
6. Monitoring of Operations and Maintenance
Part 3: Financial Covenants
1. Payment to the Operator
2. Escrow Account
3. Insurance
4. Accounts and Audit
Part 4: Force Majeure and Termination
1. Force Majeure
2. Change of Scope
3. Termination
4. Transition Phase and Handback of Project Facility
Part 5: Other Provisions
1. Assignment and charges
2. Change in Law
3. Liability and Indemnity
4. Rights and title over the project facilities
5. Dispute Resolution
6. Disclosure
7. Redressal of Public Grievances
8. Miscellaneous
9. Definitions
Part 6: Schedules
Covered in this training
session
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• http://mohua.gov.in/cms/model-citybus.php - Draft contract template
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
27
Contract Formulation
Risks associated with outsourcing and allocation of risks
Commission Risk
Revenue Risk
Procurement Risk
Performance Risk
Force Majeure Risk
Change in Law Risk
Financial Risk
Operating Risk
Authority
Authority
Authority/Operator
Operator
Authority/Operator
Authority
Authority/Operator
Operator
RISK TYPE GCC NCC
Authority
Operator
Authority/Operator
Operator
Authority/Operator
Authority
Authority/Operator
Operator
Risk allocation to be decided by Authority depending on their capacity to manage it.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
28
Contract Formulation
Risks associated with outsourcing and allocation of risks
The main tasks in managing and mitigating risks are:
• To identify them and assess their likely impact (consequence).
• To conduct an assessment of likelihood (how likely is the occurrence of such an event).
Analyzing these risks would help in avoiding or dealing with consequences such as increased costs, delayed
time etc. Risk is best allocated to the party which can manage that risk.
Risk Explanation Consequence
Commissioning Risk Risk that the authority or the operator, or both, might not receive allapprovals needed to provide the services
• Additional Costs
• Delayed Service
Revenue Risk Risk which affects the overall profitability or viability of services, orthe level of public subsidy required to support services
• Losses
• Reduced revenue
Procurement Risk Risk that the buses are not delivered on time or as per specification • Delayed Service
Financial Risk Risk that the project isn’t able to raise debt or achieve financialclosure
• Additional Funding Costs
• Delayed Service
Operating Risk Risk that adversely affects the day-to-day operations • Reduced revenue
• Losses
• Additional Costs
Performance Risk Risk that the operator is not able to meet availability andperformance standards
• Deficient services
• Reduced revenue
• Losses
Force Majeure Risk Risk that unanticipated acts delay the project or destroy the assets ofthe project
• Additional Costs
• Reduced Revenue
• Losses
Change in Law Risk Risk that legal framework of the project will be affected • Cost of compliance withnew regulations
For further reading, kindly refer “Model Contract Guidelines for City Bus Transport – MoHUA”
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
29
Contract Formulation
Risks associated with outsourcing and allocation of risks
The risks so identified need to be classified into retained risks (with the authority), transferable risks
(transferable to the operator), and shared risks (shared by both parties).
These risks then need to be detailed and categorized as per “Degree of Risk” and “Likelihood”. For example:
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
AS 4360:1999 Qualitative measure of CONSEQUENCE
LEVEL DESCRIPTOR DESCRIPTION
1 InsignificantLittle negative impact on system
operation or image
2 Minor
Affects reliability and convenience
of passengers as well as system
reputation
3 ModerateA compromise on service quality
and systemcredibility
4 Major
Major event requiring urgent
attention; threatens system
integrity
5 Catastrophic
Affects total system with massive
financial or political impact, or
future of operations
AS 4360:1999 Qualitative measure of LIKELIHOOD
LEVEL DESCRIPTOR DESCRIPTION
A Almost certain Expectedto occur
B LikelyWill probably occur during normal
circumstances
C PossibleCould occur under certain
circumstance
D UnlikelyWould not be expected to occur
under most circumstances
E RareCould occur under unusual
circumstances
The risks which are of lesser degree and lesser
likelihood are generally retained by the
authority. An indicative matrix is depicted in the
adjacent figure. The risk needs to be distributed
as per the risk appetite.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
30
Contract Formulation
Length of the outsourcing contract
• Determining the contract period not only ensures timely commencement of services but also generates interest among the operators.
• The authority should decide upon the length of the contract which is most suitable to its objectives and
requirements, such as availability of bidders, recovery of costs, and favorable investment horizon.
• Ideally, the length of the contract should be equal to the economic life of buses (as shown in the case
study on the next page) since prior to that the maintenance cost of the bus would increase. (Additional
charges related to change and maintenance of buses that become old and causes more discomfort to
passengers should be included in the new contract, etc.)
Pros of short-term contract
Shorter contracts provide an opportunity to test market prices frequently, to inject new blood and renew the fleet and
technology
Private operators remain motivated to maintain high standards of performance and maintain the fleet
Increases competition and the authority may re-tender the project frequently to get the best price
Cons of short-term contract
Short contracts are costly, disruptive, as operators change often, and may not deliver anticipated benefits. Short term contracts
are less attractive from operators’ perspective and results in few bidders
The interest of contractors towards building the business may deteriorate if they do not see themselves as long-termoperators
The value for money or lifecycle cost may not meet the expectations of the authority. Not suitable if operator is required to
invest in infrastructure
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
31
Contract Formulation
Length of the outsourcing contract in Bogota (Columbia)
Contract length in Bogota, Colombia
The term of contract for TransMilenio in Bogota (Colombia) depends on the time the operator takes to recoup
its investment. The regular operation period of the contract is between the start of regular operation as determined
by TransMilenio S.A. and the time at which average mileage of fleet usage reaches 850,000 kilometers. A higher
mileage every year leads to a shorter contract while smaller mileage allows for longer contracts giving the
private operator time to recoup its investment.
Inference: A traditional approach for the length of the contract term is to align it with the asset life of the vehicle.
Achieving higher mileage would require good maintenance of buses which would ensure high quality service. In
Bogota, a bus approximately runs 235 kms a day which makes 85,000 kms a year making a general contract length
of 10 years.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
32
Contract Formulation
Conditions precedent for the authority and operator
Conditions Precedent
1Authority’s conditions precedent
• Execute depot license agreement with the operator
• Procure water, sewage, electricity at bus depot / parking space
• Procure bus permits
• Grant approvals, permissions, and authorization within competence of
the authority
• Execution of Escrow Accounts
• Handing over the bus depot
Operator’s conditions precedent
• Sign the agreement within specified days of letter of acceptance
• Submit a performance guarantee in the form of a bank guarantee
• Certify that all representations and warranties are true and correct
• Deliver the initial lot of buses according to the bus delivery schedule
2
• Conditions precedent are the items and obligations the respective parties must fulfil prior to the contract coming into
effect.
• These typically have a material impact on the effectiveness of the contract and could include necessary permissions,
availability of facilities, necessary preparation, etc.
If either party is unable to fulfil the conditions precedent, there is a provision to extend the period to fulfil conditions
precedent. However, the party failing to achieve conditions precedent is liable to a penalty. Further, if the party is not
able to fulfil the conditions precedent even within the extended period, the other party has the right to terminate the
contract.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
33
Contract Formulation
Key considerations in an outsourcing contract related to buses
Buses
• Authority shall use the latest bus specifications prepared by MoHUA
• Ticketing equipment specification set by the authority
• Authority to identify fleet size based on demand and service requirements
• Authority to select bus type suitable to service design and passenger expectations
• Investment on buses made either by the authority or the private operator
• Defined time period set in contract for delivery of buses
• Defined time period set in contract for commencement of bus services
Who shall procure and what shall be the timeframe?
Who shall select the type and number of buses?
Who shall set the technical specifications?
Decisions related to fleet procurement are key to provisioning of bus services. These decisions impact theefficiency of operations, financials, service level, environment, public service objective of bus operations,etc.
It should be noted that technical specifications should not be manufacturer specific since it
limits the availability of fleet due to the specified design with limited manufacturers.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
34
Contract Formulation
Key considerations in an outsourcing contract related to infrastructure
Successful bus operations and contract viability are reliant on availability of key infrastructure facilities.
• All bus contracts require the specification of
a bus depot to manage the functions of
parking, fleet repair and scheduled
maintenance, fueling, washing and cleaning
administration, and management of
operations, etc.
• Bus depots are generally provided by the
authority. Utilities used in operations and
maintenance should be brought by the
operators.
• The location and size of bus terminals are determined on
the basis of route network structure and function
especially if multi-modal functions are needed, and are
usually at places where a number of routes and modes
converge or intersect.
• Ownership of terminal is under the authority. The
operation and maintenance may be outsourced to private
operator under a contract.
From an operator’s viewpoint, bus stops are an important
element in the contract because the revenue is directly
affected by the provision or lack of bus stops.
• Planning of bus stops: The authority should plan the
locations of bus stops, based on route assessment.
• Construction and maintenance of bus stops: This task can
be done by;
• Authority / Third party contract via authority’s
permission
• Private contractor / operator (operator received
incentive to maintain the bus stops)
• ITS helps authorities and operators control
and monitor the system to improve services
and the reliability and efficiency of operations.
• The construction and operation of control
center must lie with the authority. However,
the authority should share real time ITS
information with the operator.
Bus Depot Facilities
IT Systems
Bus Stop
Bus Terminal
01 02
03 04
Prasanna purple was having an issue with the maintenance of buses. The bus depot was encountering a drainage
problem due to which the buses were not maintained properly. Since the drainage problem was unaccounted for, there
was a delay in fixing the problem. As a result of this problem, only 12 out of 35 buses were running on the roads.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
35
Contract Formulation
Key considerations in an outsourcing contract related to performance
Performance standards comprise Minimum Service Level (MSL) benchmarks, which should cater to the basic
demands and requirements of the passengers. Further, exceeding these benchmarks / falling below these
benchmarks may result in incentives / penalty as per the contract. Specified performance parameters
enable standardization of performance among different operators within a city.
• The authority should understand that the penalty should not be considered a source of revenue. Itshould be applied as a corrective measure for deviant behaviour.
• If the penalty has to be applied, it should be equitable. Example: In a contract of INR 100 crores, apenalty of INR 1000 is not considered as equitable.
• While the penalty is important in performance standards, certain incentives should also be awarded forabove benchmark performance. An example for London performance standard is provided in the nextslide.
MoHUA provides service level benchmarking for urban transport and are available at
“http://mohua.gov.in/upload/uploadfiles/files/Service_level.pdf “
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
36
Contract Formulation
Performance linked incentives – Transport for London (TFL), TraffiQ (Frankfurt)
Transport for London – Performance linked incentives
• In London, the gross cost contracts are subject to financial incentives based on the quality of
service provided. For example, the reliability incentive.
• Every contract specifies a 'Minimum Performance Standard' which sets targets for service levels
and percentage of on-time arrivals and departures.
• Bus companies are then eligible for a bonus equivalent to 1.5% of the contract price for every 2%
improvement in on-time percentage.
• Similarly, they may face a 1% deduction for every 2% reduction in on-time performance below the
Minimum Performance Standard.
• Similar incentives exist for percentage of scheduled bus kilometers operated, vehicle condition,
driver performance, and customer service.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
TraffiQ (Frankfurt, Germany) – Environment linked incentives
• TraffiQ, the organizing authority responsible for local public transport services within the city of
Frankfurt, tendered a 6-year Gross Cost Contract with environmental incentives for a sub-
network (3.3 million timetable-km/year) in 2006.
• One main policy aim within the tendering procedures was the reduction of air pollution by
demanding high anti-pollution standards to fulfil the European anti-pollution regime.
• The operator of this bundle now uses vehicles already fulfilling the EEV-standards for gas emission.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
37
Contract Formulation
Key considerations in an outsourcing contract related to payment
Payment Mechanisms
The payment mechanism in the contract acts as a primary motivator of operator behavior.
• Fare box revenue (User charges)
• Availability payment (Fee per km)
• Quality performance payments (Incentives)
• Non fare box revenues (Advertisements, grants, etc.)
A combination of these payment mechanisms are used in various Contract Models.
Illustrative Contract Models combining different payment mechanism
Hybrid GCC
• Fee per kilometer, to be paid by the authority• Part of fee/km is fixed and remaining is variable • Variable dependent on increase in ridership
Hybrid NCC
• Operator retains fare box revenue collected• System Management Fee payable to the authority or Grant payable to Operator• Bonus fee for certain non-commercial and unprofitable routes
GCC • Fee per kilometer, to be paid by the authority
NCC• Operator retains fare box revenue collected from passengers• System Management Fee payable to the authority or Grant payable to Operator
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
38
Contract Formulation
Key considerations in an outsourcing contract related to payment
Net Cost Model in Santiago (Chile) - Payment Mechanism
The payment is linked to the number of passengers carried (user charges). Further, the authority, in order to
reduce the operators’ risk, provides a guaranteed payment for reduction in demand. If actual demand differs from
the reference figure, the operators receive a drop (or increase) in their income representing 10% of the demand
change. Thus, a 10% drop in user charges would only impact operator’s revenue by 1%.
• The payment mechanism for the operator should be added carefully. This may be used to elaborate on
revenues other than fare box revenue.
• The bank should notify the authority in case the amount in escrow account is less than the amount
agreed to in the contract.
• The authority should pay as per the contract timeline. Authority must understand that if the payment
record is not as per the contract, then it may happen that the cost of bid goes high.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
39
Contract Formulation
Dispute resolution and contract flexibility
Contract Flexibility
The contract needs to contain certain conditions that enable actions to address changes in operating environment
such as varying demand. Some examples can be:
• Flexibility to assign vehicles across network
• Adjusting fleet size to meet travel demands
• Network expansion
• Fare adjustment in case of increased competition in the market affecting contract viability
Dispute Resolution
This contractual parameter is required so that disagreements can be aired and resolved amicably. A methodology
outlining how disagreements shall be resolved enable maintaining a good client-supplier relationship. The person
identified for the following should not be related to either party. Disputes may be resolved through:
• Conciliation – Either party may call upon the other to arrive at an amicable settlement thereof
• Arbitration – Held in accordance with the rules in Arbitration and Conciliation Act, 1996
• Adjudication – In case of constitution of a statutory Regulatory Authority or Commission with powers to
adjudicate upon disputes between the Operator and the Authority
Indore – Contract Flexibility
In Indore initially, each operator is required to operate minimum two buses on routes assigned to them. Once
they exceed the capacity in terms of passenger kilometers served, there is provision for increase in number
of buses. In such a case, the first opportunity to deploy buses is given to the existing operator. In case they refuse,
opportunity will be given to a new entity.
Germany – Contract Flexibility
In Elmshorn (Germany), the Authority can demand changes to the service up to an amount of 10% of the
contract volume. The price for the additional services is fixed in the contract.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
40
Contract Formulation
Early termination of contract; Operator and Authority Default; Transition Plan
Termination
During the implementation of the contract, a situation may arise when it becomes necessary for either
party to terminate the contract. The termination of contract may arise due to force majeure, due to
default or at the convenience of the authority. This termination clause enables management of various
risks and concerns of parties to the contract.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
Operator and Authority Default
• During the implementation of the contract, a situation may arise when it becomes necessary for the
parties to terminate the contract. The termination of contract may arise due to force majeure, due to
default.
• The contract clause should define the specific conditions on fulfilment of which the above termination
situations will be initiated. The clause will also list the consequences for the contracting parties once the
contract is terminated.
• One very important component of the termination of contract is the rights and obligations of the
parties at termination. The obligation of the private operator on termination is usually to hand over the
project back to the authority in a specified condition.
Transition Plan
A transition plan is required to be put in place to deal with a situation where the contract’s term is
completed, or it is terminated prematurely.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
41
Contract Formulation
Developing client supplier relationship
The contractual parameters highlighted in this sub-module (3B-3L) must be honoured by both the
Authority and the Operator. It is to be noted that by entering into the agreement, both the Authority
and the Operator has made a commitment to deliver bus operations. Further, fostering a professional
relationship with your contractor (s) improves the sustainability of performance of the overall bus
operations.
The Authority must understand that the motive of the operator is to make profit in order to sustain
the operations. Example: In case there is a cause for penalty, to be imposed on the private operator,
the Authority must inform the private operator immediately, so that there is room for correction,
instead of conveying the message through penalty.
1
2
3
Shared risk – assigning of risk to where it can be best-managed
The risk needs to be assigned properly to the person / organization which
can best manage it. This exercise is explained in Section 3B of this module.
Contracts are financially viable for both parties
The contract should be drafted in a way which is viable for both
the Authority and the Operator.
Aiming for a win-win outcome
The purpose of forming a partnership is to ensure that commitments made
by both the Authority and the Operator are honoured.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
42
Contract Formulation
Developing client supplier relationship
The Operator should respect and share updates on a regular basis. A
monthly meeting to share information would foster the mutual
partnership.✔
The Authority should pay the Operator as per the contract. The
authority must understand that motive of the Operator is to make a
profit in order to sustain the operations. A delay in payment may impact
the sustainability of operations and deteriorate quality of service.✔
The Authority should understand that Operators are partners, and
should discuss the possibilities of corrections prior to taking actions
(Example: Imposing penalty). The Authority and the Operator must
honor their commitment made at the time of signing the contract.✔
Below are some tips for the authority and the operator that can aid them in developing a
good partnership.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
43
Contract Formulation
Assessment of Contract Management Capacity – Market Sounding
‘Market sounding’ exercise can be used by the authority to test the level of interest and
availability of potential private operators. It can be done in the following ways:
Key Takeaways
• The Authority must ensure that the views of stakeholders are incorporated while formulating contract.
• Market Sounding ensures that RfP is accepted by the bidders and you receive competitive bids.
EOIExpression of Interested can
be issued to identify firms that
are interested in bidding.
WorkshopA workshop can be conducted
to capture the inputs of various
stakeholders, such as, private
operators, vendors, transport
department, etc.
Road ShowsOrganizing road shows to display
the authority’s perspective and
vision for bus transport.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
44
Contract Formulation
Assessment of Contract Management Capacity
The Authority should understand their commitment to operators, commuters, vendors, etc.
by taking the responsibility to ensure bus services run in the city.
Parameters to assess Contract Management Capacity
• The Authority must have a plan to ensure sources of revenue from fare box, non fare box, and operational subsidy from government.
• To honor the financial commitment, payments are to made to private operators, sub-consultants, PMCs, other contracts such as monitoring, fare collection etc.
• Authority must plan for the necessary infrastructure facilities required for smooth bus systems.
• These include bus depot (for maintenance and parking), terminals and bus stops (with shelters).
• Authority must strengthen its capacity to monitor and control bus operations.
• ITS and MIS is an important tool to strengthen the capacity of monitoring and control.
Monitoring and ControlInfrastructure PlanningFinancial Planning
The Senior Manager must be aware about its strength and capability to honor the contract.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• Draft Guidelines for City Bus Private Operations - MoHUA
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
45
Contract Formulation
Key Takeaway
• The key contractual parameters should be carefully thought-out and focused on separately.
• While finalizing the contract, the authority should also keep in mind the perspective of the
private operator.
• The authority must consider the private operator as their partner and build a healthy and
professional client supplier relationship.
2. Contract Models
Key contractual parametersA
Risk assessment and allocationB
Length of contractC
Conditions precedentD
1. Deciding on outsourcing
BusesE
InfrastructureF
3. Contract Formulation
Performance StandardsG
TerminationJ
Operator and Authority DefaultK
Transition PlanL
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Payment MechanismH
Dispute resolution / Contract flexibilityI
PartnershipM
Contract Management CapacityN
46
RFQ and RFP Issuance
Standard RfP Provision
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• Toolkit on Contracting Urban Transport – UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
It is strongly recommended to engage a transaction advisor considering the scale of the project. The
transaction advisor would be beneficial to the authorities because of the following reasons:
1. Transaction advisor provides different types of skill set such as legal, PPP, Bus operations, financial
modeling, feasibility assessment, etc., while drafting the contract. Therefore, hiring a transaction advisor is
highly recommended. Furthermore, the contract layout price is usually very high and the transaction
advisor would be well equipped to handle these projects.
2. The transaction advisor would be well equipped to handle high price contracts and would possess
demonstrable experience.
3. The transaction advisors would contribute to vendor knowledge and innovation in the bidding process.
Since the Transaction Advisor is a neutral party, he/she will provide unbiased opinion on the viability and
responsibility of both the authority and the private operator.
The Authority and the bidders are entering into high value and long term commitments involving
reputation risks apart from other risks.
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
47
RFQ and RFP Issuance
Standard RfP Provision
Number of Buses: 100 buses
Daily assured kilometers: 100 km/bus
Annual assured kilometers: 36,00,000 kilometers (considering 360 days in a year)
Length of Contract: 8 years
Per kilometer O&M Fee: INR 50/km (operation and maintenance)
O&M Fee escalation: 10% per year
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Annual O&M Fee (in crores)
18.0 19.8 21.8 24.0 26.4 29.0 31.9 35.1
Total Outlay in contract period ~ 205 crores
Cost of buses ~ 40 crores
Cost of finances ~ 40 crores
Bank charges, depot lease change, other charges ~ 20 crores
Authority’s perspective
Private operator’s perspective
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
48
RFQ and RFP Issuance
Bid Process Management
• Competition is
expected to
provide
transparency to
the process.
• The competitive
bidding process
can either be
one stage or
two stages.
Single-stage process (RfP)
• This process is appropriate for projects
when the scope of the project is well
defined, and there are relatively fewer
bidders.
Two-stage process (RfQ + RfP)
• This process is appropriate when the
project scope is not clear and
discussions are required to finalize the
service options, and the number of
bidders is large. This process is highly
recommended for the authority.
• Quality cum Cost Based Selection
(QCBS): This method scores technical
capacity, skill and experience of the bidder.
A minimum technical score is required for
the bid to be considered for financial bid
evaluation. This is used when quality is the
prime concern.
• Least cost method: This method is
preferred when cost is the prime concern
and the minimum standard required from
the bidders can be easily identified with no
differentiation among the bidders.
Competitive Bidding
Deciding between one stage and two stage bidding process
Types of bid evaluation
• Early market engagement in pre-procurement phase may bring perspective of prospective bidders,
relevant stakeholders (such as transport department, existing transport agencies, development authority,
etc.) and ensure that procurement process is successful.
• Multiple early market engagements ensures that the decision makers are clear on interest from potential
bidders and potential issues in later stages are discussed with potential bidders.
• Since a typical 8 year contract costs ~305 crores (As per the calculation on previous slide),
comprehensive planning for RfP is recommended.
The distribution of Technical to Financial score is generally kept 70:30 (Technical is always higher). This isbecause the authorities should choose the best candidate in terms of delivering capability and then see thefinancial quotes of the operator. Example: If the authority chooses the operator with the lowest bid, it mayhappen that the quality of the bus operations reduces.
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
49
RFQ and RFP Issuance
Bid Process Management – Case study (Outsourced fleet maintenance by DTC)
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
With an increase in the
electronic content in busesand higher sophistication of
tools needed, it wasbecoming increasingly
difficult for DTC to maintainthe vehicles on their own.
NEED FOR OUTSOURCING
To ensure consistent
performance of buses onroad, the maintenance of
the buses were outsourcedto the supplier of buses.
OUTSOURCINGOF MAINTENANCE OF BUSES
Since specific tools and
parts can only be providedby specific bus
manufacturers. The multi-year contract was
negotiated with the existingmanufacturers to maintain
buses supplied by them.
NEGOTIATION
OF CONTRACT THROUGH
NON-COMPETITIVE PROCESS
1. Deciding on outsourcing
Standard RfP ProvisionA
Bid Process ManagementB
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
2. Contract Models
50
Evaluation and Selection
Evaluation of bids
Bid evaluationA
4. RFQ and RFP Issuance
5. Evaluation and Selection
6. Contract Monitoring
Technical Qualification
• The criterion has to be stringent enough to ensure that only serious bidders qualify, but not so high such
that only few bidders qualify. It should be depend on market appetite and should provide level playing
field and fair competition
• Relevant experience (recommended to be within previous 3-5 years) is a good qualifier especially having
performed similar services previously, or with a skill set that clearly qualifies their involvement.
Technical Qualification
Financial Qualification
• The bidder should have sufficient capability to undertake the financial burden of the project. The
financial capability would depend on the annual turnover (related to project value), turnover criteria for
last few years, etc.
• Usually, this is checked on the basis of average annual turnover and net worth.
• Authority should consider both turnover from relevant experience and other services, but higher
weightage should be given to turnover from relevant experience.
Financial Qualification
1. Deciding on outsourcing
3. Contract Formulation
2. Contract Models
The technical qualification takes into consideration not only bus operators but transport operators capableof running buses (such as trucks and taxis). Furthermore, it analyses the operators based on the capacityof the buses, number of vehicles and number of months of operations.
The operator must score the minimum evaluation score in order to be considered for the next round.
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
51
Contract Monitoring
Developing a comprehensive monitoring framework
The monitoring framework should be comprehensive and should consider all issues that might arise in the projectlifecycle, with due provision for review and update at any point of time.
▪ Regular evaluation
of the monitoring
procedures, as well as the level of
monitoring, will
assist the
authority to assess its effectiveness
Review and update the performance
monitoring system
▪ ITS (or agreed
reporting structure)
should provide all necessary data to
enable sufficient
monitoring
▪ Regular meetings
of all concerned
officials (including private operator
and related parties)
must be conducted
at agreed intervals to discuss any
performance
related issues
Design the performance monitoring mechanism
▪ For managing a
contract to deliver
service quality, the main KPI aspects
are:
• Failure to
perform a
service;
• Compliance with
operating rules
and service specifications;
• Meeting vehicle standards of
cleanliness and
condition; etc.
Set the output requirements, design KPIs
▪ Decide the level of
monitoring which is
most efficient considering the
cost and availability
of resources
▪ Example: ITS
generated data,
physical inspection, etc.
Evaluate existing processes and tools
▪ Determine all
parameters on
which the private operator will be
evaluated for the
quality of the
project
▪ Consider:
• Which data
sources to use
• In what form is
information
available or to be specified
Collection and analysis of information 1 2 3
45
During the development of the contract During the monitoring period1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
Authority should understand that a task which is not monitored properly is never completed.
Daily service monitoring C
52
Contract Monitoring
Developing a comprehensive monitoring framework
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
• https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/254392/tendering-road-
passenger-transport-contracts.pdf
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
Monitoring by Strathclyde Partnership for Transport (SPT) (Outsourced Monitoring)
SPT undertakes a range of activities to keep the bus network under review.
Action
Monitoring activities include:
• SPT Compliance Inspectors monitor bus services noting potential violations of traffic regulations and
preparing reports for the Traffic Commissioner. Figures are presented on a monthly basis.
• SPT prepares reports for its Operations Committee. For example, reports are prepared including patronage,
scheduled versus actual mileage, passengers per mile and lost mileage. The report also details the trend of
four-weekly passenger patronage on SPT’s MyBus (Demand Responsive Transport) services.
• Nearly 3,000 vehicle checks have been undertaken. SPT’s Compliance Inspectors also carry out monitoring and
report instances of non-compliance, including engine idling, parking issues or missing information.
• The Compliance Inspectors work with drivers and draw to their attention whenever possible any failures that
are found. Based on these findings, reports are submitted to the Traffic Commissioner as and when required.
• MyBus services are monitored by SPT officers to ensure that the service being provided by operators meets
with the expected standards.
• Monitoring arising from local service complaints that the Compliance Inspectors are requested to investigate
are also included in these figures reported to the Operations Committee.
Impact
• There has been a significantly reduced level of non-compliance recorded since SPT’s Compliance Inspectors
started work. (Third party inspection)
• The high level of compliance is reflected by the very low number of breaches found and specific monitoring is
undertaken after complaints have been received.
53
Contract Monitoring
Key Performance Indicators and Outcomes
Outcomes
Customer’s perspective
Operator’s perspective
Financial perspective
City’s perspective
Community’s perspective
Quality of service• Regularity • Punctuality
Customer value• Frequency of
service• Average speed• Behavior of crew• Comfortability• Skipping bus
stops• No. of services
per route defined
Efficiency of service• Fleet utilization • Vehicle utilization• Crew utilization• KMPL of fuel• Tyre
consumption
Effectiveness of service• Reliability• Rate of incident• Rate of
breakdown• Rate of fatality
Quantitative • Cost/Kms• Variable cost• Fixed cost
• Depreciation• Insurance• Taxes• Overhead
• Traffic revenue /kms
Economic viability• Operating ratio• Cost /kms• Earning / Kms• Profit / Loss
Adequacy of service• No. of public
transport buses
per lakh population
• Organized bus transport share
• Availability of bus transport
• Service coverage of bus transport
Quality of service• Average waiting
time for bus transport users
Pollution• Reduction in
Pollution
Road • Congestion• Safety compared
to other modes
Women safety
Vehicle Ownership• Average no. of
vehicles per head (ownership)
From the customer’s perspective, the outcome “Quality of Service” is dependent on “Regularity” and“Punctuality”.
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
54
Contract Monitoring
Key Performance Indicators and Outcomes
The Key performance indicators have to be analyzed before implementation. The training material on“Monitoring and Evaluation” details out the Key Performance Indicators. Below is a template in which theKPIs should be Benchmarked.
<Enter outcome here><Enter KPI here>
<Enter formula here>
Level of Service (LoS)
Interval Level of Service (LoS)
Slab 1 <1, 2, 3, 4, etc.>
Slab 2 <1, 2, 3, 4, etc.>
Slab 3 <1, 2, 3, 4, etc.>
Slab 4 <1, 2, 3, 4, etc.>
Frequency of Monitoring
Who is going to monitor Frequency
Operator<Daily / Weekly / Fortnightly / Monthly
/ Every 2 months / Quarterly / Semi
Annually / Annually>Middle Level
Senior Manager
Failure and Back End Causes
Assignable Causes Non Assignable Causes
1. Cause 12. Cause 23. …
1. Cause 12. Cause 23. …
Service Performance tools <Enter the method to measure this KPI here>
Refer to Training Material on “Monitoring and Evaluation” for more details.
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
55
Contract Monitoring
Monitoring the services provided by the bus operator
Daily Service Monitoring:
• This enables timely identification of any variations from specifications by the authority and the operator.
• This task requires a Control Centre which (with ITS), can be abreast with the daily service performance.
• This Control Centre may also be involved in service planning, both strategic service plan (setting overall parameters) and may also govern the daily scheduled service.
• The Control Centre will have in place standard operating procedures to cover areas such as:
Control procedures
Vehicle breakdown response
Emergency or accident
response
Malfunctions and technical support for support systems
Safety and security protocols and response
procedures
Reporting procedures
Quality inspection
procedures
Inspection and audit of contract
items
Disciplinary procedures
Contract Management Procedures:
• For contract management, the authority will have to develop a comprehensive and agreed set of procedures and processes under which it will administer the control and management of the bus operator contract. It could be named as Contract Management Procedures Manual (CMPM).
• It would aim to provide explicit and clear guidance to reduce the amount of ad hoc and arbitrary decisions that need to be made with individual operators and to build confidence in the regulatory process.
• This manual would address control and monitoring issues not contained in the contract, and may be changed and adapted as new situations arise.
Monitoring and evaluation is covered in detail in the training session of Monitoring and Evaluation.
For further reading, kindly refer to the
following material
• Model Contract Guidelines for City Bus
Transport – MoHUA
• Toolkit on Contracting Urban Transport –
UNDP/SUTP/MoHUA/IUT
• Bus system toolkit 6 – ADB
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
56
Contract Monitoring
Monitoring and supervision in London
Monitoring and supervision London (GB): Financial incentives in a Gross Cost Contract
Monitoring for Gross Cost Contract for buses is done by TfL as follows:
• The “Quality Incentive” contract payments are based on a monitoring regime that primarily measures
the reliability of the buses. The contract dedicates an entire detailed section to reliability. It states for
example at which location and what frequency monitoring will take place.
• In addition, customer satisfaction surveys are carried out, measuring waiting time and riding,
driving standard, cleanliness, information at bus stops, etc.
• Other monitoring mechanisms include: Mystery travelers, driving standards reporting, accident
and incident reporting and environmental reporting.
• Operator league tables are published for reliability and excess wait time. Other quality indicators
are reported at network level only.
• Presently, monitoring is undertaken manually with a hand held device. However, TfL is in the
process of introducing GPS in the future. This tracking system would have additional benefits, such as
passenger information.
For further reading, kindly refer to the following material
• Model Contract Guidelines for City Bus Transport – MoHUA
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
57
RfQ and RFP Issuance + Evaluation + Contract Monitoring
Key Takeaway
1. Deciding on outsourcing
3. Contract Formulation
4. RFQ and RFP Issuance
5. Evaluation and Selection
2. Contract Models
6. Contract Monitoring
Monitoring frameworkA
KPIs and their OutcomesB
Daily service monitoring C
• RfQ and RfP issuance should follow a procedure and the methodology should be finalized.
• The authority should realize the importance of transaction advisor and need of it’s
expertise.
• During evaluation of contracts, the authority should finalize the break-up between Technical
and Financial proposal.
• A key step for the authority in an outsourcing model is monitoring of the contract. The
authority should have a proper framework for monitoring.
• The authority should have proper KPI’s which they need to monitor, but at the same time,
they should understand that professional discussions are the key to solving problems faced
by either party.
58
Thank You !
Time for Discussion
59
Annexures
60
Selection of contractual model based on service plan, financial capacity and institutional capacity
Parameters Description Score Weightage (%)
Max. Score
Parameter Max Score
A Service Plan Key questions to answer before assigning ratings
1 Average load factor What is the average load factor cumulatively on all the routes?
18 3 54
• Below 30% 3
• Between 30% and 60% 2
• More than 60% 1
2 Overlap of routes Are there significant overlap of routes? 10 3 30
• More than 20% 3
• Between 10% and 20% 2
• Less than 10% 1
• No overlap 0
3 Authority's control over network and service plan
Should the authority have more control over frequency, headway, selection and modification of routes? If yes, rate 3 or else 0
4 3 12
4 Integration of different modes Is there a need to achieve seamless integration between different modes (metro, BRTS, water transport, trains etc.)? If yes, rate 3 or else 0.
4 3 12
5 Competing Modes Is there significant competition from other modes? If only one mode then give 1 score, two modes then give 2 score and three or more modes then give 3 score.
10 3 30
• Metro/Mono rail
• IPTs
• Any other
Annexure 1
Below is the detailed table for selecting the most appropriate contract based on service plan, financial capacity and institutional capacity. For further
reading, please refer to “Model Contract Guidelines for City Bus Transport – MoHUA”
61
Selection of contractual model based on service plan, financial capacity and institutional capacity
Annexure 1
Parameters Description Score Weightage (%)
Max. Score
Parameter Max Score
B Financial Capacity
1 Fund Allocation for Project Has the authority budgeted money for the entire duration of the contract? If yes, rate 3 or else 0.
10 3 30
2 Provision of dedicated funding Have any funding provisions been created such as Urban Transport Fund and/or is there a resolution from the Urban Local Body/State Govt. for funding? If yes, rate 3 or else 0.
18 3 54
3 Credit Rating What is the credit rating of the authorities financing the project?
4 3 12
• BBB and above 3
• Between B and BBB 2
• Less than B 1
• No rating 0
C Institutional Capacity
1 Creation of SPV Is there a SPV created for this project? If yes rate 3, else score 0.
4 3 12
2 Adequacy of Staff for Bus Transport
Are there bus transport staffs dedicated to administer and monitor the project? If yes, rate high or else low.
18 3 54
• More than 10 employees 3
• Between 5 and 10 employees 2
• Between 2 and 5 employees 1
• Less than 2 employees 0
Max. Score (A+B+C) 300
62
Reference table
A. 7-10
B. 11-16
C. 17
D. 18
E. 19
F. 20
A. 7-8
B. 9-11
C. 12
D. 13
E. 14
F. 15-16
Delivery PPTParticipant
Manual
A. 21-24
B. 25-28
C. 29-30
A. 17-19
B. 20-23
C. 24-25
Contract
Model
A. Various models for outsourcing bus operations
B. Summary of different types of Contract Models
C. Selection of the most appropriate Contract Model
2
Deciding on
outsourcing
A. Objective of the authority
B. Activities that can be outsourced
C. Decision for outsourcing
D. Infrastructure Analysis
E. Skilled Manpower Analysis
F. Financial Capacity Analysis
1
Contract
formulation
A. Key parameters in a typical outsourcing contract
B. Risks associated with outsourcing and allocation of risks
C. Deciding on the appropriate length of the outsourcing contract
D. Conditions precedent for the authority and operator
E. Key considerations in an outsourcing contract related to buses
F. Key considerations in an outsourcing contract related to infrastructure
G. Key considerations in an outsourcing contract related to performance
standards
H. Key considerations in an outsourcing contract related to payment
I. Dispute resolution and contract flexibility
3
A. 31
B. 32-35
C. 36-38
D. 39
E. 40
F. 41
G. 42-44
H. 45
I. 46-47
A. 26
B. 27-29
C. 30-31
D. 32
E. 33
F. 34
G. 35-36
H. 37-38
I. 39
63
Reference table
J. 48
K. 48
L. 48
M. 49-51
N. 52-53
J. 40
K. 40
L. 40
M. 41-42
N. 43-45
Delivery PPTParticipant
Manual
A. 54-56
B. 57-58
A. 46-47
B. 48-49
A. 61-63
B. 64-65
C. 66-67
A. 51-52
B. 53-54
C. 55-57
Contract
formulation
J. Early termination of contract
K. Operator and Authority Default
L. Transition Planning
M. Partnership
N. Contract Management Capacity
3
RFQ and RFP Issuance
A. Standard RfP Provision
B. Bid Process Management4
Evaluation and
SelectionA. Evaluation of bids5
Contract
Monitoring
A. Developing a comprehensive monitoring framework
B. Key Performance Indicators (KPIs) and their Outcomes
C. Monitoring the daily services provided by the bus operator
6
Annexure 1 A. Selection of Appropriate Contract7
A. 59-60 A. 50
A. 69-71 A. 59-61
64
Bibliography• DTTILLP. 2016, Final Guidelines for City Bus Private Operations, Ministry of Housing and Urban Affairs (MoHUA) and Sustainable Urban
Transport Project (SUTP) - http://mohua.gov.in/upload/uploadfiles/files/GuidelineCityBus.pdf, Accessed in April 2019
• PADECO Co., Ltd., 2008. Guidelines for Bus Service Improvement: Policy and Options. Ministry of Housing and Urban Affairs (MoHUA)
and Asian Development Bank
• UNDP, 2013. Toolkit on Finance and Financial Analysis of Urban Transport Projects. Institute of Urban Transport and MoHUA
• https://www.pppinindia.gov.in/toolkit/, Accessed in April 2019
• Urban Mass Transit Company Limited and CEPT University. Urban Bus Specifications Urban Bus Specifications – II. MoHUA
• https://ppiaf.org/sites/ppiaf.org/files/documents/toolkits/UrbanBusToolkit/assets/home.html, Accessed in April 2019
• UNDP. Training Module – Contracting in Urban Transport. Institute of Urban Transport and MoHUA
• Pucher, J., Park, H., Kim, M.K., and Song, J. 2005. Public Transport Reforms in Seoul: Innovations Motivated by Funding Crisis. Journal
of Public Transportation 8(5)
• Kim, H.J., 2007. “Seoul Public Transportation Reform: Experience & Current Initiatives”. Presented at Asia Clean Energy Forum:
Regional Policy and Finance Solutions for Energy Security and Climate Change. Organized by Asian Development Bank. 26-28 June
2007, Manila, Philippines. Retrieved: August 2008.
• Transport for London, London’s Bus Contracting and Tendering Process
• MoHUA provides model contracts for different types of Contract Models. These contracts need to be modified as per the organiz ation’s
requirements.
• GCC – http://mohua.gov.in/upload/uploadfiles/files/ModelGrossCost.pdf
• Hybrid GCC – http://mohua.gov.in/upload/uploadfiles/files/ModelHybrid.pdf
• NCC – http://mohua.gov.in/upload/uploadfiles/files/ModelNetCost.pdf
• Hybrid NCC – http://mohua.gov.in/upload/uploadfiles/files/ModelNetCostHybrid.pdf
P resentation title[To edit, c lick View > Slide Master > Slide Master]
©2019 Deloitte Shared Services India LLP 1
Pre-Training Questionnaire
Outsourcing for Senior Managers: Pre-Training Questionnaire
The questionnaire will only take 10 minutes of your time to get filled.
The purpose of this questionnaire is to understand what you already know about the training theme.
We will ask you to complete another questionnaire at the end of the training so that we can assess
what you have learnt and how the trainers have performed at conveying the key points.
Organization and Individual Details
Name of Organization
Name
Designation
Contact Number
Email Address
No. of buses run by your organization
No. of staff in your organization
Knowledge and Expectation Assessment
Q1. What are your expectations of this training? What do you hope to gain by participating?
A1.
Q2. What is the one thing that you would most like to learn during this training?
A2.
Q3. Please rate your knowledge / skill on the following learning objectives.
A3. Learning Objective Highly Proficient
Proficient Neutral Slightly
Proficient Not
Proficient
Identifying segments of bus operations which can be
outsourced
☐ ☐ ☐ ☐ ☐
Taking decision on whether or not to outsource the identified
segments or services ☐ ☐ ☐ ☐ ☐
Selecting appropriate / suitable
contractual model suitable as per the requirements
☐ ☐ ☐ ☐ ☐
Overview of key contractual
parameters ☐ ☐ ☐ ☐ ☐
Appreciating the two-way relationship between the client
and the supplier ☐ ☐ ☐ ☐ ☐
Understanding the contours of bid process management
☐ ☐ ☐ ☐ ☐
Appreciating the importance of
monitoring and developing a
monitoring framework
☐ ☐ ☐ ☐ ☐
Q4. Kindly provide any additional comments for this training.
A4.
P resentation title[To edit, c lick View > Slide Master > Slide Master]
©2019 Deloitte Shared Services India LLP 1
Post-Training Questionnaire
Outsourcing for Senior Managers: Post-Training Questionnaire
The questionnaire will only take 10 minutes of your time to get filled.
The purpose of this questionnaire is to assess the capacity building, assess the trainer, training
material and the training programme. Kindly f ill this questionnaire with respect to your experience
from the training session.
Organization and Individual Details
Name of Organization
Name
Designation
Contact Number
Email Address
No. of buses run by your organization
No. of staff in your organization
Assessment of the Training Session
Q1. Please rate your knowledge / skill on the following learning objectives.
A1. Learning Objective Highly Proficient
Proficient Neutral Slightly
Proficient Not
Proficient
Identifying segments of bus
operations which can be outsourced
☐ ☐ ☐ ☐ ☐
Taking decision on whether or not to outsource the identified
segments or services ☐ ☐ ☐ ☐ ☐
Selecting appropriate / suitable
contractual model suitable as per the requirements
☐ ☐ ☐ ☐ ☐
Overview of key contractual parameters
☐ ☐ ☐ ☐ ☐
Appreciating the two-way relationship between the client
and the supplier ☐ ☐ ☐ ☐ ☐
Understanding the contours of bid process management
☐ ☐ ☐ ☐ ☐
Appreciating the importance of monitoring and developing a
monitoring framework
☐ ☐ ☐ ☐ ☐
Q2. Please rate the training material on the following parameters.
A2. Parameter Very High High Neutral Low Very Low
Extent of coverage ☐ ☐ ☐ ☐ ☐
Relevance of contents ☐ ☐ ☐ ☐ ☐
Practical applicability of case studies
☐ ☐ ☐ ☐ ☐
Easy to understand ☐ ☐ ☐ ☐ ☐
Usefulness of reference material ☐ ☐ ☐ ☐ ☐
Understand the contours of bid process management
☐ ☐ ☐ ☐ ☐
Monitor the contract based on a contract monitoring framework ☐ ☐ ☐ ☐ ☐
Assessment of the Training Session
Q3. Was the trainer able to achieve the stated learning objectives of the session?
A3. ☐ Yes ☐ No Reasons ________________________________________
Q4. Please rate the trainer on the following parameters.
A4. Parameter Very High High Neutral Low Very Low
Knowledge of the subject ☐ ☐ ☐ ☐ ☐
Communication skills ☐ ☐ ☐ ☐ ☐
Organized and structured approach
☐ ☐ ☐ ☐ ☐
Interactive and engaging ☐ ☐ ☐ ☐ ☐
Q5. Do you think your knowledge / skill / ability on the subject has improved after attending the training session?
A5. ☐ Very High ☐ High ☐ Neutral ☐ Low
☐ Very Low Reasons ________________________________________
Q6. What are your top 3 takeaways from the training you attended today?
A6. 1.
2.
3.
Q7. Please rate the training session on the timing and duration of each module.
A7. ☐ Very Effective ☐ Effective ☐ Neutral ☐ Slightly Effective
☐ Deficient Reasons ________________________________________
Q8. What is your preference of location for this training session?
A8.
Q9. What should be the duration of this training session?
A9. ☐ 0.5 days ☐ 1 days ☐ 1.5 days ☐ 2 or more days
Q10. What should be the frequency of this training session at your level?
A10. ☐ Quarterly ☐ Semi-annually ☐ Annually ☐ Every 2 years
Q11. Kindly provide any areas in which the training requires improvement / Other additional comments
A11.
P resentation title[To edit, c lick View > Slide Master > Slide Master]
©2019 Deloitte Shared Services India LLP 1
Group Activity
Outsourcing for Senior Manages – Group ActivityOutsourcing for Senior Manages – Group Activity
Part A – Ice Breaker Question
Part B – Group Exercise
Part C – Case Study
From your perspective, what are the key activities that one should outsource in a bus transport organization and why?
Try to cover as many activities to outsource
as possible
What are the challenges faced by you while outsourcing bus operations? What are the possible solutions of those challenges?
Substantiate with observation / experience
Challenges
Problem Statement: In the city of “Riverdale”, the people have demanded regular and reliable bus services. In
order to satisfy this demand, a company “TransRiverdale” was formed. Your group members are the key members
of this company. What are the key parameters you shall consider and overall approach for addressing the same? Try to
think creatively and cover as many parameters as possible. You may refer to participant’s notes provided to you. Keep
in mind the requirement of your customers and bringing the private operator on the same page as the objective set.
Solutions
You are required to form a group of 3-5 participants in order to complete this activity. Time required for completion is 40 minutes. Furthermore, 15 minutes would be given to each group to present their outcome.
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