TRANSPORTATION, WATER AND URBAN DEVELOPMENT DEPARTMENT
THE WORLD BANK
Transport No. UT-1
COMPETITIVE TENDERING FOR PUBLIC BUS SERVICES
Richard G. Scurfield
Competitive tendering for the provision of bus services offers a possible compromise between full
deregulation and the provision of services by a large public or private monopoly. Experience in a
variety of countries has demonstrated that cost savings of between 20% and 30% are generally achieved
with few of the social costs which may occur with deregulation, such as congestion in popular corridors.
There is increasing interest in competitive tendering, or franchising, of bus services in several countries,
including the United States, the UK, Australia, Morocco and Hong Kong (minibuses).
The Bank has for many years advocated the provision of public bus services by the private sector in an
unregulated environment, with free entry and no control over tariffs. Furthermore, it has encouraged
governments to transfer existing public operations to the private sector. However, there are situations
where full deregulation and privatization may be neither practical nor politically acceptable and where
other avenues of change must be considered. These include:
● where there is a need to avoid excessive traffic congestion in high density corridors;
● where markets are thin and unlikely to be contested;
● when it is necessary to provide socially desirable, but unprofitable, bus services;
● where cartels are likely to form, or have formed;
● when it is desirable to avoid the political costs associated with radical and sudden change; and
● where the private sector is underdeveloped and has to be given time, and the incentive, to grow.
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Competitive tendering can be used to provide all, or some, services within a regulated market,