Kaunas A new framework for public transport

1
Kaunas A new framework for public transport A
practical example Guido Bruggeman Brussels
3 July 2009
Kaunas - A new framework for public
transport



2
Content
2

• City of Kaunas
• Public transport in Kaunas
• Difficult times in public transport
• How a new framework was triggered
• How the PSC was the starting point for a turn
  around
• Best practice results in Kaunas
• Quality improvement pays back
• Lessons learnt a practical framework

Kaunas - A new framework for public
transport

Guido
Bruggeman
3
Why Kaunas as an example ?
3

• 5 years ago public transport in Kaunas was nearly
  in a state of collapse
• Nowadays public transport is well organised and
  modernised and passengers numbers growing

• How did they manage this?
• What were the key actions for success?
• What were the conditions for success?

Kaunas - A new framework for public
transport

Guido
Bruggeman
4

4
Public transport in Kaunas Introduction
Kaunas A new framework for public
transport

Guido
Bruggeman
5
Kaunas is situated in the centre of Lithuania
5

• Lithuania has joined the EU in 2004

Kaunas - A new framework for public
transport

Guido
Bruggeman
6
City of Kaunas
6

• 2nd largest city of Lithuania
• 400.000 inhabitants
• Important industrial centre
• Transport node (road and railways)

Kaunas - A new framework for public
transport

Guido
Bruggeman
7
Public Transport in Kaunas nowadays
7
Kaunas - A new framework for public
transport

Guido
Bruggeman
8

8
Public transport in Kaunas A difficult starting
point
Kaunas A new framework for public
transport

Guido
Bruggeman
9
1995 2004 public transport in decline (1)
9

• Public transport in decline
• Loss of overall market share public transport
  since 95 due to
• lack of investment
• low quality of services
• poorly regulated competition minibuses
• growing car ownership
• passenger number municipal bus company down from
• 45 mln in 1995 to 18 mln in 2003

• Muncipal companies
• Overstaffing companies and low cost coverage (lt
  50)
• Product/technical oriented and not client
  oriented
• Outdated bus fleet
• Low motivation employees
• No co-operation
• No integrated ticketing system

• Policy
• No vision and strategy on public transport
• No increase of fares allowed since 1998 (single
  0.2)
• No regulatory framework (out of control and
  lack of transparency)

Kaunas - A new framework for
public transport


Guido
Bruggeman
10
1995 2004 public transport in decline (2)
10

• Uncontrolled expansion of microbuses (60
  operators)
• Poorly regulated and unfair competition
• Unsafe (lack of standards and control)
• Municipal companies faced with unprofitable
  routes due competition on the road
• Over 900 microbuses caused environmental
  pollution and congestion in city centre

Market share public transport
Kaunas - A new framework for
public transport


Guido
Bruggeman
11
Poor service by outdated bus fleet (2004)
11

• Municipal Bus Company
• Average age buses 16 years
• Fleet availability 65
• Low comfort
• High maintenance costs
• Second hand buses (10 different types)
• Environmentally unfriendly (emissions/noise)

• Municipal Trolleybus Company
• Average age buses 19 years
• Fleet availability 75

Without new rolling stock ordinary public
transport service would further decline.
Kaunas - A new framework for
public transport


Guido
Bruggeman
12

12
Arranging financing for public transport A
starting point for a full turn around
Kaunas A new framework for public
transport

Guido
Bruggeman
13
Arranging financing for fleet renewal
13
Priority was renewal of buses and trolleybuses

• Obstacles for financing
• Limited borrowing capacity at the City (debt
  limits)
• Public transport companies not creditworthy
• Poorly regulated minibuses and unfair competition
• Declining ridership and revenues
• Low fares
• Unclear long term vision
• Lack of procurement experience
• Non sustainable business

The City of Kaunas asked EBRD (European Bank for
Reconstruction and Development for assisstance
Kaunas - A new framework for
public transport


Guido
Bruggeman
14
Towards a new framework for public transport
14
The City and EBRD agreed on the following
framework
Implementation measures reflected in Public
Service Contract and Loan Agreement
Kaunas - A new framework for
public transport


Guido
Bruggeman
15
Traditional financing structure
15
Revenue from fares
Transport Company
Investment Grant subsidy payments
Bank
Passengers
City
Loan
Kaunas - A new framework for public
transport

Guido
Bruggeman
16
Financing under Public Service Contract
16
Kaunas Transport Company
Loan
Revenue from fares
Bank
Passengers
Municipality of Kaunas
Kaunas - A new framework for public
transport

Guido
Bruggeman
17
Financing under Public Service Contract
17
Kaunas Transport Company
Loan
Payments linked to Public Service Contract
Bank
Passengers
Municipality of Kaunas
Revenue from fares
Kaunas - A new framework for public
transport

Guido
Bruggeman
18
Financing under Public Service Contract
18
Kaunas Transport Company
Loan
Public Service Contract and Payments
Bank
Passengers
Municipality of Kaunas
Direct Support Agreement
Revenue from fares
A PSC enables transport operators access to
financing for investments
Kaunas - A new framework for public
transport

Guido
Bruggeman
19
Basic elements PSC Kaunas
19

• Compensation
• Fixed price per kilometre (gross contract)
• Annual indexation for labour, fuel and materials
• Bonus and penalties based on performance and
  customer satisfaction
• No exposure to tariff changes
• Duration 5 years with option for 5 years
  extension
• Level and price of service
• Defined by the City (routes and frequency)
• Quality standards with defined targets
• Tariffs set by the City
• Monitoring
• Objective criteria (e.g. cancelled trips)
• Customer satisfaction surveys
• Complaints registration
• Obligations operator
• Deliver services in accordance with the PSC
• Business Plan
• Obligations City
• Respecting the PSC

Kaunas - A new framework for
public transport


Guido
Bruggeman
20

20
Best practice results of a new framework for
Kaunas Many actions were driven by the PSC
Kaunas A new framework for public
transport

Guido
Bruggeman
21
New rolling stock for Kaunas
21

• Direct loans to bus and trolleybus companies
  10 and 15 million
• NO municipal guarantee - Maturity 10 years
• Procurement of 55 new diesel buses and 42 new
  trolleybuses
• Improvement of workshops and maintenance
  equipment
• Huge boost in perceived quality by passengers
  (and drivers)

Kaunas - A new framework for
public transport


Guido
Bruggeman
22
Business Plan and Marketing Plan
22
TABLE OF CONTENTS 0 Statement of Commitment 1.1
Highlights 1.2 Objectives 1.3 Mission 1.4
Keys to Success 2 Company Summary 2.1 Company
Ownership 2.2 Start-up Summary 2.3 Company
Locations and Facilities 3 The future market of
Public Transportation in Kaunas 3.1 The
Market 3.2 The market players 3.3 Competitor
comparison 3.4 The SWOT Analysis 4 The Services
to be provided by UAB Kauno Autobusai 4.1 The
present services 4.2 Future Services 4.2.1 Distri
bution Strategy 4.2.2 Pricing Strategy 4.2.3 Marke
ting Strategy 5 The future structure of
operations and organization 5.1 Personnel 5.2
Organisational Strategy 5.3 Organisational
Structure 5.4 Management Team 5.5 Personnel
Plan 6 External implications, restrictions and
regulations 6.1 Environmental impact 6.2 IS and
IT 6.3 External competition 7 The financial
assumptions, efforts and effects 7.1 General and
Important Assumptions 7.1.1 Macro
assumptions 7.1.2 Financial assumptions 7.2 Revenu
e forecasts 7.3 The Service Fee
calculation 7.3 Cost Forecasts 7.4 Key Financial
and Operational Indicators 8 The
Addendums 8.1 Investment Plan 8.2 Projected
Profit and Loss 8.3 Projected Cash Flow 8.4
Projected Balance Sheet 8.5 Financial and
operational indicators and ratios 8.6 Service Fee
Formula Calculations and forecasted Service Fee
amounts 8.7 Graphs

• Business Plans were prepared for both municipal
  companies with help of Swedish consultant.
• Including financial model for 10 years

STRATEGIC BUSINESS PLAN   UAB KAUNO AUTOBUSAI,
KAUNAS, LITHUANIA   2004 2013
Kaunas - A new framework for
public transport


Guido
Bruggeman
23
Basis calculation for Public Service Contract
23
A PSC forces transport companies to make a long
term financial planning
Kaunas - A new framework for
public transport


Guido
Bruggeman
24

Customer statisfaction surveys
24

• Annual customer satisfaction surveys
• Carried out by independent company
• Monitoring under PSC
• Great source of marketing information
• Discussion on company performance

Kaunas A new framework for public
transport

Guido
Bruggeman
25
Creation of a Public Transport Department
25

• A proposal for a specific transport department
  was developed
• It was established in early 2007 (with logo
  sign).
• The office co-ordinates public transport in
  Kaunas
• www.transportas.kaunas.lt

Kaunas A new framework for public
transport

Guido
Bruggeman
26

A popular website for communication with clients
26
One internet site for all public transport in
Kaunas
Kaunas A new framework for public
transport

Guido
Bruggeman
27
Question of the month
27
Which transport mode to you like the most?
Kaunas A new framework for public
transport

Guido
Bruggeman
28
Introduction of unified ticketing system
28

• Partly financed trough EU Structural Funds (75)
• Electronic ticketing system with chipcards
• Marketing campaign at introduction
• System started with passes, paper passes
  terminated 1 August 2009
• Single tickets as of 1 January 2010
• System was also introduced in Vilnius and
  Klaipeda (combined used foreseen)

Kaunas - A new framework for
public transport


Guido
Bruggeman
29
Passenger information
29

• Introduction of passenger information
• Route map of buses at stops (and leaflet)
• Time tables at 367 stops (with new shelters)
• Real-time passenger information at stops
• Financed with help of EU funds

Kaunas - A new framework for
public transport


Guido
Bruggeman
30
Route network in Kaunas
30
Kaunas - A new framework for public
transport

Guido
Bruggeman
31
Outsourcing an example - ticket inspection
31

• A tender was organised for ticket inspection
• The selection criteria was price per one
  bus/trolleybus inspection
• 140 in-house ticket inspectors were replaced by
  28 employees of a private company
• The inspection plans are prepared on weekly basis
  with exactly indicated stops and number of
  inspections to be carried out.
• Company is paid on the basis of number of
  actually delivered inspections
• Malus/bonus system
• 8 increase in fare revenue collection
• Increase in passenger control service culture

Kaunas - A new framework for
public transport


Guido
Bruggeman
32
Passenger numbers
32

• Decline of ridership stopped and trend reversed
• 20 more passengers over 5 years (2008 110
  million passengers)
• 12 more passengers between 2007-2008
• 282 public transport trips per inhabitant annually

122 34 - 62
Kaunas - A new framework for
public transport


Guido
Bruggeman
33
CIVITAS award
33

• Best Environmental Practice in Baltic Cities
  Award for Modernisation of the Public Transport
  Network in Kaunas City (Union of Baltic Cities
  -2005)
• CIVITAS Award (2005)

CIVITAS Award for a demonstration city -
KaunasThe city of Kaunas has been working toward
an ambitious sustainable transport policy that
has been able to turn around the local urban
environment. The effort is all the more
remarkable if one considers the difficult post
soviet conditions in which Kaunas was no longer
than 10 years ago. Noteworthy accomplishments of
the local strategic plan include the thorough
modernisation of the public transport fleet, the
introduction of electric vehicles, the
development of a bicycle network, the involvement
of citizens in service improvement and the
promotion of public-private partnership for
service provision. A key success factor in
Kaunas is the strong and continuously won
political support, comprehensive evaluation and
monitoring campaigns that have always backed
policy implementation, and the increasing
exposure of the city to European policies,
programmes and experiences.
Kaunas - A new framework for
public transport


Guido
Bruggeman
34

Building blocks for a framework
34
Lessons learnt from the Kaunas case

• Political support (and a champion taking the
  lead)
• Public Service Contracts that enable companies to
  operate professionally and deliver value for
  money to the society
• Compensation instead of (open end) subsidies !
• Sound regulatory framework at EU member state
  level, supporting sustainable development of
  public transport
• Public transport strategy both as a political
  commitment and a framework for developments

Kaunas - A new framework for
public transport


Guido
Bruggeman
35

Pillars for a framework (2)
35
Lessons learnt from the Kaunas case

• Monitoring as a tool for performance evaluation
  and steering on results
• Corporatisation PT companies with sound Business
  Plan and acting as corporate entity
• Commercialisation (not necessarily privatisation)
  with strong focus on the Client
• EU funds and projects to support ambitious
  turn-around programmes
• Best international practice to learn from

Kaunas - A new framework for
public transport


Guido
Bruggeman
36
36
Thank you for your attention !
Guido Bruggeman Independent Urban Transport
Consultant Prinsengracht 464 hs 1017 KG
Amsterdam The Netherlands Phone [phone]
82 Email guido.bruggeman_at_planet.nl
Public Service Contracts An overview



Guido Bruggeman
37
37
Appendix Basic principles Public Service
Contract
Public Service Contracts An overview



Guido Bruggeman
38
What is a PSC?
38

• A Public Service Contract is signed between a
• Transport Authority and a Transport Operator and
  defines
• rights and obligations of both parties (who is
  responsible for what?)
• quantity and quality of services delivered under
  the contract
• compensations payments to the operator for
  delivering of services under the contract
• as well as
• use and ownership of assets (infrastructure and
  rolling stock)
• monitoring
• management (execution) of the agreement (PSC)
• Note a common used alternative for rights and
  obligations is roles and tasks.

Public Service Contracts An overview



Guido Bruggeman
39
Why to have a PSC in place?
39

• clear definition of public transport services
  to be delivered
• clear defintion of compenpensation payments to be
  made to the operator
• clear distintinction of tasks and responsiblities
  (who is doing what?)
• continuation of payments (long term fixed
  contract) to operator
• fixing budgets for public transport
• to ensure value for money
• transparancy
• minimise political interference in daily
  operations and management
• access to financing (of investments) for Operator

Regardless national and EU legislation and Regardl
ess of the operator is in house operator or a
private operator, a PSC should be always in
place !
Public Service Contracts An overview



Guido Bruggeman
40
40
Contents of A Public Service Contract
Public Service Contracts An overview



Guido Bruggeman
41
Rights and obligations under a PSC
41
An example of rights and obligations under a PSC
There are many ways to devide rights and
obligations among parties
A clear description of rights, obligations and
taks of both parties is key to a PSC
Public Service Contracts An overview



Guido Bruggeman
42
Basic elements of a PSC
42

• Preamble
• SCOPE
• RIGHTS AND OBLIGATIONS OF THE TRANSPORT OPERATOR
• OBLIGATIONS OF THE AUTHORITY
• EXECUTION OF AGREEMENT
• APPENDICES

The main contract is in principle fixed for
duration of the contract. Appendices are updated
on a regular basis.
Public Service Contracts An overview



Guido Bruggeman
43
Preamble PSC
43

• A preamble is a nice way make statement about
  the intension of the PSC

PREAMBLE   This Agreement for the provision of
Public Transport Services is intended to foster
improvement and further development of passenger
transport in name City and the surrounding
communities. It is designed to enhance service
delivery and financial performance, and ensure
value for money for the City and its
citizens.   The contracting Parties intend that
this Agreement shall contribute to public
transport in name City and the surrounding
communities offering an attractive alternative to
individual motorized traffic, and promote
tourism, environmental protection, energy
savings, traffic safety, and the quality of life.
Public Service Contracts An overview



Guido Bruggeman
44
I. SCOPE OF AGREEMENT
44

• Scope
• Activities of the Company
• Subcontracting
• Financial Responsibilities
• Overall Transport Planning

Public Service Contracts An overview



Guido Bruggeman
45
II. RIGHTS AND OBLIGATIONS OF THE TRANSPORT
OPERATOR
45

• Public Transport Services
• Vehicles
• Safety
• Service Quality
• Tariffs
• Tickets Sales
• Information
• Marketing Activities
• Control of Passengers
• Customer complaints

Public Service Contracts An overview



Guido Bruggeman
46
III. RIGHTS AND OBLIGATIONS OF THE TRANSPORT
AUTHORITY
46

• Payments for Transport Services
• Control of Legal and Contractual Obligations
• Transport Infrastructure and Traffic Control
  Measures
• Customer Complaints

Public Service Contracts An overview



Guido Bruggeman
47
IV. EXECUTION OF AGREEMENT
47

• Duration
• Management of the Agreement
• Information
• Control and Audit
• Invoicing and Payments
• Amendments to the Agreement
• Force Majeure
• Arbitration
• Termination

Public Service Contracts An overview



Guido Bruggeman
48
Appendices PSC
48

• Appendices
• Public Transport Reference Service Plan
  (Template)
• Public Transport Operational Plan (in force) -
  routes, intervals, operation times
• Tariffs Public Transport
• Measures and objectives to improve speed and
  punctuality (traffic flow quality)
• Vehicle standard requirements
• Service Quality Standards (direct performance)
• Customer Satisfaction Index (survey)
• Incentives and penalties
• Calculation of compensation payments to be paid
  by the City to the Company
• Price Indexation Formula
• Assets made available to the Transport Operator

Public Service Contracts An overview



Guido Bruggeman
49
Direct performance measures example
49
Penalties for direct performance (examples)
Public Service Contracts An overview



Guido Bruggeman
50
Customer satisfaction Index example
50
Customer Satisfaction Survey
For each Quality Index Category of the Customer
Satisfaction Index, the following incentives
and/or penalties will apply   In case the value
of a quality index category in higher than the
contracted value of Appendix 5, the City will pay
an incentive to the Company in the amount of EUR
25,000 for each 0.1 point difference In case
the value of a quality index category is lower
than the contracted value of Appendix 5, the
Company will pay a penalty to the City in the
amount of EUR 25,000 for each 0.1 point
difference.
Public Service Contracts An overview



Guido Bruggeman