Form of service contracting

The two main forms of service contracting are ‘gross cost’, whereby the operator is paid solely for the delivery of the service, and ‘net cost’, where the operator retains the revenues that he collects. There are wide variations in the detail form and terms of the contract, and the balance of advantages will vary according to the specific circumstances within a given city.
Implicit in a gross-cost contract is a fare collection agency separated from the service providers, and accountable for the collection, protection and distribution of the passenger fares arising. Under a net-cost contract, the operator will seek to maximize his own fares collection, but may also be allocated payments from centrally collected fares (e.g. season tickets, or public service obligation compensation) on the evidence of patronage.