Service contract management

Description / objective

In many cities and regions, the public transport services are performed by Operators under Service Contract to the Transport Authority. The Service Contract could be for the entire network of a city/area, for a sector of the city/area, for a route cluster, for an individual route, or even for specific trips on a route. In many cases, there is a formal procurement mechanism, and there are also processes for retendering, renewal and extension of Services Contracts. All of these processes must be managed and initiated at the correct times.

While Service Contracts between Transport Authorities and Operators are the most typical case, similar situations arise where public agencies contract in dedicated or special services (e.g. schools transport, mobility services for elders/disabled), or where large Operators sub-contract a significant amount of their services to smaller operators (e.g. in areas of lower demand, peripheral areas, as peak-time auxiliaries).

There is a formal Contract, which specifies the services to be performed, the vehicles to be used, the expected quality, and the basis for payment. There is usually a payment to the Operator, the main forms being “Gross Cost” (the Authority keeps the revenues and pays the Operator the agreed amount for service production) or “Net Cost” (the Operator keeps the revenues, and the Authority pays an agreed supplemental amount). There are many variants of these involving revenue, cost and risk sharing. Payments are usually based on the actual work produced and the quality of the work – this requires on-going record-keeping and monitoring. Many Service Contracts include penalty and bonus provisions, which also require record-keeping and monitoring.

The Service Contract Management function consists of multiple tasks associated with Service Contracts. These include:

  • Launch and tracking of procurement processes for all Service Contracts
  • Oversight of expiry/renewal dates, review dates, (re)negotiation dates, etc.
  • Input and update of all relevant data relating to the individual contracts
  • Reporting, monitoring, tracking and analysis of service production
  • Reporting, monitoring, tracking and analysis of service quality, non-performance and deviations
  • Reporting, monitoring, tracking and analysis of revenues
  • Management of payments due under Service Contracts, including ensuring that they are paid correctly and in timely manner
  • Management of communications with Operators concerning contracts
  • Management of warnings, disputes and (if necessary) termination of contracts
  • Management of transfers of contracts among parties

Given the very wide range of Service Contracts, other tasks may also be performed to meet requirements of sponsoring agencies (e.g. reporting on the number of target clients transported in the period).

Technologies, data and resources

Many transport entities manage this process without any comprehensive software for Service Contract management – the various information are held on different systems, some computerised and others in printed form, linked only by a common file or contract number. This is not recommended, as the total value of the Service Contracts may be in the order of several hundreds of millions of dollars.

Most transport entities who have computerised the process tend to develop their own systems (using in-house IT specialists, or contracting in a software system). There are few ‘off-the-shelf’ commercial products available for Service Contract management.

The primary data required for the Service Contract management are:

  • Base data, including contract details, expiry/renewal dates, payment dates, payment basis, quality parameters and target values, bonus/penalty parameters, contractor data (sourced from Procurement Department, either as manual inputs or link to their system)
  • Periodic operational data (trips/kms operated, additional services, service not performed) sourced from the AVM system or input manually; and, where relevant, revenue data, sourced from the Fare Collection system or input manually
  • Service Performance data, both for calculation of bonus/penalty and for determining whether any intervention is required (sourced from a Service Performance system or input manually)
  • Record of payments paid (sourced from Accounting system or direct bank records)

Service Contract Management systems generally have very modest computing resource requirements as they mostly store and retrieve records, and generate associated reports. The more significant data generation and analysis is usually performed in other systems (e.g. AVM, Fare Collection) and the Service Contract management system just receives the consolidated data.

Advantages and cautions

The primary advantages of ITS-supported Service Contract Management functions are:

  • Consolidation of all information associated with Service Contracts into a single system (or a virtual system, if linked to data held on other systems), with advantages of improved oversight, and consistency of information.
  • Data can be transferred automatically from both ITS and other corporate IT information stores. This saves on data inputting costs, and eliminates human errors.
  • Speed of data transfer and report production, so that same-day or following-morning reports are available.
  • Automatic item, trend and exception reporting
  • Timely warning of due dates for procurement, renewals, reviews, payments, etc.

There are no identified cautions associated with this ITS-related function.

Case Studies