Presentation is loading. Please wait.

Presentation is loading. Please wait.

Andrea Zatti University of Pavia & CIRIEC-Italy SECTORAL REPORT ON LOCAL PUBLIC TRANSPORT Services of general economic interest in Europe: Facts, Experiences.

Similar presentations

Presentation on theme: "Andrea Zatti University of Pavia & CIRIEC-Italy SECTORAL REPORT ON LOCAL PUBLIC TRANSPORT Services of general economic interest in Europe: Facts, Experiences."— Presentation transcript:

1 Andrea Zatti University of Pavia & CIRIEC-Italy SECTORAL REPORT ON LOCAL PUBLIC TRANSPORT Services of general economic interest in Europe: Facts, Experiences and Prospects Pavia (Italy), September 24-25, 2010 Research carried out with the contribution of the Italian Ministry of Education, University and Research (MIUR) – PRIN 2008

2 Foreword (1) Aim of the report is to evaluate: If and which new organizational and governance modes emerged in the last two decades (market structures, ownership, regulation, etc.) If a common model of governing Local public transport (LPT), based on liberalization and privatization, has actually come out The impact of the changing models on key issues such as: financing, employment, working conditions, general interests, quality

3 Foreword (2) Countries: Austria, Belgium, France, Germany, Italy, Poland, Spain, Sweden, UK (London and outside London) Sources of the report: CIRIEC reports by national experts EU-driven reports and projects (eg. PIQUE project, Contracting report by the DG Regio) Selected papers and web-factsheets

4 Market structure in Local Public Transport (LPT) Organisational forms Authority initiativeMarket initiative Direct public management (self-production) External regulation and contractualization Regulated authorization Open entry (Licensing with light regulation) In house Outsourcing (mainly by competitive tendering) Increasing competition and contestability Increasing responsibilities and risks delegated to external operators Reduction of the authority rules on the actions of market suppliers Liberalisation Detailed contracting Sub- contracting Outline contracting Deregulation

5 Liberalisation as a composite process towards… Shifting from governing the whole process of service provision to regulating particular aspects of the service supply chain Splitting between planning and operations Increasing market competition and contestability (benchmarking, tendering, territorial mobility of providers, etc) Increasing freedom and responsibility for (external) operators to influence services’ design (tactical level decisions, network and functional contracts, etc.) Increasing risk allocation to the (external) operator (cost and revenue risks, net cost contracts, etc) The degree of development and the combination of all these aspects can vary a lot from case to case The process should be intended as a continuum rather than characterized by rigid divisions Coherence among different features should be pursued

6 Service design and risk allocation Contribution of the operator to design the public transport services Contribution of the Authority to design the public transport services Level of freedom of the operator to design services Detailed contract Steering via detailed service design Steering via minimum standard and guidelines Intermediate Steering via functionally described aims Outline contracts RISK ALLOCATION SERVICE DESIGN ALLOCATION Source: adaptations on Van de Velde e al., 2008 al., 2008

7 PSOs, contracts and authority regulation are key tools of liberalised markets But fully deregulated (free entry) markets, public service obligations, contracts and public authority capacity for expertise and control acquire a key role in “liberalized” markets: To make the operator’s view converge towards the general interest To guarantee the separation of roles To describe service design responsibility To define risk allocation to each of the involved parties To develop ex post means of checking whether the obligations of the parties have been fulfilled or not

8 Privatisation EU liberalisation policy formally does not concern itself with the question of ownership. Pros of privatisation: Internal efficiency higher than public counterparts (uncertain) Higher guarantee of separation in terms of responsibilities and risks Revenue generation for public budgts Cons of privatisation: Potential conflict between the commercial and other interests of the private operator and the general interest pursued by the public authority Privatization without liberalization is certainly negative, but even liberalization without privatization entails some problems

9 The EU Umbrella: General principles While in electricity and postal services European directives played a crucial role in orchestrating the liberalization processes, the impact on inland transport remained more feeble and centered on general principles According to the EC Treaty, Member States are given the right to restrict EU competition and state aid rules when necessary for the operation of services of general interest, but under certain conditions: proportionality, transparency, non discrimination, equal treatment. Secondary legislation (reg. 1191/69 and 1893/91) did not address the question of how to award public service contracts (service concessions) The European Court of Justice and National Courts have shaped the perimeter of application of the general principles in the case of service concessions, but not always in a unique and consistent manner.

10 The EU Umbrella: White paper-September 2001  It summarises the main objectives of the EU Commission in the transport sector: - “to guarantee safe, efficient and high quality passenger transport services through regulated competition, guaranteeing also transparency and performance of public passenger transport services, having regard to social, environmental and regional development factors, or to offer specific tariff conditions to certain categories of traveller, such as pensioners” - Main underlying elements: - - passenger transport services are considered services of general interest, where the economic performance should be outweighed with social, environmental and regional development factors; - - regulated competition is envisaged as a key opportunity to meet all (potentially conflicting) objectives of passenger transport services: efficiency, reliability, affordability, etc.; - - competition distortion should be avoided when awarding exclusive rights and compensations to public service operators.

11 The EU Umbrella: Regulation 1370/2007 (1)  It provides clear definition about “public service operators”, “direct award”, “public service contracts”….  It openly acknowledges the “general interest” in transport services since “many inland passenger transport cannot be operated on a commercial basis. Thus competent authorities of the Member States must be able to act to ensure that such services are provided. The mechanisms that they can use to ensure that public passenger transport services are provided include the following: the award of exclusive rights to public service operators, the grant of financial compensation to public service operators and the definition of general rules for the operation of public transport which are applicable to all operators”.

12 The EU Umbrella: Regulation 1370/2007 (2)  It recognises that “the introduction of regulated competition leads to more attractive and innovative services at lower cost and is not likely to obstruct the performance of the specific tasks assigned to public service operators” But  It permits freedom of choice for local authorities among three organisational forms: - Internal department - Legal distinct entity over which the competent local authority exercises control similar to that exercised over its own departments (“in house” Judgement Teckal, 50, but 100% ownership is not a mandatory requirement ) - Competitive tendering to a third party  Allows national regulations to be more “pro-competitive”

13 The EU Umbrella: Regulation 1370/2007 (3)  It makes direct award possible even (if national law permits) for Railways “De minimis” < 1M€ or < 300.000km of service SME (< 23 vehicles) < 2M€ or 600.000km of services “Urgency”  It limits the action of the in-house operator within the territory of the competent local authority  It applies detailed rules on compensation according to the Altmark criteria (C-280/00)  It leaves open the possibility of requiring public service operators to comply with certain social standards concerning the rights of workers  It enters into force in December 2009, with a long transitional period (10 years )

14 The EU Umbrella: Regulation 1370/2007 (4) Self production In houseOutsourcing

15 The EU Umbrella: Regulation 1370/2007 (5) Competitive tendering denoted the starting point of the EU Commission proposal Some Member States and the EU Parliament called upon the subsidiarity rule to prevent the full acceptance of this point The French model emerged as a compromise (including negotiated procedure) Freedom of choice is balanced by reciprocity rules Flexible approach, but requiring a clear-cut choice between internal regulation and outsourcing

16 Competent authorities (1) Definition and planning of services Austria - Rail transport is assigned to the federal State - Lander and municipalities have responsibility for the provision of local and regional road passenger transport - Market initiative regime with exclusive authorization for economically profitable routes, but with a strong defensive approach with respect to established incumbent operators -Increasing role of Transport Associations as intermediate regulatory authorities Belgium - Since regional governments are responsible for regional and urban transports in their area - Authority initiated regime France - Since 1982 decentralisation to departments and municipalities - Authority initiated regime - Strong development of inter-municipality and cooperation to compensate for the small size of French municipalities Germany - Since 1996 decentralisation to Lander and local authorities - - Market initiative regime with exclusive authorizations for economically profitable routes, but with a strong preferential position for the incumbent operator - Strong development of transport associations to coordinate local authorities and operators Italy - - Since 1997 decentralisation to regional and local authorities - - Authority initiated regime, with a hypothetical space even for market initiatives - - Scattered development of super-municipal cooperation

17 Competent authorities (2) Definition and planning of services Poland - - Since 1989 decentralization to local governments - - Authority initiative with an opportunity for market licensed initiatives even if without exclusivity - - Cooperation of municipalities only partially developed Spain - - Decentralization to regional and municipal level - - Authority initiated regime - - Increasing role of inter-municipal syndicates to coordinate public transport services within the metropolitan area and to play the regulatory role (eg. CRTM Madrid) Sweden - - Planning and financial responsibilities given to Counties - - Authority initiated initiative - - Strong regulatory role of regional transport authority UK- London - - Greater London Authority is responsible for the Capital’s transport system - - Authority initiated regime - - Strong regulatory role of Transport for London, which is a functional body of the Greater London Authority UK- Outside London - - Transport planning and financing delegated to County Councils - - Market initiative without exclusive rights. Regional and local authorities arrange for the provision of additional passenger transport services where such services are not provided by the market on commercial basis. - - Services are planned by Integrate transport authorities at the County level

18 Definition, planning of services: main findings (1) Public administrations still have the main regulatory responsibilities in urban areas: Strategic responsibilities in urban transports are commonly in the hands of public authorities The general interest in LPT (urban) services seems to be well acknowledged Even where the market can take the initiative and apply for a license or an authorization (Austria, Germany, Poland), this opportunity has been scantly developed and authority driven supply is clearly predominant (“Market initiative is present in a moribund state”) The exception is represented by the UK outside London, where, however, local PTAs have been given increasing opportunities to influence the supply and to integrate provisions by private companies (quality partnership, social services, financing of bus stations, etc)

19 Definition, planning of services: main findings (2) Increasing organizational and financial responsibilities to regional and local authorities Better adaptation to territorial needs Increasing accountability Decentralization has been also seen as an opportunity for “economization” (see below) and this can highly influence organisational choices and the ability of local governments to pursue the social goals of services Development of cooperative arrangements (Public Transport Authorities in Spain, Transport Associations in Austria, Agglomeration in France, Transport Agencies in Italy) to integrate transport services, to guarantee administrative coordination and even a higher degree of independence with respect to providers

20 Cooperative arrangements in selected countries AUSTRIA - GERMANY Local and regional public transport is organized into Transport associations. A transport association is a contractual, supra-local cooperation of territorial bodies and transport companies. It is responsible for laying down the fundamental guidelines concerning setting fares, for an integrated information system, marketing activities, quality management, local and regional public transport planning suggestions to the local authorities, tendering on behalf of the local government and stipulation of transport service contracts. FRANCE. Only 21,2% of the urban organising authorities are communes working alone. The other organising authorities are mainly made up of several municipalities (agglomeration). The urban public transport is one of the most important topics of intercommunity cooperation. SPAIN. Increasing role is acquired by “ Public Transport Authorities ” as an instrument trying to overcome the dysfunctions generated by the current pattern of distribution of responsibilities among different authorities. Public Transport Authorities have emerged, on the basis of inter- institutional dialogue, as transport management independent agencies in the main urban agglomerations of the country. Partners are mainly local authorities, but the presence of regional governments is also very wide. ITALY. In several urban areas intercommunity cooperation has been voluntarily developed so that a single service provider covers numerous municipalities. Yet, there are some cases (Rome, Genoa) where only the main municipality is served.

21 Organizational forms and market structures (1) Austria - Exclusive direct authorization to municipally owned companies is the prevailing organizational form in main urban areas (Wien, Linz, Graz, Klagenfurt, Bergenz). In Klagenfurt and Salzburg even the regional government shares the ownership - Vertically integrated municipal companies plan, build and operate the urban network through formal or informal agreements. Service planning tasks and risk sharing are opaque - Profitable routes are under the initiative of transport entrepreneur, but must not endanger the commercial profitability of existing transport companies - Competitive tendering for non profitable routes is limited to new routes or restricted areas of the network - Small private companies operate mainly on the interurban network and account for a small share of the market - Very low mobility of providers and lack of involvement of multinational companies - Tendering by steering committees of the Transport Associations is problematic, as local territorial governments are usually part of both the steering committee and the transport companies - Since the end of the ’80 municipal operators have increasingly transformed into separate legal entities under private law (corporatization).

22 Organizational forms and market structures (2) Belgium - Exclusive direct award of by the regional governments to their owned operators still under public law (“organizations of public interest”) - The separation of roles is weak, and operators keep relevant strategic responsibilities - Increasing recourse to sub-contracting to private operators in Wallonia (30%, without tendering) and in the Flemish region (45% mainly through tendering). - These private operators are small entities generally operating under gross cost contracts and with no freedom in services design. - Public operators act as planner, provider, purchaser and regulator of the service. Indirect tendering in the Flemish region

23 Organizational forms and market structures (3) France - Direct award to a state owned company (RATP) in Paris and Ile de France Outside Paris: - The management of services is generally delegated through tendering (negotiated) procedure to external operators (90% of cases) - Self production by the public administration mainly in small cities (with the exception of Marseille) - Providers are few large groups. There are three major operators: one is public (state owned), one is private, one is mixed - Costs and risk sharing are very differently allocated case by case, but the proportion of local operators regulated by cost-plus (management) contracts has drastically decreased - Commonly the whole network is entrusted to a single operator (network contracts) through a negotiated procedure - High freedom of choice for local authorities to choose their providers - High rate of renewal of incumbent operators (>80%) - Operators commonly keep some responsibilities in service definition above all during the negotiation stage - Commonly assets and infrastructures are provided by the public authority - Collusive behaviour among the three leading operators has been revealed by the Antitrust Authority in 2005

24 Organizational forms and market structures (4) Germany - Exclusive direct authorization to municipally owned companies is the prevailing organizational form in main urban areas - Vertically integrated municipal companies plan, build and operate the urban network through formal or informal agreements. Service planning tasks and risk sharing are opaque. - Profitable routes are under the initiative of transport entrepreneur - Competitive tendering for non profitable routes, but limited since services provided by municipal companies are defined to be profitable using revenues from cross-subsidisation - Tendering is used in some cases when prior negotiations with the existing operator have delivered unsatisfactory results - Sub contracting is developing in some urban areas where the existing in-house operator is progressively withdrawing its operative role - Small private companies operate mainly on the interurban network and account for a small share of the market (<20%; < 10% excluding short distance trains) - Very low mobility of providers and limited involvement of multinational companies - “After the formal liberalization process started in the middle of the nineties, the market shares hardly changed” - Municipal operators have increasingly transformed into separate legal entities under private law (corporatization). - Although the change of the legal form was interpreted as an intermediate step towards privatization, the owners of most communal transport companies are still local governments - Municipal companies have developed several internal organisational changes (subcontracting, outsourcing of selected tasks, etc) mainly to cope with budget constraints and short cuts in public funding.

25 Organizational forms and market structures (5) Italy - Direct management of services by the municipal-owned operator is still the predominant choice in largest urban areas - Compulsory formal privatization (corporatization) of operators has been completed everywhere - Corporatization has transferred a large part of technical competences to the provider - Coverage of regulated competition highly incomplete (20% of the network) and geographically and temporally (2000-2004) concentrated - Tendering procedures generally regard the whole local network, often integrating urban and inter-urban routes - Low number of bidders (<3 in nearly 70% of cases) - The incumbent operator has been generally entrusted to provide services, alone or with other partners (80% of cases) - Selecting mechanisms do not favor competition (multidimensional tenders, incomplete separation of asset ownership and management from service provision, social clauses for the existing staff) - The too local approach to regulation, influenced by the strict existing relationship between the buyer/regulator and the incumbent provider, has undermined the credibility of auctions - Collusive device to divide up the territory revealed by the Antitrust Authority - Moderate increase in the presence of private players, but with a limited effect on the overall structure, which remains predominantly public - Some PPP initiatives for metro and tramways in Milan and Florence - Territorial mobility nearly absent and modest incidence of foreign players - Net cost contracts clearly predominant - High fragmentation of suppliers

26 Organizational forms and market structures (6) Poland -Variety of different organisational models at the local level: self production, direct award to a commercial company under the municipalities' control, competitive tendering to private entities, market initiatives - The majority of operations (nearly 90%) is carried out by self production or (increasingly) corporatisated municipal operators. - Despite plans conceived at the beginning of the 90s, few companies have been privatized - In Warsaw, direct awarding for bus, tram and metro, except for about 10% of the whole production amount, which is tendered. - In Cracow direct award to a 100% municipally owned holding company. The city plans to award 8-15% of the bus service in a competitive tendering procedure in the years to come - Public transport authorities have been created within some public administration (Warsaw, Gdansk, Cracow, Poznam) to play the regulatory role. - Competitive tendering to private operators is exploited to serve some routes in large urban areas or some small villages.

27 Organizational forms and market structures (7) Spain - Direct management by municipally owned enterprises prevails - Contractualisation between transport authorities and transport operators is gaining ground - Direct award to a public company owned by the metropolitan government in Barcelona and Madrid - Operators have important responsibilities in services design - Operational and revenue risks borne by the operator, but with soft budget constraints - 40 years concession for the construction and operation of a new tramway line in a suburban municipality of Madrid (PPP) - Construction and operation of a new tramway line in Barcelona assigned to a mainly private operator (PPP) - Tendered network contracts in Oviedo and Santiago de Compostela - Interurban transport frequently tendered to private operators

28 Organizational forms and market structures (8) Sweden - - Generalized use of competitive tendering to entrust services - - Mainly route-by-route contracts, with limited discretion for operators - - Mainly gross cost contracts - Strong role of the Public transport authorities in the strategic and tactical level - Transport authorities take in some cases the form of a company owned by local and regional authorities - Mainly private operators. Publicly owned companies were privatized or taken over in several cases - Concentration process where, with the growth of competition, smaller companies were taken over by larger ones - Multinational transport companies have increased their presence

29 Organizational forms and market structures (9) UK- London - Generalized use of competitive tendering to entrust bus services - Mainly route-by-route contracts - Progressive evolution from net to gross-cost contracts - Tender procedures highly standardized to reduce administrative costs and increase transparency - All service planning by Transport for London, the transport authority of the Greater London, that directly operates also the Underground and Croydon Tramlink (insourcing) - 80% of bus routes run by six major private companies - - Competition and privatization developed progressively: former monopolistic operator completely privatized in 1994; by the end of 1995 half of the network had been tendered at least once, and by the beginning of 2001 all the bus miles were supplied through tendered contracts - - 40% of contracts have changed suppliers with tendering procedures UK- Outside London - Free market entry for bus services - Non-exclusive licensing for commercial routes - - Bus market is dominated by few operators, even though no cartels or market dominance have appeared - - Social-non commercial routes tendered to private operators - Quality partnership with private operators - The role of local Integrated Authorities has gained momentum with the 2000 and 2007 Transport Act

30 Trends in liberalisation (1) AustriaBelgiumItalyFranceGermany Limited Municipally owned incumbents keep a preferential position Tendering developed on additional and complementary routes Very limited Regional monopoly of public owned companies Indirect tendering in the Flemish region to small family companies Limited Municipally owned incumbents keep a preferential position Tendering developed in 20% of the network with few effects and low operators’ mobility Medium Competitive (negotiated) procedure for 90% of services Involvement of providers in services design (network contracts) Presence of few large (national) operators with low territorial mobility Limited Municipally owned incumbents keep a preferential position Tendering developed on additional and complementary routes and in regional railways

31 Trends in liberalisation (2) Poland Spain SwedenUK-LondonUK-Outside London Limited Self production and corporatized municipal companies prevail Tendering developed on additional and complementary routes and in some small cities Limited Municipally owned incumbents keep a preferential position Competitive procedures developed in the interurban market Medium Generalised use of competitive tendering to entrust services Strong regulatory role of transport authorities Low service design discretion and low risk allocation to providers Medium Generalised use of competitive tendering to entrust services Strong regulatory role of TfL that manages directly even the metro and some tramlinks Low service design discretion and low risk allocation to providers Very high Free entry regime with increasing concentration of suppliers The role of local Integrated Authorities has gained momentum following 2000 and 2007 Transport Act

32 Trends in privatization AustriaBelgiumItalyFranceGermany Limited MediumLimited PolandSpainSwedenUK-LondonUK-Outside London Limited High

33 Organisational forms: a tentative categorization (1) Belgian model Public monopoly (public law companies), with no attempts to develop direct competitive tendering Strategic and tactical levels frequently overlapping Increasing recourse to sub- contracting to private suppliers for the operational level (Flanders) Scandinavian model (Sweden, UK-London) Wide recourse to competitive tendering Development of strong regulatory bodies, frequently arisen from the ashes of the former monopolistic local provider High degree of privatization of operators Detailed gross cost contracts French model Wide recourse to competitive negotiated tendering Network tendering with some service design freedom for operators High degree of concentration Net cost contracts prevail Public ownership still relevant, but not locally owned companies

34 Organisational forms: a tentative categorization (2) Scandinavian model Ambiguous models (Italy, Germany, Austria, Poland, Spain) Competition is formally considered as a key tool to organize service provision Real market contestability is hampered by legal, administrative and political barriers Lack of true independence in the relationship competent authority-provider Prevalence of locally owned operators Providers have relevant steering and organizational responsibilities Prevalence of net cost contracts, but with soft budget constraints Opaque and complicated financial and operational relationships among various actors

35 Organisational forms: main findings (1)  Variety of organizational forms can be observed across Europe and even within the same country  Relevant indicators of change, but no unambiguous trends emerge: several stop and go, legislative wavering, adjustments in the contractual forms, changes in the allocation of risks, re-regulations of markets, recover of influence of the state sector, etc.  Contractual approach widespread, but with different degree of force and incentivizing power  The separation of roles is still weak and opaque in many cases  Direct award to public owned companies is even now the prevailing organizational form in the main urban areas: (Wien, Bruxelles, Rome, Milan, Paris, Madrid, Barcelona, Warsaw, Munich, Berlin)

36 Organisational forms: main findings (2)  Many countries show an uncertain attitude towards liberalisation and are characterized by hybrid market forms. The full application of the EU regulation can bring about a more defined outcome  Coverage of regulated competition highly incomplete. Even when employed, the application of tendering shows rather conservative stance to most forms of competitive pressure  Where competition has been developed in a consistent way, regulation has increased rather then diminished: development of independent authorities, quality standards, benchmarking, etc.  The prevalence of gross cost contracts brings together the need for more specialist know-how within the authority  The attribution of higher service design discretion (outline contracts, big network contracts, etc) and of higher levels of risk (net cost contract) can operate as an entry barrier for operators (French case)

37 Organisational forms: main findings (3)  Growth in private ownership emerges, but with a partial effect on overall ownership structures. In 6 countries private operators mainly play a complementary role (additional services, inter urban routes, sub- contractors, shareholders of mainly public companies)  Privatization can be an important tool to ensuring an effective separation of roles (London, Sweden), but it is not the only device (e.g. France)  Privatization is associated to very different degree of liberalization (from the Flemish case to the UK one)  Outsourcing of certain functions (cleaning, ticketing, advertising, etc) is widespreading to gain flexibility and cost-savings  Outsourcing of an increasing part of the network by public companies to private bus operators (sub-contracting) is bringing about a form of indirect tendering in some measure converging towards the Scandinavian model

38 Three (often neglected) features  1.“Corporatization”: a systematic shift in the legal form of public-service companies. While previously part of the public administration and then autonomous public companies, most of them have been converted into private-law companies (Italy, Austria, Germany, Poland, Spain, London)  2. “Economisation”: changes in funding schemes and stagnating or only slowly growing public budgets (harder budget constraints and increasing opportunity cost of public funds)  3. More fragmented working relations

39 Corporatization: benefits  Hybrid form between self-production and real outsourcing (in house outsourcing or formal privatization)  It has been seen as a tool to increase transparency and accountability with respect to self production  It has been seen as an opportunity to increasing manageriality and efficiency, through the transfer of control rights from politicians to managers  It should/could have represented an intermediate step towards liberalisation/privatisation (as already occurred in London and Sweden) Typically, before a government enterprise is privatised, it goes through the intermediate stage of corporatization. Most of the efficiency gains seem to occur in this stage, though there is controversy about why. Some argue that the freedom from government personnel, procurement, and budget restrictions is all that is required…(Stigliz, 2000)

40 Corporatization: pitfalls  It has frequently become a landing place rather than an intermediate step  It generates confusion among the different (conflicting) roles played by the public authority (owner-shareholder, regulator, agent of voters/users/workers)  It can delay the introduction of competition or bring about unfair competition (informational rents, asset ownership, proximity to the local regulator, softer budget constraints)  It can be counterproductive in terms of transaction costs, transparency and accountability with respect to self-provision (a new agency problem arises)  It weakens the “legally binding” nature of contracts with respect to real outsourcing (eg. prevalence of net cost contracts with corporatized public operators)  It makes public budgets and accounting more opaque (both cases)  It favors the further fragmentation of labor relations EU and national rulings have progressively bordered this opportunity, but the real effects of these measures have to be carefully monitored

41 Economization (1)  The changing regulatory environment did not developed in a budget-neutral environment  Declining public subsidies coupled with decentralization are key drivers of recent evolutions  Growing cost pressure not (only) from the market, but even from the regulator that is also the funding authority  The objective function of the principal deeply changed in the last two decades  Gains in productivity can compensate for declining public subsidies but not infinitely…

42 Economisation (2)  It can trigger ineffective privatization (privatization without liberalisation)  It can obstacle the correct implementation of competitive procedures: auctions which provide for too low compensations and/or for excessive quantitative and qualitative requirements (fleet renewal, veh-km supplied, blocked tariffs) can void, or distort the selection in favor of the local incumbent public provider  It can weaken the capacity to control and monitor contracts  It can bring about misperception of the true effects of the reform (eg. increasing tariffs or services’ withdrawal)  It can conflict with the social role of services (moderate tariffs, territorial coverage, social accessibility, competitiveness with respect to private means)

43 Economisation (3)  Economisation, production efficiency, financial transparency and accountability are not the same thing  Economisation is a political choice (hopefully based on cost-opportunity calculation) and not just what the doctor ordered  There are still good (and even increasing) reasons to grant public funds to LPT services  Innovative financial-revenue raising solution can contribute to meet budgetary, social and efficiency reasons (earmarked taxes, revenue sharing on excise duties, road pricing, PPP) - Cost recovery ratio in Bruxelles increased by 15 percentage points from 1989 to 2007. “L’objectif d’atteindre un taux de 50%, au sens européen, est un objectif affiché à la fois par la STIB et le gouvernement” -Cost recovery ratio in the Flanders declined by 15 percentage points from 1999 to 2007. “En Flandre, l’objectif prioritaire semble avoir été de maitriser l’évolution des prix et ainsi garantir une accessibilité sociale aux transports en commun ».

44 Labour relation regimes (1)  Labor costs make up for the major part of total production costs in LPT  The reform of public sector employment relations thus can represent a key element of the wider process of public service restructuring  Two main options Cut workforce Reduce unitary costs

45 Labour relation regimes (2)  As far as the workforce is concerned, the picture is mixed since there have been job cuts in some cases and employment growth in others  Emergence of new labour relation regimes (LRR) often with only weak links to the old LRR of the public sector:  Multi tier labour systems: Civil servants, public employees subject to private law, private employees  Decentralisation of collective bargaining at sectoral level  Fragmentation of labour regulation within companies  Contracting out of certain labour intensive services and activities  Flexibilisation of working time and use of atypical forms of employment

46 Labour relation regimes (3)  The general picture is mixed and hardly traceable back to a single model  Liberalisation can’t be considered the only (and probably neither the most important) driving force  Human resource management changed significantly even within public administration (performance based reward systems, flexible contracts, management by objectives, etc.). “Organizational change (creation of subsidiaries, outsourcing of functions, flexible contracts) not only responded to regulatory needs; instead companies have deliberately exploited new regulations in order to escape “expensive” public-sector collective agreements under the pretext of growing competition. In fact, reorganization was to a large extent driven by the search of lower labour costs” (PIQUE Project, Deliverable 15 p. 4). “Taking the different effects of change into account, it is likely that the effects of the competition approach will be limited in public transport. Instead the budgetary problems and the rationalisation effects seem responsible for the major changes (Latniak, 2006 on the German situation)

47 Labour relation regimes (4) SwedenBelgiumGermany/AustriaUK Centralised and comprehensive collective bargaining system National-sector framework agreement giving guidelines and limits to local bargaining No significant competition on wages No public/private divide Trade Unions have mostly been able to guarantee similar working conditions for employees through the established system of sectoral coordination Few changes after liberalization and privatisation Centralised and comprehensive collective bargaining system Trade Unions have mostly been able to guarantee similar working conditions for employees through the established system of sectoral coordination The personal of the private operators [sub-contractor] has the same statute as the personnel of “De Lijn” [public monopolist] High ability to limit wage dumping Few changes occurred in the last two decades Relevant decentralisation and fragmentation Branch level agreements, but not obligatory Subsidiary companies and private companies not covered by industry level collective agreement Separate sets of labour regulations within the same public company depending on their time of entry Lowering of wages due to outsourcing of specific tasks Some federal states require to consider collective agreements in public tendering procedures Company level bargaining and differences in wages and conditions across different companies No sectoral bargaining, nor national company bargaining Strong decentralisation and flexibilization after liberalisation and privatization

48 Labour relation regimes (5)  New employment relations and management can give an important contribution to improve the quality of services and reduce costs But  The choice of an alternative organizational form (self-provision, corporatization, private outsourcing) cannot be justified only by the attempt/opportunity to pay less the workforce  New models cannot result in a “race to the bottom” or contradict the Lisbon goal of better jobs  Different labour conditions (status, wages, flexibility) should be justified by different job skills and responsibilities (eg. regulation vs. provision)  Sector-wide regulation and/or coordination should be able to ensure a minimum level playing field among competing companies  Competent authorities are given freedom by the EU regulation to impose certain social standards “in order to ensure transparent and comparable terms of competition between operators and to avert the risk of social dumping” and shall exert this opportunity in an effective way

49 Conclusions (1)  Subsidiarity and local experimentation characterise LPT in Europe. No unambiguous and paradigmatic trend emerges  Public regulation is still widely accepted as a necessary pillar of market organisation and seems to have strong theoretical and practical justifications (coordination economies, externalities, strong reliance of market results on traffic and land management, social and territorial accessibility)  Some rather well characterised organisational models come out by the report, but several countries still have a too ambiguous attitude towards market organisation  Regulated competition is seen has an “attractive and innovative” opportunity at the EU level and has brought about some encouraging results in cases studies (Sweden, London)  The adoption of a “market based” approach has however to be founded on a set of consistent and conscious choices and actions (development of regulatory expertise, true separation of roles, adequate management of main tangible and intangible assets)

50 Conclusions (2)  Liberalisation is far from being an “open delegation”: LPT services are complex services and call for the creation of a corresponding degree of complexity within the Local government-guarantor  Contracting-out of simple tasks (ie. Route tendering, frequent auctions, public asset ownership, rational risk sharing, etc) can be a tool to exploit as well the production efficiency of external (private) providers (Scandinavian model)  In this perspective, a strong attention has been traditionally targeted to the “agent” but the key issue continues to be the “behaviour of the principal” (objective functions, expertise, political accountability, financial accountability)  The reduction of public compensation can be an important (and positive) outcome of the process, but should not become an unquestionable driving force  Corporatization has been largely exploited as an intermediate solution with respect to the divide internal/external regulation, but results seem to be not convincing  New forms of service users’ voice and participation should be considered as a viable and integrative form of regulation

Download ppt "Andrea Zatti University of Pavia & CIRIEC-Italy SECTORAL REPORT ON LOCAL PUBLIC TRANSPORT Services of general economic interest in Europe: Facts, Experiences."

Similar presentations

Ads by Google