Transcript Diapositiva 1

Services of general economic interest in Europe:
Facts, Experiences and Prospects
Pavia (Italy), September 24-25, 2010
SECTORAL REPORT ON LOCAL PUBLIC
TRANSPORT
Andrea Zatti
University of Pavia & CIRIEC-Italy
Research carried out with the contribution of the Italian Ministry of Education, University
and Research (MIUR) – PRIN 2008
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
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
Market structure in
Local Public Transport (LPT)
Organisational
forms
Authority initiative
Direct public
management
(self-production)
Market initiative
External regulation
and contractualization
Regulated
authorization
Open entry
(Licensing with
light regulation)
Outsourcing
(mainly by competitive
tendering)
In house
Subcontracting
Detailed
contracting
Outline
contracting
Increasing competition and contestability
Increasing responsibilities and risks delegated to external operators
Reduction of the authority rules on the actions of market suppliers
Liberalisation
Deregulation
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
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
SERVICE
DESIGN
ALLOCATION
Level of freedom of the operator to design services
Detailed contract
Steering via detailed
service design
Intermediate
Outline contracts
Steering via minimum
standard and guidelines
Steering via functionally
described aims
RISK ALLOCATION
Source: adaptations on Van de
Velde e al., 2008 al., 2008
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
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
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.
The EU Umbrella:
White paper-September 2001
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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.
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”.
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
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It permits freedom of choice for local authorities among
three organisational forms:
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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”
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)
The EU Umbrella: Regulation 1370/2007 (4)
Self production
In house
Outsourcing
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
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
- 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
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Italy
Competent authorities (2)
Definition and planning of services
Poland
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Spain
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Sweden
-
UKLondon
UKOutside
London
- 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
- 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)
- Planning and financial responsibilities given to Counties
-- Authority initiated initiative
-- Strong regulatory role of regional transport authority
- 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
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- 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
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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)
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
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 interinstitutional 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.
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).
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
Organizational forms and market structures (3)
- Direct award to a state owned company (RATP) in Paris and Ile de France
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
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.
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
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.
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
Organizational forms and market structures (8)
- 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
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Sweden
Organizational forms and market structures (9)
UKLondon
UKOutside
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
- 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
Trends in liberalisation (1)
Austria
Belgium
Italy
France
Germany
Limited
Very limited
Limited
Medium
Limited
Municipally owned
incumbents keep a
preferential position
Regional monopoly
of public owned
companies
Municipally owned
incumbents keep a
preferential position
Competitive
(negotiated)
procedure for 90%
of services
Tendering
developed on
additional and
complementary
routes
Indirect tendering in
the Flemish region
to small family
companies
Tendering developed
in 20% of the
network with few
effects and low
operators’ mobility
Involvement of
providers in services
design (network
contracts)
Municipally
owned
incumbents keep
a preferential
position
Presence of few
large (national)
operators with low
territorial mobility
Tendering
developed on
additional and
complementary
routes and in
regional railways
Trends in liberalisation (2)
Poland
Spain
Sweden
UK-London
UK-Outside
London
Limited
Limited
Medium
Medium
Very high
Self production
and corporatized
municipal
companies prevail
Municipally owned
incumbents keep
a preferential
position
Generalised use
of competitive
tendering to
entrust services
Generalised use
of competitive
tendering to
entrust services
Free entry regime
with increasing
concentration of
suppliers
Tendering
developed on
additional and
complementary
routes and in
some small cities
Competitive
procedures
developed in the
interurban market
Strong regulatory
role of transport
authorities
Strong regulatory
role of TfL that
manages directly
even the metro
and some
tramlinks
The role of local
Integrated Authorities
has gained
momentum following
2000 and 2007
Transport Act
Low service
design discretion
and low risk
allocation to
providers
Low service
design discretion
and low risk
allocation to
providers
Trends in privatization
Austria
Belgium
Italy
France
Germany
Limited
Limited
Limited
Medium
Limited
Poland
Spain
Sweden
UK-London
UK-Outside
London
Limited
Limited
High
High
High
Organisational forms: a tentative
categorization (1)
Belgian model
Scandinavian
Scandinavianmodel
model
French model
(Sweden, UK-London)
Public monopoly (public law
companies), with no
attempts to develop direct
competitive tendering
Strategic and tactical levels
frequently overlapping
Increasing recourse to subcontracting to private
suppliers for the
operational level (Flanders)
Wide recourse to competitive
tendering
Wide recourse to competitive
negotiated tendering
Development of strong regulatory
bodies, frequently arisen from the
ashes of the former monopolistic
local provider
Network tendering with some
service design freedom for
operators
High degree of privatization of
operators
Detailed gross cost contracts
High degree of concentration
Net cost contracts prevail
Public ownership still relevant, but
not locally owned companies
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
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
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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)

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)
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, subcontractors, 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
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Three (often neglected) features
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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
Corporatization: benefits
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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)
Corporatization: pitfalls
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

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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
Economization (1)
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

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…
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)
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
- 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 ».
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)
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
Cut workforce

Two main options
Reduce unitary costs
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:

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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
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
“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)

Human resource management changed significantly even within
public administration (performance based reward systems, flexible
contracts, management by objectives, etc.).
Labour relation regimes (4)
Sweden
Belgium
Germany/Austria
UK
Centralised and
comprehensive collective
bargaining system
Centralised and
comprehensive collective
bargaining system
Relevant decentralisation
and fragmentation
Company level
bargaining and
differences in wages
and conditions across
different companies
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
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
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
No sectoral bargaining,
nor national company
bargaining
Strong decentralisation
and flexibilization after
liberalisation and
privatization
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
Conclusions (1)
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
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)
Conclusions (2)
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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