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Incentives in Bus Concession Contracts: A Review of Several Experiences in Latin America

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  • Andrés Gómez-Lobo
  • Julio Briones

Abstract

This paper reviews the incentive structure of concession contracts in several Latin American transit reforms. It also presents a conceptual analysis of the optimal design of concession contracts. The conceptual discussion and case studies reviewed indicate that payment to operators should be linked to operational variables and that some demand risk should optimally be transferred to operators. Performance standards linked to fines and penalties are not sufficient to guarantee good quality of service, particularly in citywide reforms and where institutional capacity - in terms of size, experience and expertise of staff - is lacking and regulatory processes are slow, bureaucratic and cumbersome. This review may be useful for policy-makers designing transit reforms in other countries. The policy lessons of the paper are particularly relevant to cities in the developing world but they are also important for reforms in other countries.

Suggested Citation

  • Andrés Gómez-Lobo & Julio Briones, 2014. "Incentives in Bus Concession Contracts: A Review of Several Experiences in Latin America," Transport Reviews, Taylor & Francis Journals, vol. 34(2), pages 246-265, March.
    • Handle: RePEc:taf:transr:v:34:y:2014:i:2:p:246-265
    DOI: 10.1080/01441647.2014.895451
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    References listed on IDEAS

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    1. Stanley, John & van de Velde, Didier, 2008. "Risk and reward in public transport contracting," Research in Transportation Economics, Elsevier, vol. 22(1), pages 20-25, January.
    2. David A. Hensher & Anne Yvrande‐Billon & Rosário Macário & John Preston & Peter White & Bill Tyson & D. M. Van de Velde & Bert van Wee & Joaquim José Guilherme de Aragão & Enilson Medeiros dos Santos , 2007. "Delivering Value for Money to Government through Efficient and Effective Public Transit Service Continuity: Some Thoughts," Transport Reviews, Taylor & Francis Journals, vol. 27(4), pages 411-448, July.
    3. Carlos Oliveira Cruz & Rui Cunha Marques, 2012. "Risk-Sharing in Seaport Terminal Concessions," Transport Reviews, Taylor & Francis Journals, vol. 32(4), pages 455-471, February.
    4. Bray, David & Mulley, Corinne, 2013. "Workshop 4: Designing contracts/concessions: What has worked and what has not and why?," Research in Transportation Economics, Elsevier, vol. 39(1), pages 226-231.
    5. Walters, Jackie & Jansson, Jan Owen, 2008. "Risk and reward in public transportation contracting," Research in Transportation Economics, Elsevier, vol. 22(1), pages 26-30, January.
    6. Hensher, David A. & Houghton, Erne, 2004. "Performance-based quality contracts for the bus sector: delivering social and commercial value for money," Transportation Research Part B: Methodological, Elsevier, vol. 38(2), pages 123-146, February.
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    3. Vigren, Andreas & Pyddoke, Roger, 2020. "The impact on bus ridership of passenger incentive contracts in public transport," Transportation Research Part A: Policy and Practice, Elsevier, vol. 135(C), pages 144-159.
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    7. Sepúlveda, Juan Pablo & Galilea, Patricia, 2020. "How do different payment schemes to operators affect public transport concessions? A microeconomic model," Transport Policy, Elsevier, vol. 93(C), pages 27-35.
    8. Godachevich, Javiera & Tirachini, Alejandro, 2021. "Does the measured performance of bus operators depend on the index chosen to assess reliability in contracts? An analysis of bus headway variability," Research in Transportation Economics, Elsevier, vol. 90(C).

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