Foreword ....................................................................................................... vi
Final report recommendations ................................................................... xii
Metropolitan network & service planning ................................................ xii
Metropolitan contracting ........................................................................ xiv
Metropolitan funding .............................................................................. xvi
Rural & regional NSW ............................................................................ xvi
Statewide issues .................................................................................... xix
Implementation/transition ....................................................................... xxi
Maps ........................................................................................................... xxiii
1.0 Introduction ............................................................................................. 1
1.1. Terms of Reference for the Review ....................................................... 1
1.2. Approach to the Review ........................................................................ 2
1.3. Scope of the Review ............................................................................. 3
1.4. This Report ............................................................................................ 3
1.5. Relationship to Parry Inquiry ................................................................. 3
1.6. Consultation on the Interim Report ........................................................ 4
1.7. Submissions .......................................................................................... 5
2.0 Metropolitan planning ............................................................................ 6
2.1 Metropolitan Planning: the Interim Report concept ............................... 6
2.2 Key issues ............................................................................................. 7
Strategic corridors ..................................................................................... 7
Contract region boundaries ...................................................................... 9
Integrated services ................................................................................. 10
Planning partnership ............................................................................... 11
Alignment with planning strategies ......................................................... 14
Bus priority & enforcement ..................................................................... 15
Driver amenities ...................................................................................... 16
CBD buses ............................................................................................. 17
2.3 Recommendations .............................................................................. 17 ii

3.0 Metropolitan contracting ...................................................................... 21
3.1 Metropolitan contracting: the Interim Report concept .......................... 21
3.2 Submissions ........................................................................................ 21
3.3 Key issues ........................................................................................... 22
Competitive tendering ............................................................................. 22
Contract design & risk allocation............................................................. 24
Contract term .......................................................................................... 25
Contract boundaries ............................................................................... 25
Service standards & performance monitoring ......................................... 27
Penalties, termination & step-in rights .................................................... 29
3.4 Recommendations .............................................................................. 29
4.0 Metropolitan funding ............................................................................ 32
4.1 Metropolitan funding: the Interim Report concept ................................ 32
4.2 Key issues ........................................................................................... 32
Industry viability ...................................................................................... 32
Updated policy context ........................................................................... 33
Risk allocation & funding models ............................................................ 34
Specific payment issues ......................................................................... 35
Redirection of existing funding ................................................................ 36
Financial modelling ................................................................................. 36
4.3 Recommendations .............................................................................. 37
5.0 Bus services in rural & regional NSW ................................................. 39
5.1 Rural & regional transport services: the Interim Report concept ......... 39
5.2 A whole-of-government approach to integrated regional transport services ...................................................................................................... 40
Integrated regional transport plans & budgets ........................................ 41
Transport regions, transport teams & transport development officers .... 42
5.3 Regulating for service outcomes, rather than by mode ....................... 43
Service accreditation .............................................................................. 43
More responsive service models ............................................................ 44
Contracting for better service outcomes ................................................. 47 iii

5.4 Delivering better value for money ........................................................ 48
Competitive tendering for services .......................................................... 48
Deriving economies of scale ................................................................... 49
Exit strategies for rationalised services ................................................... 50
Re-focussing existing services................................................................ 51
5.5 Funding & financial viability ................................................................. 53
Further analysis: viability of the country commercial & non-commercial sectors of the industry ............................................................................. 54
Financial viability of individual non-commercial operators ...................... 54
The PwC model ...................................................................................... 55
The PwC model versus the ITS model ................................................... 56
The impact of the current funding & contracting arrangements on required
EBITDA ................................................................................................... 57
Payments in advance ............................................................................. 58
5.6 Transport information & communications ............................................ 59
5.7 Recommendations .............................................................................. 59
6.0 Statewide issues ................................................................................... 62
6.1 Fares, ticketing & concessions ............................................................ 62
Responses to the Interim Report ............................................................ 62
Fares ...................................................................................................... 63
Frequency of use discounts .................................................................... 64
Concessions ........................................................................................... 65
Ticketing ................................................................................................. 66
6.2 SSTS issues ........................................................................................ 67
Submissions ........................................................................................... 67
Recent developments ............................................................................. 68
SSTS hours of travel ............................................................................... 68
6.3 Governance arrangements.................................................................. 69
6.4 Alternative asset management ............................................................ 71
6.5 Recommendations .............................................................................. 71
SSTS ...................................................................................................... 72
Governance arrangements ......................................................................... 73 iv

7.0 Implementation ..................................................................................... 74
7.1 Principles & parameters ...................................................................... 74
7.2 Key steps: metropolitan areas ............................................................. 75
The Passenger Transport Act ................................................................. 75
Operator negotiations ............................................................................. 75
Transition arrangements ......................................................................... 76
7.3 Key steps: rural & regional areas ........................................................ 77
7.4 Recommendations .............................................................................. 78
Appendix 1: Terms of Reference ................................................................ 80
Appendix 2: Organisations consulted ....................................................... 81
Appendix 3: Submissions received from organisations .......................... 84
Appendix 4: Interim report recommendations .......................................... 88 v

The community and industry response to the Interim Report of the Review of
Bus Services in NSW, released in November 2003, has been informative and of great assistance in the preparation of this Final Report. Most contributions were supportive of the changes proposed to the bus service contracting regime and of the proposal for consolidated contract regions.
In many instances, responses to the Interim Report suggested amendments which were both positive and helpful, and consequently these have been acknowledged and adopted.
The principal objective of the Review, to create a bus transport system with common standards of fares and service levels, has been widely accepted as a realisable outcome from the implementation of the recommendations outlined in the Interim Report.
Discussions with the major stakeholders, including bus operators, unions and user groups, produced varied indications of support for the early introduction of the Review recommendations.
It is recognised that those affected often resist change and in this respect it is necessary to understand the approach adopted by the Bus and Coach
Association (BCA) on behalf of its members when discussing the Interim
Report recommendations.
The BCA response clearly outlined concerns expressed by member bus operators on the impact of proposed changes to the planning, contracting and funding of bus services. These concerns have been discussed with the BCA in detail, considered by the Review, and addressed as appropriate in this Final
Report.
The task of the BCA is to protect its members’ interests, and in doing so maintain the status quo as far as possible. However, this is not necessarily in the community interest nor conducive to the development of an effective bus transport system for the metropolitan regions of the State.
The Review welcomes the involvement of private bus operators in the provision of transport services, albeit in a significantly changed contracting, funding and operating environment which will provide certainty and growth for the future.
Greater Sydney is recognised throughout the world as a city with outstanding features; it therefore follows that the quality of the bus transport system should measure up to community expectations, commensurate with the international status of the city.
At present it is clear that we have two bus systems – government and privately operated
– with widely varying levels of service and customer satisfaction, and, consequently, falling short of community expectations. vi

The Review believes that the inequities currently existing in the system must be eliminated, and that this can only occur with structural changes and reforms, such as those recommended in this Final Report.
The most significant reform must involve the manner in which the Government authorises bus operators to provide services in franchise areas. Larger contact regions incorporating strategic corridors will facilitate the planning and establishment of a bus network which integrates with other transport modes, and provides services to desired travel destinations.
To achieve this change, existing contracts covering small fragmented areas, may have to be extinguished and replaced with new region wide contracts.
The move to new, larger contract regions and fewer contracts will result in the changed status of a number of current operators. Change can best be achieved by encouraging operators to form regional alliances and suitable arrangements so that there is one lead operator per region. Performance based transitional contracts can then be entered into through an Expression of
Interest process.
The new contract holders should then be responsible for co-ordinating the services of other bus operators currently providing services within the region.
On expiry of these initial transitional contracts, a competitive tendering regime should be introduced for all regions, preferably on a sequential basis.
Contract duration may vary depending upon the disposition of assets.
Alternative options in this regard are canvassed in this Report.
Further consideration of the issue of asset and infrastructure ownership by the
Review confirms the benefits that would flow from the separation of operating responsibility and asset ownership.
Response from financial institutions, experienced in the establishment and operation of infrastructure trusts, has been both positive and constructive, and indicate that the concept is worthy of further consideration. In the short term, it will be important for contracting arrangements to give Government greater control over assets in the event of a contract breach or termination.
A central element of the future bus transport system for Greater Sydney is the creation of a network of strategic bus corridors, linking residential communities, regional centres, hospitals and education facilities.
The corridors identified by the Review for the Greater Sydney area have been universally accepted as appropriate, and where organisations have proposed amendments, these have been considered and selectively adopted.
The Review believes that the proposed strategic corridors could be proclaimed as Transitway routes if necessary, and subject to cost benefit analysis to enable the implementation of bus priority improvement measures.
Appropriate provision should also be made for effective enforcement measures to ensure the efficient operation of bus priority. vii

Given the cost of bus priority development, its extension across the network of bus corridors will require new funding mechanisms, such as developer contributions and expanded parking space levies.
The proposed restructure to establish larger contract regions – ten in metropolitan Sydney, two for Newcastle and one each for Wollongong,
Central Coast and the Blue Mountains
– has been validated by stakeholders with only minor boundary adjustments necessary.
In the Interim Bus Review Report, consideration was given to the provision of free CBD buses in Newcastle, Parramatta and Wollongong, based on the successful Perth and Fremantle CAT services. A visit to review these West
Australian services by the Lord Mayors of the three cities produced enthusiastic support for the concept, which should now be further progressed.
In December 2003 the Final Report of the Ministerial Inquiry into Sustainable
Transport in New South Wales, conducted by Dr Thomas G Parry, was simultaneously released with the NSW Government’s response to its recommendations.
As many of the recommendations relating to fares and concessions initially proposed in the Parry Inquiry Interim Report had been considered by the Bus
Review in its Interim Report, the clarification of the Government position has greatly assisted in the preparation of this Final Report.
Responses from bus user groups reflected the anxiety of those who benefit from access to the Pensioner Excursion Ticket, and who feared a loss of future eligibility. The reactions from these user groups, primarily Seniors Card holders, and their strong representations to the Government, have resulted in a clear statement of policy which will ensure their continued access to the concession.
The fare increase proposed for the Pensioner Excursion Ticket by the Parry
Inquiry, from $1.10 to $2.50, was also supported by the Review, and has been endorsed by the Government. Whilst there were expressions of concern at the amount of increase, there was also a recognition that the price had not increased since 1989, when the then Government increased the Pensioner
Excursion Ticket by 66% per cent to the pre GST $1.00 fare.
The decision of the Government to adopt the recommendations put to it by the
Parry Inquiry and the Bus Review Interim Report, that the Pensioner
Excursion Ticket be made available to private bus patrons, has been enthusiastically supported by user groups. The extension of the availability of the Pensioner Excursion Ticket justifies the increase to $2.50, as it still represents a cost saving on current fares for the private bus passenger.
The Government response to the Parry Inquiry Final Report extended the area of coverage of the proposed $2.50 fare to the outer boundaries of the
CityRail network, a material benefit to users.
Country based pensioner concession cardholders have raised the claim that the Pensioner Excursion Ticket should be available where bus services exist viii

in country towns. In the interests of equity the Review believes that this is a reasonable proposition which is widely supported, and recommends it accordingly.
Morning peak travel restrictions on the use of the Pensioner Excursion Ticket were proposed in the Interim and Final Parry Inquiry Reports and supported by this Review in its Interim Report. In the Government response to the Parry
Inquiry Final Report, an assessment of the impact of morning peak congestion was proposed prior to further consideration of the limitation.
Both government and private bus operators have raised their concerns about peak capacity constraints and the additional costs incurred to provide for discretionary pensioner excursion travel. It is desirable therefore that operators closely monitor the profile of morning peak ticket sales, and advise of trends and implications to enable further Government consideration of the proposed limitation.
To minimise delay to journeys caused by driver sales, pensioner organisations have requested that their Excursion Ticket be made available for sale as a multi-day ticket, able to be purchased at a variety of locations. They suggested that if accompanied by fraud prevention measures, such as the use of photo identification on concession cards, this initiative could have significant value.
Fares paid by bus travellers fall far short of the cost of providing acceptable services and service levels, and Government subsidies, either direct or indirect, are a necessary feature of the provision of an effective bus transport system.
The Review’s Terms of Reference required consideration of the establishment of a consistent statewide fare regime, and this has been done.
Both this Review and the Parry Inquiry believe that a standard metropolitan fare scale should be introduced which would apply equally to private and government bus operators.
The outcome of this equalisation process would then reduce the State Transit pricing CSO payments for redistribution across the industry. It is noted that the
Government response to the Parry Inquiry concurs with this initiative.
While the Final Report of the Parry Inquiry proposed that the IPART annual fare assessment increase STA fares over time, the Review believes that fare equalisation should be given priority to eliminate the STA pricing CSO and to bring forward the extension of benefits to the wider community.
Concern about the operation of the School Student Transport Scheme (SSTS) arose during the conduct of this Review, due to the central funding role played by the scheme in bus industry financing. The Bus Review Interim Report and the Parry Inquiry Final Report recommended that bus operators be paid on actual school travel undertaken and the Government response concurred with this. ix

The consequential funding gap will leave many operators unable to maintain scheduled route services due to inadequate fare box revenue; therefore supplementary subsidies, based on efficient costs, may be required.
This requires the introduction of the new planning, contracting and funding arrangements proposed by this Review. To facilitate this, the Ministry of
Transport will locate all relevant functions in an Operations stream separate from the Policy function. Further consideration can be given to the need for a separate Passenger Transport Authority, once this operations area is functioning and its performance able to be evaluated.
In considering the provision of bus services in rural and regional locations, the
Review’s Interim Report recommended that a new administrative structure be developed which would better co-ordinate access to transport resources and funding. Strong support for this concept was identified in subsequent discussions with various transport user interest groups and in consideration of submissions.
The appointment of regionally based Transport Working Groups, convened by
Transport Co-ordination and Development Officers employed by the Ministry of Transport, has been recognised as an initiative which will identify local transport needs and provide tailored solutions.
Appropriately funded community transport organisations can assist in the provision of solutions for many of the needs of transport disadvantaged groups through liaison with the proposed Transport Co-ordination and
Development Officers and Working Groups.
In the course of the Review a number of associated issues arose which are worth reporting on, one being the viability of the bus manufacturing industry located in this and other Australian states.
Consideration of submissions and manufacturing site visits highlighted the need to ensure that facilities and skills are maintained to supply suitable new and refurbished buses to operators. A number of manufacturers have exited the industry and those remaining will only survive in an environment which provides certainty for the future of bus operators.
Issues which concerned the Transport Workers’ Union were the need to ensure that all new drivers received workplace induction and safety training and that regular refresher courses are provided. The Union also raised the question of award compliance and the need to observe the requirements of the Occupational Health and Safety Act, suggesting that contracts incorporate adherence to these instruments as a proviso. These seem to be reasonable requirements that can easily be incorporated into service contracts.
The Final Report also addresses two other issues raised by the Transport
Workers’ Union – the need for driver amenities at interchanges and stations, and the need for some flexibility in respect of the hours during which school students can use their SSTS passes. x

This Review of Bus Services in New South Wales has provided a unique opportunity for a wide variety of bus industry participants, interest groups and transport users to present their opinions on ways to improve the system.
Thanks must be extended to the more than 1,800 organisations and individuals for their contributions to the process of review, and for devoting the time to present many excellent submissions and ideas.
I must also commend the highly talented team of policy development officers of the Ministry of Transport, Joanna Quilty, George Pund, Bill Grant, Catherine
Reilly, Matthew James, Matt Hunter, Stephen Timbrell, John Morandini,
Marion Browne and Rosemary Evans, who totally devoted themselves to the to the task of the Review over an extended period, and thank them for their efforts.
During the course of the Review regular meetings of a Review Advisory Group comprising representatives of The Cabinet Office; Treasury; the Department of Infrastructure, Planning and Natural Resources (DIPNR); Transitways; the
Roads and Traffic Authority (RTA); Railcorp; and the Ministry of Transport
(Contracts); as well as Joe Tripodi, Parliamentary Secretary to the Minister for
Transport Services, met to consider and advise on issues associated with the
Review. Their assistance was invaluable and much appreciated.
The consultants to the Review
– SAHA International, LEK Consulting,
Parsons Brinkerhoff, Sinclair Knight Merz, Booz Allen Hamilton, INDEC
Consulting and Allens Arthur Robinson – have also provided critical inputs to the analysis and recommendations contained in the Interim and Final Reports.
For that we all express our appreciation.
I thank the Director-General of the Ministry of Transport, John Lee, for his generous support of the Review and his continued interest in its progress.
In conclusion, on behalf of the Review team and myself, I must thank the Hon
Michael Costa for entrusting us with the responsibility of undertaking this important examination of the bus industry and the service it provides to the community.
Barrie Unsworth
Chair
Review of Bus Services in New South Wales xi

Metropolitan network & service planning
1. The Government should progressively implement, for Sydney,
Wollongong, Newcastle and the Central Coast, a network of viable strategic corridors to provide fast, frequent, direct and convenient links to regional centres. The identification of suitable corridors should be finalised on the basis of patronage modelling results and stakeholder inputs.
2. The network of strategic corridors should be underpinned by 10 contract regions in the Sydney metropolitan area, 2 for Newcastle and one each for Wollongong, the Central Coast and the Blue Mountains.
3. Within each region, provision of bus services along the Strategic
Corridors should be integrated with local bus services.
4. A partnership approach to integrated service planning between the lead operator for each region and the Ministry of Transport should be adopted, with Ministry of Transport having a system-wide oversight role.
5. New ‘service planning guidelines,’ to replace the existing Minimum
Service Level (MSL) Policy, should be developed by a central working group including representatives from the bus industry, community transport providers and the Ministry of Transport. The guidelines should identify:

roles and responsibilities in the planning process;
 desirable service frequencies along strategic corridors and for local services;
 opportunities to integrate bus services with rail and ferry services where appropriate;
 opportunities for operators to target resources at viable, demand responsive services, with flexible solutions to best serve the needs of the transport disadvantaged;
 the need for local government to implement local planning policies to encourage public transport provision;

factors/criteria to be taken into account when recommending that service frequencies or routes be varied; and
 factors/criteria to be taken into account for determining when patronage levels or community needs are such that local services would be better provided under the auspices of community transport or a community transport/private operator partnership arrangement.
6. Regional service planning forums, comprised of representatives from the lead operator, local government, the Roads and Traffic Authority (RTA), xii

community transport local working groups and the Ministry of Transport, should be convened annually or as needed to assist with the service planning and review process. The role of the forum should be to advise the lead operator and the Ministry of Transport on service planning issues, frequency requirements and proposed changes that will have a material impact on passengers and the region.
7. The Ministry of Transport should consider employing regional transport co-ordinators in metropolitan areas to promote co-operative service provision between all transport providers – bus, rail, community transport and taxis
– to encourage flexible solutions and ensure that services for the transport disadvantaged are optimised.
8. In leading the development of the Sydney Metropolitan Strategy, the
Department of Infrastructure, Planning and Natural Resources (DIPNR) should ensure that:
 the role of bus services and bus priority measures in effectively meeting the long term transport needs of metropolitan Sydney is recognised and promoted;
 planning for the provision of bus services is factored into the development of greenfield sites and high level integrated transport planning at the regional and sub-regional level;
 the strategic corridors and contract regions proposed in this Final
Report are used as the starting point for meeting medium and longer term transport needs; and
 the strategy encompasses policies which support the development of viable public transport solutions such as supporting employment and population growth in regional centres, encouraging development along strategic corridors and restricting parking.
9. The service planning roles of DIPNR and the Ministry of Transport should be clearly defined to reflect:
 DIPNR’s focus on strategic level integrated transport planning at the regional and sub-regional level as key components of the Sydney
Metropolitan Strategy and other regional planning activity; and
 The Ministry of Transport’s focus on translating these strategic level transport outcomes into shorter term service planning requirements reflected in proposed bus service contracts.
10. The RTA, in consultation with the Ministry of Transport and DIPNR, should progress the initial assessment of the proposed strategic corridors, undertaken as part of this Review, to:
 prioritise the strategic corridors according to need for and impact of proposed bus priority measures;

determine, case by case, the level of infrastructure required and associated costs; xiii


develop an expanded bus priority program (including additional revenue sources) to be rolled out over the length of the first contract period; and
 implement electronic enforcement measures in parallel with bus priority measures.
11. To ensure that bus drivers have adequate access to amenities at stations and interchanges, it is recommended that:
 DIPNR should finalise the draft Interchange Design Guidelines and ensure that they effectively address the issue of driver amenities, in consultation with the Transport Workers’ Union, the Rail, Tram and
Bus Union, the Bus and Coach Association, State Transit, Railcorp and the Ministry of Transport;
 consideration should be given to the Transport Infrastructure and
Development Corporation taking a lead role in working with other relevant Government agencies to resolve the issues of ownership, funding and maintenance of amenities at new interchanges and stations; and
 Railcorp should continue to ensure adequate access for bus drivers to existing facilities at stations and interchanges.
12. The Lord Mayors of Parramatta, Newcastle and Wollongong should set up a working party to further investigate the feasibility of establishing free buse s within their respective cities’ CBDs. The working part should consist of the Lord Mayors and relevant business and community leaders.
Metropolitan contracting
13. There should be one contract per contract region for the Sydney,
Newcastle, Wollongong, Central Coast and Blue Mountains metropolitan areas.
14. There should be a transition period to enable existing operators to organise themselves on a region by region basis to achieve the above.
Following this, contracts in metropolitan NSW should be let through competitive tendering (or similar process) to ensure a strong customer focus and best value for the taxpayer. Assessment criteria should not be based on cost alone and should include performance factors such as:
 service planning skills;
 on-time running/reliability;
 environmental history;
 customer relations activities; and
 workplace relations, OH&S experience and proposed approach. xiv

15. The terms of the new contracts should reflect an appropriate allocation of risk between operators and Government, dependent on which party is best placed to manage the risk, in respect of factors such as patronage, service planning, fares, fares collection and data collection/reporting.
16. There should be greater flexibility in determining the length of the contract period, but with 5 year contracts and the opportunity to extend for 2 to 5 years (subject to satisfactory performance) the norm.
17. Other terms of the contract should include or reflect:
 the prerequisites before a principal operator (and associated operators) can enter into a contract;
 the boundaries and strategic corridors that make up the contract region;
 services to be provided locally and along the strategic corridors, including integration requirements with other modes;

service quality, performance, bus fleet and other standards to be met, such as punctuality and reliability, timetable information (including requirements in relation to community consultation/notification in respect of service changes), signage, customer relations/complaint handling, fleet specifications, and environmental performance
(including implementation of the RTA ’ s Clean Fleet maintenance guidelines);

requirements in relation to the development of Accessible Transport
Action Plans and Customer Relations Plans;
 recording and reporting requirements including provision of boarding and revenue data, financial records, and the need to report regularly to the community on punctuality/reliability, customer service and complaint handling;

service planning to be undertaken by operators in consultation with regional service planning forums and approved by the Ministry of
Transport, in keeping with relevant guidelines;
 requirements in relation to provision of SSTS, other concessional travel, fares and ticketing, including participation in the smatcard ticketing and installation in buses of related equipment;
 the need for co-operative arrangements as required with neighbouring and other operators, including for the provision of community transport;
 participation on local transport working groups as required;
 contract payment details including those for SSTS, concessions and any CSO funding;
 requirements in relation to staff training/qualifications and work safety; xv


provisions for dispute resolution;
 termination events;
 procedures in relation to contract breaches, including a graduated penalty regime and the exercise of step-in rights where required; and
 procedures in relation to the re-tendering of contracts.
Metropolitan funding
18. The Ministry of Transport should implement a financial model for bus service provision in metropolitan NSW that appropriately addresses risk allocation issues, provides incentives for service improvement/patronage growth, and promotes accountability and transparency.
19. Elements of the metropolitan financial model should include:
 operator to largely retain fare revenue;

capacity for revenue sharing where applicable to off-set risks outside the operator’s control, particularly in the initial transition period;
 reimbursement of SSTS and concession travel based on actuals or at an agreed rate/fixed sum, based on travel data generated from the ticketing system;
 incentive payments for service quality and penalties for failure to meet standards; and
 an appropriate CSO payment, case by case as required.
20. Where possible, State Transit should be required to make targeted efficiency savings to reduce the level of CSO payment. Identified savings should be used to fund service improvements across the metropolitan network over time.
Rural & regional NSW
21. The Ministry of Transport should commence recruitment of regionally based Transport Development and Co-ordination Officers to facilitate the development of innovative transport solutions and the best use of available resources in country areas. Specifically, their role should encompass:

mapping existing services and needs;
 establishing regional co-ordination committees of relevant stakeholders to further advise on need, and assist with integrated service provision and planning; xvi


monitoring the effectiveness of services;
 working with stakeholders to identify and trial service improvement projects, funded by seeding grants; and
 working with the Operations stream of the Ministry of Transport to extract greater value from, and insert more flexibility in, bus contracts.
The Ministry of Transport should also consider establishing the Position of Aboriginal Transport Development Officer to develop transport solutions appropriate to the needs of Aboriginal communities.
22. As recommended in a previous review, community transport services should be recognised as playing a crucial role in the transport task, with safety and accreditation requirements applying where appropriate.
Barriers to the provision of flexible solutions involving the most appropriate vehicle type should be removed.
23. The Ministry of Transport should develop a new ‘ modular ’ service contract for country NSW that is capable of being adapted to the different service needs of different communites and addresses:

services to be provided, including integration requirements with other modes;
 requirements in respect of availability for other charter and community work;

uniform standards for service quality, performance and bus fleet specifications;
 reporting requirements to enable better perfomance monitoring and to inform ongoing service planning;
 procedures for dealing with disputes and contract breaches;
 flexibility in the contract term, from 5 to 10 years;

contract payment details that take into account income from charter and other work for specified groups;
 service planning and review processes, including participation in local co-ordination committees; and

contract renewal opportunities and performance assessment processes.
24. The Ministry of Transport should develop a new financial model for rural and regional bus services that, subject to IPART endorsement, replaces the existing ‘non-commercial’ funding model. The model should:
 update the inputs in the current funding model to reflect efficient benchmark costs; xvii


link return to operational effort;
 eliminate any biases in favour of multiple contracts holders/larger operations;
 recognise income derived from other sources (such as commercial charter work) and its contribution to capital costs while still providing incentives to take on this work; and
 establish a per kilometre charge at which the vehicle is to be made available for charter and other work for specified groups.
25. To provide service that better meet local needs and provide better value for money, consideration needs to be given to:
 replacing regular route services in country towns with demand responsive, flexible services, recognising that commuter needs should not drive service planning in these areas. As a starting point, the proposal for a demand responsive service for the Dubbo township should be trialed as soon as possible and opportunities for similar trials identified; and

the potential for:
 establishing single operator networks for the provision of school services in a given area (replacing the existing single noncommercial contracts) to maximise the efficient use of vehicles and achieve economies of scale,
 funding new services (including regular services to isolated communities) from any savings that may be realised,
 rescheduling CountryLink coach services so that they provide for an adequate stop-over in regional centres and better meet the needs of the broader community by providing a useful daily link between isolated communities and their regional centres; and
 rolling out a transport information and referral service (based on the system developed by the Macquarie Area Health Service).
26. The Ministry of Transport should negotiate with operators to move them onto new contractual and funding arrangements.
27. The Ministry of Transport should continue to work with NSW Health, the
Department of Ageing, Disability and Home Care, DIPNR and other government stakeholders to develop Integrated Regional Transport
Plans and Budgets as a mechanism for facilitating a whole-ofgovernment approach to planning, procuring and funding country transport solutions.
Agencies should commit to ensuring that any new services are procured through the integrated planning approach to maximise value for money and optimise service outcomes for the community. xviii

Statewide issues
Fares, ticketing & concessions
28. To ensure an equitable system, a consistent bus fare scale should be progressively implemented across all metropolitan bus services and operators should be required by contract to offer the same core fares, concessions, and ticketing arrangements.
29. Government should request that IPART seek to align State Tr ansit’s fares to the Transitway fare scale (equivalent to the private operator fare scale) as a matter of priority.
30. As commercial contracts in regional areas expire, a single fare scale, consistent with the country fare scale, should be applied so that over time all regional operator fares are aligned to the one scale.
31. Private operators should be obliged to offer a TravelTen (or equivalent) product, discounted at 10-15% relative to single fares. Over time, the discount on State Transit’s TravelTen (or equivalent) should be brought to a similar level.
32. Once the smartcard system is implemented, only single fares and a more limited number of products (such as TravelTens and the Pensioner
Excursion Ticket) should be allowed to be loaded onto the smartcard, to promote ease of use.
33. The proposal, recommended in the Parry Inquiry Final Report and supported by Government, to increase the Pensioner Excursion Ticket to
$2.50 and expand it to areas within the Greater Metropolitan Region serviced by private operators, should be implemented as part of new contractual arrangements.
34. Once the Pensioner Excursion Ticket is available across the metropolitan area, operators should be required to monitor and report to the Ministry of Transport on the extent and impact of Pensioner
Excursion Ticket holders travelling during the morning peak.
35. Prior to the implementation of smartcard, consideration should be given to allowing the purchase of a multi-trip Pensioner Excursion Ticket, as a means of reducing on-board ticket purchases and resultant delays, particularly during peak times. Photo identification should be required for purchase and use of the ticket, to protect against fraud.
36. The Pensioner Excursion Ticket should also be available for use on bus services in large country towns where community transport cannot provide an equivalent service.
SSTS
37. In-principle agreement should be sought from education bodies to participate in the smartcard trial during the second half of 2004, and in xix

the broader implementation of the system in 2005. The trial should include:
 consultation with school staff, unions and parents;
 consideration of ways to minimise the administrative load for schools; and
 the identification of any transition costs.
38. Following the trial, a Memorandum of Understanding should be entered into between the Ministry of Transport and relevant education bodies.
This should outline respective roles and responsibilities in relation to the administration of SSTS under the smartcard system to ensure its effective roll-out and implementation.
39. Once fully implemented, the potential of the smartcard system to make
SSTS more responsive to the changing educational and social needs of students and families should be explored.
40. The Ministry of Transport and the BCA should jointly identify and implement strategies to ensure that operators and drivers are aware of the recently developed SSTS Guidelines on Hours of Travel, which enable some flexibility in determining when during the day an SSTS bus pass can be used.
Governance arrangements
41. The Ministry of Transport should proceed with the establishment of an operations stream that will consolidate service planning, contracting and funding responsibilities for passenger services under a single management arrangement. To ensure these arrangements commence with the introduction of the new contracting regime, an assessment of the capability, resources and operational requirements needed should be undertaken as a priority.
42. As part of the above, discussions should commence to enable the transfer of State Transit’s planning capability to the Ministry of Transport, concurrent with the signing of new contracts with State Transit.
43. The effectiveness of the Operations stream should be monitored over the contract period prior to any further consideration being given to the establishment of a Passenger Transport Authority.
44. In the longer term, serious consideration should be given to the establishment of an appropriate entity to enable the separation of asset control from the operation of services, to realise a range of benefits as outlined in this Report. As a more immediate measure, contracts need to provide for step-in rights and call options to enable Government control over assets where necessary to ensure continuity of services. xx

Implementation/transition
Metropolitan areas
45. To enable the implementation of new arrangements, the Passenger
Transport Act 1990 and other relevant legislation should be amended to allow for:
 removal of automatic renewal rights;
 extinguishment of existing contracts where necessary

performance standards and penalties;
 payment of SSTS on actuals;
 the creation of defined contract regions and the identification of strategic corridors;
 a partnership approach to service planning and the replacement of
MSLs with service planning guidelines;
 IPART determination of State Transit and private operator fares;

recognition of the role of community transport in the provision of local services and/or services to meet the needs of particular groups; and
 flexibility in relation to contract periods, including temporary contracts and termination provisions.
46. To provide certainty, the introduction of new contracting arrangements should be progressed expeditiously, with the aim of being in place across the Sydney metropolitan area by 2005. The first 2 years should be viewed as a transition period, to enable the collection of relevant information and data, and the review and refinement of arrangements as necessary.
47. A whole-of-government taskforce, comprising the Ministry of Transport,
Treasury, The Cabinet Office and other relevant agencies should be established to oversee and monitor implementation of new contracting arrangements for metropolitan areas. Updates on progress with implementation should be published quarterly on the Ministry of
Transport’s website.
Rural & regional NSW
48. For rural and regional NSW, the Passenger Transport Act 1990 should be amended to provide for:
 a more flexible contracting regime;

a more flexible accreditation regime;
 recognition of community transport providers; and
 transitional provisions which recognise a gradual roll-out of new service delivery, funding and contracting arrangements. xxi

Map 1:
Map 2:
Map 3:
Map 4:
Sydney metropolitan existing contract areas
Sydney metropolitan proposed contract regions
Sydney metropolitan proposed strategic corridors (overlay)
Sydney strategic corridors schematic
CityRail schematic (overlay)
Newcastle metropolitan proposed contract regions & strategic corridors
Map 5: Wollongong metropolitan proposed contract regions & strategic corridors
Map 6: Central Coast metropolitan proposed contract regions & strategic corridors
Map 7:
Map 8:
Metropolitan proposed contract regions
Proposed NSW country transport regions
Map 9: Dubbo hail-and-dial-a-ride proposal
[The maps are available on the Review’s website as JPG files] xxiii

On 2 July 2003 the Minister for Transport Services, the Hon Michael Costa
MLC, announced the establishment of a Ministerial Review into Bus Services in NSW, to be chaired by the Hon Barrie Unsworth. The Review was to examine, and make recommendations to improve, the provision of bus services for people in NSW.
On 17 November 2003, the Minister released the Interim Report of the
Review. The Interim Report contained 36 recommendation covering metropolitan issues (network and service planning, contracting and funding), rural and regional NSW and statewide issues (fares, ticketing and concessions, school student travel and governance arrangements).
This Final Report has been prepared following consultation with community, industry and government representatives on the issues raised in the Interim
Report.
1.1. Terms of Reference for the Review
The Terms of Reference (see Appendix 1) require the Review to consider:
 The opportunity provided by integrated ticketing to establish a consistent statewide fare regime;
 The potential benefits of a network of strategic bus regions across the
Greater Sydney metropolitan area which integrate with rail services and other travel patterns;
 Improving the structure of the network to respond to changes in the future capacity of rail, and the future development of the metropolitan area;
 Improved Bus Priority measures, Transitways and other options that may impact on services and suggested desirable service standards;
 Improved use of resources in rural and regional communities to ensure more flexible solutions to local transport needs;

Funding, contractual and regulatory arrangements and any legislative changes required to implement these improvements; and
 The best mix of recommendations to achieve improvements in a cost neutral manner.
The Terms of Reference also require the Review to take into account the findings of the Ministerial Inquiry into Sustainable Transport for NSW undertaken by Dr Tom Parry. An Interim Report from this Inquiry was released in August 2003 and the Final Report was released in December 2003.
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1.2. Approach to the Review
The work of the Bus Review was undertaken within broader NSW
Government objectives for transport, urban development and the environment, which aims to:
 Increase the use of public transport;
 Provide efficient, reliable and safe public transport options;
 Connect communities, meet the need of growing suburbs and ensure equity and accessibility;
 Contribute to environmental and urban management goals; and
 Ensure value for money, accountability and transparency for Government investment in the public transport system.
The methods used to address the Terms of Reference involved a range of approaches, including:

A detailed examination of current bus service delivery arrangements in
NSW;
 Consultation with key stakeholders including representatives of community and special interest groups, bus operators, academics, experts and interested individuals;
 Analysis of over 1,300 submissions received from individuals, organisations and groups in response to an initial call for submissions;
 Analysis of a further 500 submissions received in response to the Interim
Report;
 A review of documentation relevant to bus service provision in NSW, other states and overseas;
 Examination of bus service systems in other states, most notably
Queensland and Western Australia;

Visits to regional centres in NSW (Wagga Wagga, Dubbo, Lismore,
Wollongong and Newcastle) to gain first hand knowledge of the challenges faced;

A case study approach to highlight issues associated with implementing the proposed concepts; and
 Research, analysis and modelling on key issues such as patronage growth, service integration, financial impacts and delivery of supporting infrastructure such as bus priority measures and interchanges.
Stakeholder and community involvement has been central to the Review process. Issues raised generally in consultations and submissions are discussed in Section 1.7 and are also detailed in each relevant chapter.
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1.3. Scope of the Review
The focus of the Review is principally on bus services defined by the
Passenger Transport Act 1990 as regular passenger services (which means they are run according to regular routes and timetables). However, in looking at the total picture to ensure best use of available resources, it has been necessary to also examine other ways of delivering transport services, such as community transport programs and demand-responsive approaches.
The Report’s definition of metropolitan areas is the 15 metropolitan contract areas shown in Map 7. These are based on a combination of existing service and planning boundaries, including the Greater Metropolitan Region as defined by the Department of Infrastructure, Planning and Natural Resources
(DIPNR) and the area covered by smartcard implementation.
The term ‘rural and regional NSW’ refers to those towns and areas outside of the metropolitan contract boundaries.
1.4. This Report
The Interim Report provided substantial background information on bus services across NSW, including a brief history of regulated bus services, an overview of current arrangements, an analysis of limitations of the existing system, and recommendations to make improvements. The recommendations of the Interim Report are included in Appendix 4 of this Final Report.
The Final Report does not attempt to retrace these efforts. Its focus is on amendments to the Interim Report’s recommendations based on submissions received and on further work carried out since November 2003.
As a result, each chapter outlines the concepts proposed in the Interim Report and highlights key issues identified in submissions and in additional work undertaken by the Review team.
The Report concludes with discussion of the implementation of these proposals.
1.5. Relationship to Parry Inquiry
The Final Report of the Parry Inquiry was released on 9 December 2003.
Following the NSW Government’s response to the Parry Inquiry Final Report, a number of issues raised in this Review’s Interim Report have been further considered, including:
 payments to transport operators for school student travel are to be based on actual travel;
 smartcard technology is to be piloted in private buses in 2004 and rolled out across the private bus fleet in 2005 to enable actual travel based payments;
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
no co-payment is to apply to school student travel as smart card ticketing will address ‘phantom’ riders and provide a basis for actual payment;
 the Pensioner Excursion Ticket is to be extended to metropolitan private bus networks, at a flat rate of $2.50, with Seniors Card holders to remain eligible;
 the proposal to place time restrictions on the use of Pensioner Excursion
Tickets is not to be pursued, pending an assessment of the impact on AM peak congestion of extending this ticket to all transport modes;
 a comparable set of fares and concessions is to be considered for State
Transit and private bus passengers over time;

any fare increases beyond CPI will need to be directly aligned to clearly identified service improvements;
 DIPNR is to assess funding sources, including development charges, to fund feeder services from new areas to the existing transport network;

local service providers and users of community transport services are to be brought together to develop plans for better services and promote coordination of available resources;

streamlined funding and administrative arrangements are to be brokered to meet local need, including funding from Home & Community Care, the
Community Transport Program and funding from other agencies such as
NSW Health;
 a network of regional community transport development workers is to be established across the state, that are funded and co-ordinated by the
Ministry of Transport; and

CountryLink services are to be included in the development of Integrated
Regional Transport Plans.
1.6. Consultation on the Interim Report
Extensive consultation was held with community, industry, and government stakeholders in the preparation of the Interim Report, including regional visits, community forums and inspections of bus operations. The organisations consulted during this process are detailed in Appendix 2. Following on from this consultation, a series of meetings were held to brief key stakeholders on the proposals and encourage submissions.
Among the groups consulted during this period were:

Industry: the Bus and Coach Association (including a presentation at the
2003 Regional Conference); the Bus Industry Confederation;
Commonwealth Bank; the Institute of Transport Studies, University of
Sydney; Macquarie Bank; the Rail, Tram & Bus Union; the State Transit
Authority; and the Transport Workers’ Union.
 Community Groups: Action for Public Transport; the Combined
Pensioners’ & Superannuants’ Association; the NSW Council on the
4

Ageing; the Disability Council of NSW; NCOSS; the NSW Government
Social Justice Reference Group; the Total Environment Centre; and the
Youth Action & Policy Association.
 Government Agencies: the Department of Ageing, Disability & Home Care; the Department of Education & Training; NSW Health; Macquarie Area
Health Service; DIPNR; RailCorp; the Roads & Traffic Authority; The
Cabinet Office; and the NSW Treasury.
1.7. Submissions
The announcement of the Review generated significant interest and over
1,300 submissions were received prior to the preparation of the Interim
Report. Organisations that made submissions are listed in Appendix 3.
The major issues raised in submissions from organisations and individuals in metropolitan areas were the need to improve service planning and ensure frequent and reliable bus services. In rural and regional areas, the key issues were the need for better co-ordination of services to meet unmet demand, the lack of services between smaller communities and regional centres, and seating capacity on school buses.
The release of the Interim Report generated over 500 submissions, with over
20% (118) coming from organisations and groups. Key issues raised in submissions are dealt with in each relevant section of this Report.
Organisations that made submissions on the Interim Report are listed in
Appendix 3.
The bulk of individual submissions (65%) concerned changes to the
Pensioner Excursion Ticket, with other concerns (in order of priority) being restrictions on Seniors Card holders; restrictions on use of the PET in peak hours; and pricing. As noted in Section 1.5, these issues have been largely addressed in the Government response to the release of the Parry Inquiry
Final Report.
Of the remaining 35% of submissions from individuals, the main issues raised were the need for frequent and reliable services, and the need for better planning and co-ordination of services. This is consistent with the submissions made at the commencement of the Review.
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2.1 Metropolitan Planning: the Interim Report concept
The Interim Report highlighted the way in which the current service planning arrangements, when combined with the contracting and funding regime, have acted against the development of a real bus network in metropolitan NSW and contributed to a continuing decline in patronage.
The key constraints are:
 separate planning undertaken by the 38 metropolitan operators with no strategic guidance from Government to meet its metropolitan development or environmental objectives;
 rigid Minimum Service Levels (MSLs) across contract areas which can result in long, circuituous routes and restrict operators’ ability to target resources to effective routes;
 exclusive rights in contract areas which discourage services which meet travel patterns;

funding arrangements which skew the planning focus to school student travel and don’t provide incentives to establish services in ‘greenfields’ areas;
 the lack of a strategic plan to guide and program investment in bus priority; and
 urban development processes and parking polici es which don’t support public transport development.
To address these issues, the Interim Report identified the need for:
 a planning partnership, with operators given the scope to develop services based on real need within a strategic framework set by Government;
 strategic corridors providing fast, frequent, convenient and direct services based on real travel patterns;
 integration of strategic corridors and local routes to improve services, frequencies and connections and make better use of resources;
 the strategic corridors to provide a targeted program for bus priority improvements, supported by more effective enforcement;

moving from pre-set MSLs to a demand-responsive culture using a mix of regular fixed routes and divert-on-demand services, including community transport as a service option;
 planning policies and processes which concentrate activity in key centres, manage parking, anticipate growth and accommodate bus services; and
 further investigation of free, high-frequency CBD buses in Newcastle,
Parramatta and Wollongong, jointly funded by local and state government.
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2.2 Key issues
Strategic corridors
The Interim Report identified a network of strategic corridors in the Sydney,
Newcastle, Wollongong and Central Coast areas. These corridors reflect actual travel patterns, are anchored at regional centres and serve patronage generators such as district centres, campuses and hospitals. They will provide frequent, fast, convenient and direct services, integrate with local services, connect with other modes and provide a blueprint for improving bus priority measures.
The concept of strategic corridors was generally supported in submissions, through representative comments such as:
We support the proposed establishment of strategic corridors to provide fast, efficient and direct services linking centres. (Total Environment Centre)
…without a system promoting effective cross-regional bus services, bus transport will be unable to meet its potential as a user friendly transport mode.
(Harris Park Transport)
The cross-regional routes would provide a commuter service that would contribute to reducing road congestion in Sydney. (Maunsell Australia)
The concerns raised in submissions generally concerned the detail of strategic corridors, and fell into two major categories:
 detailed routes of particular corridors; and
 new strategic corridors.
Detailed routes of particular corridors
The Interim Report identified corridors between centres rather than specific routes, noting that detailed route design would be undertaken during the planning process. Nevertheless, a number of submissions identified patronage generators which should be included on the relevant strategic corridor. The following corridors have been amended to reflect these suggestions:
 Corridor 1: variation to acknowledge future development of the ADI site.
 Corridor 2: variation to include UWS Werrington and the Huntingwood industrial estate.
 Corridor 4: variation to operate via the Homebase commercial precinct at
Prospect.

Corridor 12: variation to operate via Bass Hill Plaza.
 Corridor 23: variation to operate via Sutherland Station and connect with
Corridor 22.

Corridor 28: variation to operate via Roselands shopping centre.
 Corridor 33: variation to operate via UWS Milperra.
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
Corridor 39: variation to operate via Concord Hospital.
 Central Coast North Corridor: variation to include Toukley.
 Central Coast South Corridor: variation to include Kincumber.
The revised strategic corridors are shown in the overlay of Map 2.
New strategic corridors
A number of submissions identified additional corridors that could be considered as strategic corridors. These were assessed on the same basis as the initial strategic corridors, as outlined above. Some of these suggestions, such as a new corridor from Penrith Lakes to Glenmore Park, do not fit the strategic corridor criteria. However, separate routes from Penrith Lakes to
Penrith and from Glenmore Park to Penrith would be considered as primary routes in developing a regional network.
Further patronage modelling has been undertaken since the Interim Report, using the Transport and Population Data Centre’s Sydney Strategic Travel
Model (STM). The STM is a strategic planning tool that is used by
Government in high level evaluations of infrastructure, development and policy proposals. Its strengths are that it provides a common platform for assessment of proposals and its ability to highlight relative differences in alternative approaches through scenario modelling. Nevertheless, it is intended to operate at a strategic level only and, like any model, is limited by its demographic inputs and the difficulty of attempting to forecast human behaviour.
In discussions with the Bus and Coach Association and the Institute of
Transport Studies, it has been agreed that the STM is a valid strategic modelling tool but that its application needs to recognise its limitations. The
Review therefore recommends that the strategic corridors identified in this
Report be seen as a framework for implementing cross regional services in metropolitan areas, with the strategic corridors confirmed following further patronage modelling and stakeholder input. The transitional provisions of the new regional contracts should also reflect the general lack of industry experience in operating trunk routes between centres by enabling review of the corridors in their early years of operation.
Strategic corridor interchanges
Parsons Brinckerhoff Australia was engaged by the Review to examine the capacity of bus interchanges on the 43 strategic corridors identified in the Interim Report.
An audit was done of theoretical capacity of these interchanges and the layover and driver amenity facilities provided. The study assumed a requirement for each bus stand to serve a maximum capacity of 15 buses per hour or 4 minutes per bus.
Parsons Brinckerhoff identified 18 interchanges requiring works to manage the additional bus movements resulting from the strategic corridors. These works ranged from improved signage, improved traffic management, additional shelters, expansion or reconstruction. The indicative capital cost estimate of these works is $18-$23 million.
8

This cost has been included in the financial model to ensure the cost to Government of implementing bus reform is recognised. Following this initial study, further assessment of works will be required once the structure of the regional service network is finalised.
The Ministry of Transport should examine the potential for involving the
Transport Infrastructure Development Corporation (TIDC) in developing the infrastructure supporting the strategic corridors. The TIDC was created as part of the recent reform of rail agencies to design and deliver major transport infrastructure, such as interchanges, terminuses and related projects, as approved by the portfolio Minister and voting shareholders.
Contract region boundaries
The Interim Report identified 15 metropolitan contract regions for the Sydney,
Central Coast, Newcastle and Wollongong areas. Boundaries were determined on the basis of:
 travel patterns,

containing bus travel as far as possible within one region;
 growth areas;
 geographic constraints; and
 minimising forced transfers and overlapping routes.
As one submission stated:
This should have been done years ago. (Action for Public Transport)
A number of submissions from transport operators made comments on boundary issues. Further analysis was undertaken to consider whether boundaries could reflect existing boundaries such as Health, DADHC or local government areas. The Review believes that while Area Heath Service boundaries are appropriate for rural and regional areas, the transport task is very different in metropolitan areas and contract region boundaries should reflect actual travel patterns as far as possible.
Local government area boundaries are subject to change for reasons unrelated to transport. Furthermore, the Review placed major regional centres such as Parramatta, Liverpool and Chatswood on the edge of contract boundaries to enable them to be served by multiple regions. As these centres are typically located in the middle of their own local government area, their boundaries do not support this principle.
The Review assessed specific suggestions for changes against the criteria for contract boundaries and recommends the following amendments, which are reflected in the maps at the front of this Report:
 Region 1: use the Nepean River as the western boundary of Region 1 to create a new Blue Mountains region. Penrith CBD would be nominated as
9

a new contract-free zone serviced by both regions. As there is no identified strategic corridor in the Blue Mountains region, further consideration needs to be given to whether its western boundary is Springwood, Katoomba or
Mount Victoria.
 Region 4 and Region 8: shift the boundary of these regions, using the
Lane Cove River and its tributaries as the new western boundary for
Region 8, to facilitate travel from the Northern Beaches to the North Shore.
 Region 5 and Region 6: shift the eastern boundary of Region 5 to include the University of Sydney – Cumberland Campus in Region 5.
 Region 5 and Region 6: shift the northern boundary of Region 5 to the
Main Western Line to enable Region 6 to have access to Parramatta.

Region 5 and Region 10: shift the south-eastern boundary of Region 5 to include Sandy Point to reflect current travel patterns.
The revised contract region boundaries for Sydney are shown in Map 2.
Those for Newcastle, Wollongong, and the Central Coast are at Maps 4, 5 and 6.
Integrated services
The Interim Report included a case study where the multiple existing operations in the proposed Region 3 were integrated to form one network, consisting of a strategic corridor, feeder services and local services.
Eliminating the duplication of services in separate contract areas, allowing routes to reflect travel demand, and redirecting resources onto strategic corridors resulted in significant patronage gains which exceeded additional operating costs.
Further modelling has since been undertaken, covering the 6 regions in metropolitan Sydney that are currently mainly served by private bus operators. This approach reflects the fact that State Transit already generally operates larger, more integrated regions.
An indicative network structure was developed for each region, based on identified strategic corridors linking key centres, local primary routes feeding into these corridors, and local secondary routes serving local centres and lesser railway stations.
Frequencies for the strategic corridors were assumed at 10 minutes in peak periods, 15 minutes in the off-peak, 30 minutes at night; and operating 5am to midnight at least 6 nights a week.
Frequencies for local primary routes were assumed at 20 minutes in peak periods, 30 minutes off-peak and 60 minutes at night. Local secondary routes were assumed at 30 minutes in the peak, 60 minutes in the off-peak, with no night services. For areas with regular density, topography and catchment, the existing rule for providing services within 400 metres and 800 metres of
10

residences was applied. These guidelines were moderated for areas with limited catchment such as peninsulas and more isolated areas.
This revised service network was modelled alongside the existing network using the Sydney Strategic Travel Model. This enabled an assessment of the relative performance of both networks and the isolation of reform benefits such as new ticketing arrangements and bus priority.
In considering the results of the modelling, it must be remembered that the
STM is a strategic level tool only. Therefore the 6 regions have been consolidated to provide an aggregate result. Using current patronage data, the modelling indicates:
 operating integrated networks under existing ticketing arrangements, on existing roads without bus priority improvements, would generate about
30% more patronage than the existing segmented operations, requiring a
10-15% increase in service kilometres; and
 adding bus priority to this scenario to achieve 25km/h average speeds would generate almost 50% more patronage than existing operations, with service kilometres still only 10-15% higher, due to better vehicle utilisation.
While the preliminary results require further analysis, at a strategic level they provide a positive indication that integrated service planning provides real patronage benefits in a viable manner. The Review, therefore, believes that integrated service planning through consolidated contract regions should be pursued in the further development of the contracting and planning reforms.
Planning partnership
There is general agreement across environmental organisations, the bus industry and government agencies on the need to reform the current disparate and rigid route planning regime used in metropolitan areas. These views are reinforced by submissions from individuals seeking services which provide better connections to key destinations, improved interchange with other transport modes and regular service reviews to ensure demand is met.
The Interim Report suggested that reform of the planning process for metropolitan bus services be based on 2 key principles:
 a system-wide oversight role for Government, with a focus on the performance of the strategic corridors to ensure the benefits of professionally designed networks are available across metropolitan areas; and
 local operators to undertake detailed operational planning of strategic corridors and local routes, working within guidelines that provide the flexibility to target resources to demand.
It is proposed that Government have a greater role in the planning of strategic corridors than it does with local services, reflecting their potential impact on metropolitan planning and environmental priorities.
11

To set the strategic framework, Government should identify the broad corridors to be served and set minimum frequencies. The operator would then develop proposals for detailed routes, services and timetables which would not require approval if within the guidelines, but would still be required to be notified to the Ministry of Transport. Alterations to services that are above the requirements set out in the guidelines, or with no material effect on passengers and still within the scope of the guidelines, would also need to be notified to, but not approved by, the Ministry.
To meet demand and create community confidence in the reliability and quality of strategic corridor services, the starting point for operations and frequencies should be:
 10 minute frequencies in peak periods;

15 minute frequencies off-peak;
 30 minute frequencies at night; and
 operating 5am to midnight at least 6 nights.
For local services, Government should limit its oversight role to establishing the service guidelines and processes – including community consultation – to be undertaken by the operator in planning, delivering and changing services.
Providing operators with flexibility in planning local services is essential if resources are to be directed to areas of real need. Latitude to operators in this regard also gives them responsibility for service outcomes, reflecting an appropriate allocation of risk.
It has been recognised by the range of stakeholders who responded to the
Interim Report that Government must release operators from the straightjacket of Minimum Service Levels. Many submissions noted how these restrictions limit the ability of operators to innovate and instead divert resources into indirect services with long travel times:
We agree that service and frequency guidelines should be revised to meet identified travel demand and support the proposed strategic corridors. (Total
Environment Centre)
CTO recognises that the Minimum Service Levels need to be replaced.
(Community Transport Organisation)
In replacing MSLs, the core principles of the guidelines should be to provide demand-responsive and viable services across each region. The entrenched culture of providing services to meet arbitrary standards irrespective of patronage needs to be shifted.
12

To achieve this, the guidelines should consider the following concepts:
 To ensure demand is actively considered in establishing new service networks, the presumption should be against providing fixed timetable, fixed route services for:
 local services that do not integrate into a strategic corridor and which operate in less populated or less accessible areas such as peninsulas;
 late night and Sunday services on local routes that do not feed into strategic corridors; and/or
 any service that cannot be justified on at least an hourly basis.
 In these circumstances, service delivery solutions such as divert-ondemand or use of community transport should be the first consideration.
 For all local services, operating hours and frequencies should reflect demand during the commuter peaks and during shopping hours. If patronage is low at these times, there should be no obligation to provide fixed route services at night and on Sundays.
 To shift the current thinking which leads to circuitous routes, active consideration should be given to the additional distance travelled and the proportion of real and potential passengers affected. To achieve this, the guidelines could include criteria such as those applying in Perth, which in
Sydney can be translated as:
 for strategic corridors, do not deviate more than 10% of shortest distance by road unless required to serve a major patronage generator;
 for strategic corridors and local routes feeding into them, the distance travelled by at least 80% of potential passengers should not exceed
1.2 times the shortest road distance between home and the city/regional centre;
 for local services, avoid routes where 80% of potential passengers have to deviate from shortest route by 50% (except for routes with less than 15 minutes travel time).
The community transport sector is understandably wary of expectations that it fill gaps left by the removal of particular services without additional resources.
The Community Transport Organisation has therefore confirmed its interest in playing an active role in service policy development, planning and implementation, and recognises the opportunity to work with operators in providing services for people unable to access regular route timetabled services.
It should be possible for Government funding for bus services within a particular region to be redirected from unviable fixed route services and into a different delivery solution provided either by the operator or by properly funded community transport service provider.
13

The service planning guidelines should, therefore, be developed cooperatively between Government, the bus industry and the community transport sector. Community representatives should be involved in the initial service planning stage, followed by an annual review process. This could be achieved through a regional service planning forum, involving state agencies, local government and transport providers.
The Ministry of Transport should give consideration to strengthening coordination between transport modes across the region by employing Regional
Transport Co-ordinators, with responsibility for encouraging flexible solutions to service delivery, including appropriate services in areas of transport disadvantage.
Alignment with planning strategies
The Interim Report emphasised the need for planning policies and processes which concentrate activities into key centres, manage parking, anticipate growth and accommodate bus services. This received strong stakeholder support, as indicated through comments such as:
…integrated land use and transport planning [is required] at every level – including metropolitan and regional strategies, corridor planning, subdivision design and design of individual developments. (Department of Environment &
Conservation)
The Department of Infrastructure, Planning & Natural Resources is currently developing a metropolitan strategy which will help to achieve greater integration of planning and transport policies, and to guide the long term development of, and infrastructure requirements for, the Sydney region. This provides an opportunity to ensure that the role of bus services in meeting the future transport needs of Sydney is properly considered.
On a local level, DIPNR has developed the Integrated Transport and Land
Use planning policy as a model for local government involvement. It includes policies on the management of travel demand by encouraging the concentration of trip-generating development in centres, supported by practice guidelines to implement the policy. Further supporting these activities is the development of the draft State Environmental Planning Policy 66 (Integration of Land Use and Transport) which is currently being reviewed following local government and industry submissions.
This highlights the different roles of DIPNR and the Ministry of Transport in developing the metropolitan bus system, with DIPNR’s focus on strategic level integrated transport planning and the Ministry of Transport’s focus on translating these strategic level transport outcomes into shorter term service planning requirements. To ensure an appropriate allocation of responsibilities, and in light of new organisational arrangements to be implemented by the
Ministry of Transport, it would be useful for DIPNR and the Ministry of
Transport to work together to further clarify service planning roles (see
Chapter 6).
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Bus priority & enforcement
The extension of bus priority measures and improved enforcement received a significant positive response in submissions. Most stakeholders agreed that improved bus priority is a critical plank in achieving the package of reforms proposed in the Interim Report.
The Roads and Traffic Authority supports the development of the network of strategic corridors and has welcomed the development of a planning framework to focus bus priority. In its submission, the RTA noted that its recent investments have seen the number of people travelling in bus lanes (in the peak direction over 2 hours) rising from 30,480 in 1998 to 87,790 in 2003.
The RTA funds specific bus priority measures under a program providing $15 million annually, with a target of an additional 5 kilometres of bus lanes each year. Additionally, bus priority measures are included in general road works such as interchange improvements and major new projects such as the Lane
Cove Tunnel.
The RTA has suggested that its Public Transport Information and Priority
System (PTIPS) be considered as a key method of providing improved bus priority. The PTIPS project is a trial for new traffic control software which links a GPS transponder on a bus, an electronic timetable and the traffic signal to give priority to a late running bus. This technology is currently being trialled on
15 buses operating on State
Transit’s Route 400 between Bondi Junction and
Burwood. This route, identified in this Report as a strategic corridor, is 38 kilometres long and passes through over 80 sets of traffic lights.
The trial is still underway, but initial results indicate that late running has been reduced on the buses included in the trial and that reliability has been improved by reducing the variability of travel time. The RTA has emphasised the need for extensive development of management systems to ensure the successful operation of PTIPS.
Bus Priority on strategic corridors
The Review engaged Sinclair Knight Merz (SKM) to assess the bus priority measures required to enable the strategic corridors to operate at average speeds of 20km/h and
25km/h during the AM peak (7:00am-9:00am). These are the operating speeds used in the Review’s patronage and financial modelling of strategic corridors and integrated services. Each of the 43 Sydney corridors identified in the Interim Report were assessed in both directions.
SKM investigated each of the corridors and found that buses can currently operate on 18 corridors (42%) at average speeds at or over 25km/h. To establish these corridors, no bus priority measures are initially required. A further 16 corridors (37%) operate at average speeds between 20-25km/h and 9 corridors (21%) operate under 20km/h.
To address these speed constraints, SKM then undertook an analysis of 150 intersections which represented “choke points” on the corridors.
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In determining the measures to be applied to improve average bus speeds, SKM took a minimalist approach and gave priority to traffic signal pre-emption for buses.
Establishment of bus lanes and bus by-pass lanes at intersections were only considered where they fitted within the existing road reservation.
Final costing will be undertaken following the finalisation of the RTA’s PTIPS trials, but the indicative cost of implementation at these 150 intersections is $20 million, depending on utility relocation costs. Implementing PTIPS would be most effectively phased in with the smartcard project, as both involve the installation of GPS transponders on buses. It is critical the compatibility of the transponders to both technologies be confirmed.
This ‘minimalist’ approach provides the Government with a means to deliver early implementation of the strategic corridors with minimal community impact. Once corridors and routes are confirmed, further work needs to be undertaken in conjunction with the RTA and DIPNR to determine long term bus priority requirements.
An expanded bus priority program should be developed according to a mix of strategies, ranging from traffic light pre-emption to bus signals, bus lanes and
Transitways. Standardised and expanded bus lane hours should also be considered, particularly in CBDs. The RTA has committed to investigate transit lanes which can be converted to bus lanes. As this should ideally be rolled out over the length of the first contract period, additional funding sources will be required.
To support the bus priority investment, there is a need for the enforcement of bus lanes to be undertaken more rigorously. A trial of electronic bus lane enforcement in Oxford Street is currently underway and the RTA advises that this technology is working well. To be effective, electronic enforcement needs to be supported by legislative changes which allow ‘owner-onus’ provisions
(which cover infringements such as red light cameras) to apply. This legislation has been tabled in the Legislative Assembly and is awaiting the resumption of Parliament.
Driver amenities
A key issue raised in consultation with the Transport Workers’ Union was the lack of amenities (such as toilets) for bus drivers at stations and interchanges, and the need to ensure that the construction of new interchanges and stations incorporates requirements in this regard.
The provision of access to existing facilities was raised by the Ministry of
Transport with the State Rail Authority (now Railcorp) towards the end of
2003. Agreement was reached to allow bus drivers to use public toilet facilities at railway stations, including after hours, on presentation of a bus driver authority card.
In relation to the construction of new interchanges and stations, draft
Interchange Design Guidelines have been developed by DIPNR, documenting requirements for interchange facilities. The guidelines are not
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mandatory and have not yet been formalised. It would be beneficial if these could be expanded to address the issue of driver amenities in more detail, in consultation with th e Transport Workers’ Union, the Rail, Tram and Bus
Union, the Bus and Coach Association, State Transit, Railcorp and the
Ministry of Transport.
A broader issue that remains unresolved is who owns, funds, maintains and ensures the provision of driver amenities at new stations and interchanges.
The Review notes that the second reading speech for the legislation which created the Transport Infrastructure Development Corporation indicated that
TIDC would design and deliver major railway and other transport infrastructure projects, and could also hold, manage and establish assets associated with the development of transport systems.
On this basis, it seems appropriate for TIDC to take a lead role in working with other relevant Government agencies to resolve the issues of ownership, funding and maintenance of new facilities. Railcorp should continue to ensure adequate access for bus drivers to existing facilities at stations and interchanges.
CBD buses
The Interim Report outlined a concept of free, frequent CBD buses to operate in Newcastle, Wollongong and Parramatta, linking key retail, tourism and entertainment precincts. These services would be jointly funded by state and local government.
This proposal received mixed support, with concerns including the revenue impact on operators. Nevertheless, the majority of those who responded to this idea agreed that further investigation of the concept was justified.
Acting on this, the Ministry of Transport arranged for the Lord Mayors of
Wollongong, Newcastle and Parramatta to inspect the Central Area Transport
System (CATS) operating in Perth and Fremantle. The Lord Mayors, who were briefed on the tendering, funding and operational arrangements for the
CAT system, collectively resolved to move forward with discussing the implications for their own cities.
The Review has been advised that each council will now develop a proposal for submission to the NSW Government, including funding arrangements and implementation plans.
2.3 Recommendations
1. The Government should progressively implement, for Sydney,
Wollongong, Newcastle and the Central Coast, a network of viable strategic corridors to provide fast, frequent, direct and convenient links to regional centres. The identification of suitable corridors should be
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finalised on the basis of patronage modelling results and stakeholder inputs.
2. The network of strategic corridors should be underpinned by 10 contract regions in the Sydney metropolitan area, 2 for Newcastle and one each for Wollongong, the Central Coast and the Blue Mountains.
3. Within each region, provision of bus services along the strategic corridors should be integrated with local bus services.
4. A partnership approach to integrated service planning between the lead operator for each region and the Ministry of Transport should be adopted, with Ministry of Transport having a system-wide oversight role.
5.
New ‘service planning guidelines,’ to replace the existing Minimum
Service Level (MSL) Policy, should be developed by a central working group including representatives from the bus industry, community transport providers and the Ministry of Transport. The guidelines should identify:
 roles and responsibilities in the planning process;

desirable service frequencies along strategic corridors and for local services;
 opportunities to integrate bus services with rail and ferry services where appropriate;

opportunities for operators to target resources at viable, demand responsive services, with flexible solutions to best serve the needs of the transport disadvantaged;

the need for local government to implement local planning policies to encourage public transport provision;
 factors/criteria to be taken into account when recommending that service frequencies or routes be varied; and
 factors/criteria to be taken into account for determining when patronage levels or community needs are such that local services would be better provided under the auspices of community transport or a community transport/private operator partnership arrangement.
6. Regional service planning forums, comprised of representatives from the lead operator, local government, the RTA, community transport local working groups and the Ministry of Transport, should be convened annually or as needed to assist with the service planning and review process. The role of the forum should be to advise the lead operator and the Ministry of Transport on service planning issues, frequency requirements and proposed changes that will have a material impact on passengers and the region.
7. The Ministry of Transport should consider employing regional transport co-ordinators in metropolitan areas to promote co-operative service
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provision between all transport providers
– bus, rail, community transport and taxis – to encourage flexible solutions and ensure that services for the transport disadvantaged are optimised.
8. In leading the development of the Sydney Metropolitan Strategy, DIPNR should ensure that:
 the role of bus services and bus priority measures in effectively meeting the long term transport needs of metropolitan Sydney is recognised and promoted;
 planning for the provision of bus services is factored into the development of greenfield sites and high level integrated transport planning at the regional and sub-regional level;
 the strategic corridors and contract regions proposed in this Final
Report are used as the starting point for meeting medium and longer term transport needs; and
 the strategy encompasses policies which support the development of viable public transport solutions such as supporting employment and population growth in regional centres, encouraging development along strategic corridors and restricting parking.
9. The service planning roles of DIPNR and the Ministry of Transport should be clearly defined to reflect:
 DIPNR’s focus on strategic level integrated transport planning at the regional and sub-regional level as key components of the Sydney
Metropolitan Strategy and other regional planning activities; and
 The Ministry of Transport’s focus on translating these strategic level transport outcomes into shorter term service planning requirements reflected in proposed bus service contracts.
10. The RTA, in consultation with the Ministry of Transport and DIPNR, should progress the initial assessment of the proposed strategic corridors undertaken as part of this Review, to:
 prioritise the strategic corridors according to need for and impact of proposed bus priority measures;

determine, case by case, the level of infrastructure required and associated costs;
 develop an expanded bus priority program (including additional revenue sources) to be rolled out over the length of the first contract period; and
 implement electronic enforcement measures in parallel with bus priority measures.
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11. To ensure that bus drivers have adequate access to amenities at stations and interchanges:
 DIPNR should finalise the draft Interchange Design Guidelines and ensure that they effectively address the issue of driver amenities, in consultation with the Transport Workers’ Union, the Rail, Tram and
Bus Union, the Bus and Coach Association, State Transit, Railcorp and the Ministry of Transport;

consideration should be given to the Transport Infrastructure and
Development Corporation taking a lead role in working with other relevant Government agencies to resolve the issues of ownership, funding and maintenance of amenities at new interchanges and stations; and
 Railcorp should continue to ensure adequate access for bus drivers to existing facilities at stations and interchanges.
12. The Lord Mayors of Parramatta, Newcastle and Wollongong should set up a working party to further investigate the feasibility of establishing free buses within their respective cities’ CBDs. The working part should consist of the Lord Mayors and relevant business and community leaders.
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3.1 Metropolitan contracting: the Interim Report concept
The Interim Report outlined how the existing contract provisions and their administration work against the provision of quality bus services. It identified the major issues as being limited accountability to passengers and
Government, the operators’ lack of flexibility to meet demand for services, and the wide variability in service standards.
The key aspects contributing to this situation are:
 legislation which enshrines perpetual renewal of contracts and provides no flexibility in contract periods;
 the inability to update contracts to drive service improvements or achieve initiatives such as smartcard ticketing;

small or fragmented contract areas that do not reflect travel patterns;
 no workable performance assessment process;
 limited service standards that are difficult to enforce due to lack of data;

no consistent standards for key elements such as driver training and customer service; and
 insufficient passenger and community consultation or notification.
To address this situation, the Review recommended:
 phasing in competitive tendering as current contracts expire;
 a standard contract duration of 5 years, with the flexibility to let contracts for shorter periods for continuity of service;
 the establishment of larger metropolitan contract areas based on travel patterns and route structures which reduce forced transfers and duplicated services;
 contract provisions which allow a comprehensive and consistent set of measurable service standards;
 scope for government initiatives, training and safety requirements to be incorporated into contracts;
 strengthening of reporting and monitoring requirements;
 introducing a series of graduated remedies to enable effective and appropriate action to be taken in response to contract breaches; and
 step-in rights and call options to enable service continuity.
3.2 Submissions
Submissions to the Review were, in general, supportive of the need for improvements to current contracting arrangements. Community groups and organisations representing a range of interests emphasised the need for
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contracts to ensure a stronger customer focus, improved performance standards and greater accountability in service delivery, as well as specific areas such as complaints handling and passenger information.
The Transport Workers’ Union stressed the need for any new tendering and contracting arrangements to mandate requirements in relation to employees and workplace conditions, highlighting that:
…operators with poor records of industrial and legal compliance, poor safety records and management practice … also have a record of poor service delivery. (Transport Workers’ Union)
Submissions from bus operators also supported the need for change, although a number expressed the view that the Interim Report provided too little detail in relation to proposed new contracting arrangements.
Many submissions highlighted that contracts with measurable service standards and penalties for non compliance would need to be backed up by an adequately resourced enforcement regime, including operator self reporting and regular auditing of performance.
Some submissions cautioned against implementing changes such as competitive tendering too quickly and recommended a phased-in approach, while others suggested that there was a need to be bold and not repeat the mistakes of past reform attempts which, according to one submission, have been characterised by:
… caution, compromise and respecting the rights of vested interests over and above those of users and potential users of public transport.
Based on the views put forward in the submissions in response to the Interim
Report, and additional analysis and research undertaken by the Review, the following key issues have been further considered and have informed the final recommendations on contracting for bus services in metropolitan areas.
3.3 Key issues
Competitive tendering
While the majority of submissions were in favour of the introduction of competitive tendering for bus contracts in metropolitan areas, a number suggested that a different approach, that of performance based contracting, could achieve the same or better outcomes. Arguments put forward by the
Bus and Coach Association and others in support of this view included:

the need to recognise that existing operators have invested considerably in their businesses, have commitments to employees and have an expectation of renewal under their current contracts;
 tendering may achieve short term cost savings but experiences in other states such as Victoria show that windfall gains are not sustained and there can be greater costs to Government; and
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
NSW bus operators are already cost efficient so short-term cost savings are unlikely to be realised.
The Institute of Transport Studies defines negotiated performance based contracts as an alternative or ‘sequenced complement’ to competitive tendering with rights to continue to provide services dependent on an operator’s performance. It argues that there is a growing role for negotiated performance based contracts where the financial gains from re-tendering are small, the incumbents are already efficient suppliers, and there is a need to provide longer term incentives to grow patronage, invest in quality assets, and develop effective services in partnership with Government.
The Westbus submission argued that:
… performance based contracts provide a better method of encouraging long term and sustainable development of the public transport network and ensuring the delivery of quality services than the distraction, disruption and uncertainty created by a periodic tendering process.
The Review does not regard performance based contracting and competitive tendering as mutually exclusive. Even where a contract is competitively tendered, it can incorporate regular performance review and options for contract extension on the basis of good performance. Past performance should also be a criteria in tendering/re-tendering processes.
A key factor considered by the Review is that incumbent operators in NSW metropolitan areas have never faced competitive pressure, direct or indirect, for the right to hold service contracts which grant them considerable benefits such as exclusive rights, ongoing renewal, and substantial funding through
SSTS. This has led to a culture where maintaining the status quo and protecting vested interests have been allowed to take precedence over the development of a uniform and effective bus service system that meets passenger needs and can evolve as demand changes.
Even those against the general introduction of competitive tendering for metropolitan bus services acknowledge that there are circumstances, such as the commencement of services in newly developing areas, or where an operator is in serious breach of contract, where competitive tendering is desirable.
Discussions with The Cabinet Office (TCO) have confirmed the need for reform of bus contracting, consistent with the direction outlined in the Interim
Report, in order to meet National Competition Policy requirements. In particular, TCO has stressed the desirability of:

removing barriers to entering the industry; and
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
overcoming the contractual limitations imposed by exclusive rights and automatic renewal provisions; to ensure a more contestable bus service system. At the same time, TCO is aware that there will need to be a transition to this more contestable environment.
The Review believes that there is a role for competitive tendering in the provision of bus services in metropolitan NSW. This is not simply for the purpose of driving efficiencies (although available evidence is that not all metropolitan operators are operating at efficient costs). Rather, competitive tendering is a means of moving away from the prevailing ‘rights’ culture and introducing the discipline required to ensure a consistent focus on service and passenger outcomes.
The Review acknowledges that any competitive tendering process needs to be carefully and thoroughly undertaken, with a range of criteria taken into account in assessing bids. Factors such as a po tential contractor’s ability to provide innovative and reliable services, their commitment to customer service and to adequate training and conditions for staff, as well as their previous safety, environmental and workplace relations performance, should all be taken into account.
It is also recognised that at present, the availability of critical performance and patronage data in relation to existing arrangements, let alone the proposed new contract areas and services, is lacking. On this basis, the Review believes that a competitive tendering approach should not be introduced immediately. As information becomes available and as service strategies, network plans and contracting arrangements are able to be reviewed, competitive tendering will become a viable option.
In the interim, negotiated contracts, premised on:
 one contract per region;
 annual benchmarking of costs and performance; and
 the regular provision of relevant data from operators; should be the starting point.
Contract design & risk allocation
It is recognised that the contract needs to provide an appropriate risk/reward framework for operators. The level of subsidy paid for services should have regard to the cost of service provision and the level of risk transferred. The allocation of risk is intrinsically linked to key contract design elements such as service planning responsibilities, contract length, payments, incentives, standards required, and fare collection.
The Review is also mindful of the fact that there are risks outside the operator’s control. Factors such as economic growth, the affordability of the private car, fare levels, ticketing systems and government policy in relation to
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parking and urban development can all impact significantly on patronage growth and farebox revenue. While operators should bear some of the patronage risk in a system where they play a key role in the service planning process, it is not appropriate for them to assume all the risk.
A key criticism of current contracting arrangements is that there is not an explicit recognition of the need for appropriate allocation and sharing of risk.
While in the past, the funding formula for SSTS has been able to provide something of a buffer against patronage downturn or unprofitable services
(meaning that Government has, indirectly, carried some of the risk), it now appears that, for many metropolitan operators, this mechanism is no longer adequate.
Placing an undue risk premium on operators is not desirable in that it can result in unviable contracts and an unsustainable industry, which ultimately leaves Government exposed. There is a need for contracting and funding arrangements that reflect an appropriate sharing of risk, in order to meet wider public transport objectives, at the same time as providing attractive and sustainable opportunities for operators.
Contract term
Most submissions were of the view that a 5 year contract term was insufficient. Reasons put forward included the need to:
 consider flexible contract periods to suit different circumstances;

recognise the considerable investment made by operators in their businesses and the period required to obtain a return on this; and
 allow sufficient time for the planning, development, implementation and review of new networks and services.
Suggestions in respect of a suitable contract term were generally around the
10 year mark.
The Review acknowledges that there is a case for a contract period of longer than 5 years, particularly where operators continue to own the assets.
However it is important to ensure that performance and contract terms are able to be reviewed at a suitable midway point, so that there is opportunity to terminate should this be necessary, or to extend on the basis of satisfactory or good performance.
Contract boundaries
As noted in the chapter on metropolitan planning, while the majority of submissions supported contract area rationalisation and one contract per region, some have questioned the rationale behind the number of regions proposed and the location of the boundaries. Others have raised concerns about whether ‘economies of scale’ will be realised from larger contract areas.
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Reasons behind the proposed design of the contract regions and boundaries, which relate to improved network planning and service provision that better reflects travel demand, have been outlined in the previous chapter.
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Another reason for the proposed reduction in contract areas is that it will create sustainable regions, and hence a more viable bus industry. At the moment, the number of contract areas and their disparity in size and character has created an industry where some operators are doing well, others are just surviving and a number are experiencing significant financial problems. While larger regions will still give rise to some disparities (which will need to be addressed through the funding model), they are likely to be more financially viable operations, and hence more attractive in a competitive tendering environment.
Service standards & performance monitoring
The few standards contained in the current commercial services contract are difficult to measure and operator reporting requirements are limited. Even if operators were to provide detailed performance and patronage information, at the moment there are no systems in place which would enable independent verification of this data.
Operators need to be compelled to participate in the rollout of the smartcard system which, along with bus priority technology, will mean that over time the
Ministry of Transport has ready access to independent and reliable performance and patronage data. In the meantime, it will be important to require operators to commence reporting regularly to the Ministry on key measures, to facilitate the cultural change required. The contract should also give the Director-General the right to conduct inspections and audits, and to undertake performance reviews as required.
Submissions from community organisations and interest groups identified the lack of meaningful service standards and public reporting by operators as a key failing of the current system. As well as requiring patronage and performance data, it was suggested that contracts should require operators to regularly undertake community consultation and surveys, to measure the satisfaction/dissatisfaction of both existing customers and those not using services.
The Review believes that there would be benefit in requiring operators as part of the contract to develop a passenger relations plan, to be approved by the
Director-General and detailing procedures for handling passenger complaints and inquiries and gauging customer satisfaction. There would also be merit in requiring operators to report on punctuality/reliability performance, complaint handling and customer relations activities not just to the Ministry but to local newspapers at regular intervals as well. Such mechanisms should help to increase accountability and responsiveness to passengers and the community.
A key issue raised in a number of submissions concerned mobility and accessibility for people with disabilities, particularly those living in Western
Sydney. The Western Sydney Community Forum’s submission noted that, with the exception of State Transit buses running in the north-west sector,
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private operators in this area do not timetable their accessible bus services, which in turn places increased pressure on community transport resources to
‘fill the gap.’ NCOSS suggested in its submission that targets for fleet accessibility should be included in contracting arrangements in both metropolitan and country areas, with requirements in this regard subject to improved regulation.
Requirements for public transport facilities to become fully accessible over a
20 year time period (with interim timeframes including 25% compliance in five years and 55% compliance in ten years) are set out in the Disability
Discrimination Act 1992 and associated disability standards. The Ministry of
Transport, in conjunction with the Bus and Coach Association, has been encouraging bus operators to develop Accessible Transport Action Plans, outlining how they will meet compliance standards. The contract should require the development, update and public availability of this plan to make it a more meaningful document and to provide assurances to the public that accessibility issues are being addressed.
The Transport Workers’ Union’s submission stressed the need for any new tendering and contracting arrangements to mandate induction, safety and other training requirements for workers as well as compliance with relevant laws, regulations and industrial requirements. The Review supports this approach.
The submission from the Department of Environment and Conservation highlighted that contract reform is an opportunity to improve environmental performance in the bus sector, through strategies such as:

making environmental performance a factor in competitive tendering;
 imposing minimum environmental performance requirements on operators; and

providing financial incentives for environmental performance.
The Roads and Traffic Authority has advised that NSW (with funding assistance from the Commonwealth Government) is leading the implementation of the Diesel National Environment Protection Measure
(NEPM) in Australia through a voluntary diesel testing program and the development of maintenance guidelines for diesel vehicles that ensure a vehicle's emissions are kept to a minimum. The RTA has undertaken an extensive diesel testing program involving 2,000 vehicles that has helped to further refine the in-service diesel test developed under the NEPM. An average of 25% emission reduction was achieved across the vehicles repaired.
This testing has helped the RTA to identify the maintenance procedures that minimise diesel emissions and that will form the basis of audited maintenance guidelines that can be applied by diesel fleet operators. The maintenance guidelines are now being piloted by volunteer fleets across Sydney.
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The Review supports the continual improvement of emission standards and the movement toward cleaner vehicles and fuels to reduce diesel emissions. It is therefore proposed that contracts with bus operators include a provision to implement the RTA’s Clean Fleet maintenance procedures and guidelines to reduce diesel emissions.
Penalties, termination & step-in rights
The Interim Report identified the importance of new contracting arrangements including:
 a graduated penalty regime to provide an effective and immediate way of dealing with different contract breaches;
 improved termination provisions to enable this course of action where breaches are serious and/or persistent and it is in the public interest; and
 step-in rights to give Government greater control over assets (on a temporary basis) and to enable ongoing service provision in the event of termination or an operator being unable to continue to operate.
The majority of submissions were supportive of introducing a penalty regime to improve operator responsiveness and service delivery. A number noted that appropriate penalties, combined with an adequately resourced enforcement regime, had the potential to considerably improve the overall performance of the industry and service delivery standards. The point was also made that as well as penalties, new contracts should offer incentives to encourage good performance, such as the opportunity for contract extension/renewal, or to gain ‘performance credits’ which could be accumulated and used to off-set penalties.
The Bus and Coach Association’s submission stressed that the concept of step-in rights is a complex one and that the Ministry would have to satisfy financiers as to why such rights were necessary.
It is recognised that step-in rights would only be used as a last resort and in limited circumstances. With a more viable industry, and with more effective and immediate ways of dealing with contract breaches, step-in rights would, ideally, be used in very rare circumstances only.
3.4 Recommendations
13. There should be one contract per contract region for the Sydney,
Newcastle, Wollongong, Central Coast and Blue Mountains metropolitan areas.
14. There should be a transition period to enable existing operators to organise themselves on a region by region basis to achieve the above.
Following this, contracts in metropolitan NSW should be let through competitive tendering (or similar process) to ensure a strong customer focus and best value for the taxpayer. Assessment criteria should not
29

be based on cost alone and should include performance factors such as:
 service planning skills;
 on-time running/reliability;
 environmental history;
 customer relations activities; and
 workplace relations, OH&S experience and proposed approach.
15. The terms of the new contracts should reflect an appropriate allocation of risk between operators and Government, dependent on which party is best placed to manage the risk in respect of factors such as patronage, service planning, fares, fares collection and data collection/reporting.
16. There should be greater flexibility in determining the length of the contract period, but with 5 year contracts, and the opportunity to extend for 2 to 5 years (subject to satisfactory performance), the norm.
17. Other terms of the contract should include or reflect:
 the prerequisites before a principal operator (and associated operators) can enter into a contract;
 the boundaries and strategic corridors that make up the contract region;
 services to be provided locally and along the strategic corridors, including integration requirements with other modes;
 service quality, performance, bus fleet and other standards to be met, such as punctuality and reliability, timetable information
(including requirements in relation to community consultation/notification in respect of service changes), signage, customer relations/complaint handling, fleet specifications, and environmental performance (including implementation of the RTA
’ s
Clean Fleet maintenance guidelines);
 requirements in relation to the development of Accessible Transport
Action Plans and Customer Relations Plans;

recording and reporting requirements including provision of boarding and revenue data, financial records, and the need to report regularly to the community on punctuality/reliability, customer service and complaint handling;
 service planning to be undertaken by operators in consultation with regional service planning forums and approved by the Ministry of
Transport, in keeping with relevant guidelines;
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
requirements in relation to provision of SSTS, other concessional travel, fares and ticketing, including participation in the smatcard ticketing and installation in buses of related equipment;
 the need for co-operative arrangements as required with neighbouring and other operators, including for the provision of community transport;
 participation on local transport working groups as required;

contract payment details including those for SSTS, concessions and any CSO funding;
 requirements in relation to staff training/qualifications and work safety;
 provisions for dispute resolution;
 termination events;
 procedures in relation to contract breaches, including a graduated penalty regime and the exercise of step-in rights where required; and
 procedures in relation to the re-tendering of contracts.
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4.1 Metropolitan funding: the Interim Report concept
Despite Government investment of over $600 million per year, the Interim
Report found that the current funding arrangements do not actively support its policies to increase public transport use, provide fair access to services, ensure accountability for public funding, or encourage a sustainable and responsive bus system.
This is because:
 embedding subsidies in the School Student Transport Scheme lacks transparency, limits the ability for the Government to target funds to priority areas, and focuses planning and operations on free travel rather than full fare passengers;

the combination of rigid Minimum Service Levels and arbitrary SSTS payments result in large variances in operator profitability; and
 the payment of subsidies to State Transit to maintain lower fares, a wider range of concessions and higher service levels.
To address this situation, the Interim Report recommended:
 operators retain fare revenue to provide incentives to grow patronage, particularly from full fare paying passengers;
 payment of school student transport on actual travel only;
 payment of transparent services subsidies for agreed outcomes at efficient costs where revenue does not meet service requirements; and
 over time, alignment of subsidy payments to State Transit and private operators as fare levels are equalised.
4.2 Key issues
Industry viability
As noted in the Interim Report, Government and industry concerns led to the
Financial Viability Study of metropolitan operators, undertaken by INDEC
Consulting during 2003. Phase 1 of this study involved the survey and analysis of 20 metropolitan operators in Sydney, Newcastle, Wollongong and the Central Coast, using 2001/02 data. The database developed under Phase
1 represented 84% of all buses operating in Sydney, providing a good reflection of industry performance.
Phase 1 showed that funding available to private operators from fare revenue and Government subsidies was not sufficient to ensure viable operations under current arrangements. The aggregate revenue shortfall for the Sydney private bus sector, assuming all operators maintained industry average efficient costs, was approximately $15 million in 2001/02. An examination of
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the liquidity, gearing and profitability of operators involved in Phase 1 concluded that:
 4 operators are at high risk of failure. These operators represent 44.2% of
Sydney private buses;
 3 operators are at medium risk of failure. These operators represent 17% of Sydney private buses.
Phase 2 of the study undertook a detailed analysis of individual operators, including cost and revenue data, network and service efficiency, and cost and revenue drivers. The Phase 2 studies identified certain cost reduction opportunities within the operators’ control and highlighted systemic issues beyond their control.
The aggregate revenue shortfall for 2002/03 is likely to be greater than $15 million as advice from INDEC, operators, and the Transport Data and
Population Centre is that private bus patronage further declined in 2003.
The Financial Viability Study confirmed that some bus operators are not viable under the existing planning, contracting and funding arrangements, even when operating with efficient costs. While the industry-wide additional revenue requirement of $15 million in 2001/02 is modest as a proportion of
Government funding, the Review does not believe that resources should be provided to prop up a system that is systemically flawed. Continued falling patronage, compounded by an inability to divert resources toward viable services, would see a constant increase in this revenue gap.
This chapter outlines work undertaken by the Review to determine:

the financial impacts of implementing the new planning, contracting and funding arrangements outlined in this Report; and
 opportunities for redirecting Government funding to the bus industry to optimise the benefits.
Updated policy context
In considering options for viable funding models, the Review took into account the NSW Government’s response to the Parry Inquiry Final Report, released on 9 December 2003.
This confirmed that payments to transport operators for school student travel are to be based on actual travel. Smartcard technology is to be piloted in private buses in 2004, and rolled out across the private bus fleet in 2005, to provide the real data necessary to enable actual travel based payments.
The Government also agreed that consideration should be given to a comparable set of fares and concessions for State Transit and private bus passengers over time. Any fare increases beyond CPI will need to be directly aligned to clearly identified service improvements.
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Risk allocation & funding models
An appropriate allocation of risk is essential to sustainable operations and achieving value for money from Government payments. Allocating risks to operators which are beyond their ability to manage will eventually result in financial viability problems for operators (with subsequent service degradation) or Government paying an excessive premium.
The previous chapter outlined the need for the contract to provide an appropriate risk/reward framework for operators, allocating responsibilities based on each party’s ability to manage the risk.
The planning and contracting arrangements in this Report are based on the premise that Government and operators should have differing responsibilities to match their skills and their ability to influence, manage, or control particular elements. The interaction between the parties in developing and operating bus services across the metropolitan area means that the key operational risks – patronage, operating costs and capital requirements – cannot be managed by either Government or operators alone.
Figure 4.1 below shows a theoretically optimal allocation of risk compared with some typical funding models.
Figure 4.1 Optimal allocation of risk
Risk Optimal Net Cost
Patronage
Yield
Shared
Govt
Fare collection Operator
Volume (above min) Either
Unit cost
Fixed cost
Capex
Service planning
Operator
Operator
Either
Either
Operator
Net Cost
(shared)
Shared
(cap/floor)
Operator
Gross Cost +
Incentives
Shared
Govt
Operator
Govt
Mainly operator Mainly operator Mainly Govt
The funding model currently in place in NSW nominally places responsibility for all these risks with the operator. This is not however the case in practice, because the use of SSTS as the mechanism to deliver transport subsidies blurs the real risk situation.
The Interim Report suggested a variation of this model to provide more incentives to operators to grow full-fare patronage and allow for the introduction of a transparent subsidy, where required, based on efficient operating costs.
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A number of submissions noted the range of external drivers and influences on service demand, such as employment growth, car use, ticketing systems and parking policies. Taking risk allocation principles into account, a typical response was:
These factors are likely to mean that a strict application of a net cost funding solution might not be the best approach. (KPMG Corporate Finance)
The Bus and Coach Association reiterated its preference for its ‘Three Tier
Model’ which is detailed in the Interim Report. As stated in the Interim Report, this model is a variation of a ‘gross cost’ model, with an incentive module.
The Review has further considered the BCA’s position and recognises the arguments for shifti ng from the current ‘net cost’ model. However, adopting a gross cost model places too much patronage risk with Government, including the key element of fare collection which must stay with the operator. As a matter of principle, it is preferable to embed operator incentives into the core of the model rather than rely on separate incentive components.
The Review, therefore, suggests a further modification of the funding model proposed in the Interim Report to incorporate a shared allocation of patronage risk. This shared approach will better reflect a proper allocation of risks and the partnership planning role proposed by the Review, while still providing incentives for the operator to maintain efficient costs and grow patronage.
It is acknowledged that transition to the new planning, contracting and funding arrangements will be undertaken over a number of years. During that time, initiatives such as improved bus priority and smartcard ticketing will also be introduced. The Review believes that it is imperative that the principles of the long-term funding model be set from the outset of the new contracts, to establish a responsive and performance based culture. To recognise the short-term uncertainty, it is recommended that the contracts commence with
‘shadow’ incentive and penalty mechanisms, which are then incrementally applied.
Specific payment issues
The Interim Report suggested that reimbursement of concession travel could be paid either on actual use or at a set rate. The BCA has argued that actual use should apply, in the same interests of transparency that apply to school student transport. A counter argument is that setting or capping reimbursements will:
 provide a stronger incentive for operators to focus on attracting full fare paying passengers; and
 recognise that significant concession travel is undertaken in off-peak periods when spare capacity is available on existing services.
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As there is merit in both arguments, both approaches should remain as options to be further considered in the development of the funding model and contractual arrangements.
The Review has also considered the current practice of making payment for school student travel in advance. In light of standard commercial practice, these payments should be made in arrears, rather than before the service is provided.
Redirection of existing funding
The planning chapter highlights the opportunity to use existing funding more effectively through:
 establishing new larger, integrated contract regions; and

removing artificial Minimum Service Level constraints; to enable services to be designed that respond to travel patterns.
Additionally, these new arrangements will go some way towards addressing elements identified in the Financial Viability Study as impacting on operator costs, such as depot location and requirements to operate above average numbers of dedicated ‘school specials.’
As identified in the Interim Report, there is also the opportunity to redirect existing funding within different sectors of the bus industry, particularly:
 State Transit – Pricing Community Service Obligation (CSO)
This CSO reimburses State Transit for offering fares below the maximum allowable. In responding to the Parry Inquiry, the Government has agreed to alignment of State Transit and private operator fares over time.

State Transit
– Service Community Service Obligation (CSO)
This CSO reimburses State Transit for providing services above its
Minimum Service Level obligations. In addition, State Transit operates other services above MSL requirements that are not CSO-funded and are therefore cross-subsidised by other route operations or deficit funded.

State Transit
– Efficient Costs
State Transit’s Sydney Buses and Newcastle Buses exceed the average cost of private operators serving these metropolitan areas.
Financial modelling
The Review engaged SAHA International to undertake financial modelling to determine the impact of the proposed reforms and assist in determining the right funding model for metropolitan bus services.
The objective in developing the model is to provide an analytical tool to quantify the overall cost to Government, and identify the impacts of restructuring Government funding under a range of contract models and
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payment mechanisms. In this way it provides a tool for planning and resource allocation, and identifies the impact (separately and cumulatively) of reforms including:
 the introduction of strategic corridors and local service integration;
 adjustments to fare structures and concession programs;
 consolidation of contract areas;
 funding of SSTS on actuals; and

the expansion of bus priority measures.
The financial model is being built on separate modules for each of the 15 metropolitan contract regions, allowing stand-alone calculation of funding outcomes as well as aggregate measures across the industry. It will therefore provide a modelling tool for the Ministry beyond the term of the Review.
The financial model is also being designed to undertake stress testing of critical factors through sensitivity analysis of key factors such as patronage, costs and the timing of implementation of the proposed reforms
Preliminary financial analysis confirms the INDEC Consulting findings that current industry arrangements are unsustainable. Subject to Government endorsement of the proposals in this Report, the Ministry will undertake more detailed financial and risk allocation analysis of the implementation of bus industry reform.
4.3 Recommendations
18. The Ministry of Transport should implement a funding model for bus service provision in metropolitan NSW that appropriately addresses risk allocation issues, provides incentives for service improvement/ patronage growth, and promotes accountability and transparency.
19. Elements of the metropolitan funding model should include:
 operator to largely retain fare revenue;
 capacity for revenue sharing where applicable to off-set risks outside the operator’s control, particularly in the initial transition period;
 reimbursement of SSTS and concession travel based on actuals or at an agreed rate/fixed sum, based on travel data generated from the ticketing system;
 incentive payments for service quality and penalties for failure to meet standards; and
 an appropriate CSO payment, on a case by case basis as required.
20. Where possible, State Transit should be required to make targeted efficiency savings to reduce the level of CSO payment. Identified
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savings should be used to fund service improvements across the metropolitan network over time.
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5.1 Rural & regional transport services: the Interim Report concept
The Review’s Interim Report observed that the current fragmented approach to service planning and funding seriously hampers the delivery of an integrated network of passenger transport services that meet the needs of individual communities.
Key constraints include:
 The lack of a co-ordinated approach to service planning at a strategic level:
 each of the human service delivery agencies undertakes strategic planning for their designated target groups separately; and
 there is no mechanism for co-ordinating the procurement of transport services across the separate funding programs, or to minimise overlap and/or duplication between services.

The lack of co-ordination at an operational service planning level, with service planning currently being done by individual transport service providers according to contract/funding agreement guidelines, and mostly in isolation from each other.
 Service models that don’t reflect the needs of the majority of potential public transport users in country communities.

Accreditation of operators by mode, which limits the best use of available vehicle resources to provide innovative transport solutions tailored to local needs.
 Existing contracting and funding arrangements for bus services that focus on school student transport, rather than the development of services that meet the needs of the broader community.
 Rigid Minimum Service Level requirements, which restrict the scope to introduce tailored service solutions.
 Service contracts/agreements that do not provide for the use of vehicles for other purposes, and do not give the Government sufficient control over the use of assets funded by Government.
To address these issues, the Interim Report proposed taking a whole-ofgovernment approach to planning, contracting and funding passenger transport services in rural and regional NSW by:
 establishing transport regions, aligned with NSW Government human services delivery agency boundaries (eg Area Health Service boundaries);

establishing Regional Co-ordination Committees in each region, bringing together stakeholders to help identify transport needs;
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
developing and implementing local plans for the delivery of integrated and co-ordinated transport services that meet the identified needs of local communities (integrated regional transport plans);
 obtaining support, across government agencies, for ‘pooling’ available funding resources to form integrated regional transport budgets;
 employing regionally-based Transport Development and Co-ordination
Officers in the Ministry of Transport with responsibility for co-ordinating the development of the integrated regional transport plans and the procurement of required services;
 developing a regulatory framework that promotes innovative service solutions; and
 implementing more flexible service contracts, based on required service outcomes.
The Interim Report also considered analysis of the financial viability of both the commercial and non-commercial contract services operating in nonmetropolitan areas, which suggested that:

as a sector of the industry, commercial contract services are financially viable (and may be over-compensated); and
 as a sector of the industry, non-commercial contract services are financially viable (and may be over-compensated).
The Interim Report recommended a new funding model that avoids overremunerating operators by ensuring that services are provided at efficient cost and uses transparent, targeted subsidies rather than cross-subsidisation from
SSTS payments, with cost savings from the provision of more efficient services redirected towards service improvements.
5.2 A whole-of-government approach to integrated regional transport services
NSW Government agencies
– including NSW Health, the Department of
Ageing, Disability and Home Care (DADHC), and the Department of
Education and Training – regionally based bus operators and other groups have strongly supported a whole-of-government approach to providing transport services in country NSW. For example:
… the Unsworth Review brings meaningful “whole-of-government” insight. The concept of Regional Transport Planning should bring a new and positive focus… We believe this approach has the potential to enhance our business rather than harm it. (Gerringong Buses)
[The] PTDP supports the introduction of Regional Transport Planning processes. ... Such planning will help Government realise the extent of gaps and unmet transport needs in the regions, and place MoT in a position to fund transport operators and new service initiatives which will best meet needs.
(Northern Rivers Social Development Council’s Public Transport Development
Project)
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[The] CTO strongly supports the proposed regional planning approach with the development of regional transport plans, “pooling” of funds, the establishment of Regional Transport Working Groups (TWG) and the appointment of
Transport Development Officers (with a key role co-ordinating, planning, procuring services and contract monitoring). (Community Transport
Organisation)
Key issues raised in submissions and during consultations are outlined below:
Integrated regional transport plans & budgets
While supporting the concept of integrated regional transport plans and the
‘virtual pooling’ of resources to create integrated regional transport budgets, some stakeholders raised concerns about implementation. Some submissions stressed the need to ensure the focus is on delivering tangible benefits to communities, rather than on how much integration can be achieved:
There is a risk of creating a system that focuses on the success of the process rather than the outcome.…The process of pooling all funding, reprioritising needs and reallocating funding is a major task that has no guarantee of delivering short to medium term benefits to the community.
As the Interim Report recognised, the development and implementation of integrated regional transport plans will be an incremental process, with a transition to new arrangements. The Review believes that measurable service improvements can be achieved in the short to medium term by:
 working with existing service providers; and

investing in service improvements through modest seeding grants.
For example, if further consultation with community stakeholders shows that the demand responsive model for town services, developed as part of the
Dubbo area case study, is worth pursuing, it could be trialed following agreement between the Ministry of Transport and the local bus operator. A small amount of seed funding to promote the new service would be required
(see section 5.3).
The same kind of incremental approach will be required for the implementation of pooled funding arrangements. As a starting point, the
Review proposes that:
 as any ‘new’ money for transport services becomes available, or

as current contracts and/or service agreements expire, freeing up existing resources, the process of co-ordinating service procurement at a regional level should commence. As one stakeholder in the Dubbo area put it:
You can’t do much about funding that’s already been committed, but not one cent of new government money should be spent outside the regional transport planning and procurement process to make sure the required service is delivered as cost-effectively as possible.
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Another issue raised by some stakeholders was the desirability of an approach that pools funding resources from all 3 tiers of government – federal, state, and local. The Review suggests that at both a central and local level, the NSW Government work with its federal, interstate (for cross border issues) and local government counterparts towards this goal. Local government’s representation on the proposed transport working groups should also help to achieve this aim.
Transport regions, transport teams & transport development officers
Transport regions
Submissions addressing the establishment of transport regions were mainly concerned with detail about where the boundaries will be drawn.
The Review believes that there should be 11 country and regional transport regions, and that they should be aligned as closely as practicable with the boundaries used by the Area Health Services and other human services agencies (see Map 8).
Transport working groups
There was strong support for the establishment of regional transport working groups – or Local Transport Teams – with the only substantive issues raised being the need to ensure that they are appropriately representative and adequately reflect the concerns of marginalised groups:
It should be noted that many regional areas…presently have transport committees and advisory groups. Unfortunately many of these groups do not represent the entire community and are often ‘hijacked’ by individuals or certain demographics who only wish to serve their agenda at the expense of others….
[R]egional transport groups can assist in the development of specific and effective transport solutions, however, they must be carefully selected with provisions for the introduction of new members (new ideas/ approach) after a specific time frame. (Nowra Coaches)
Even though they are among those who experience the greatest transport disadvantage, Aboriginal people often find it hard to get their voices heard. We need an Aboriginal transport strategy to make sure that the transport needs of
Aboriginal communities are firmly on the agenda. (Stakeholder, Dubbo area)
On e of the benefits of the proposed ‘virtual pooling’ approach to service funding is that it ensures that resources aimed at specific groups will still be used to procure services for those groups, with the agency responsible for administering the program continuing to oversee expenditure.
The Northern Rivers Social Development Council’s Public Transport
Development Project (PTDP) submission also proposed that the Ministry of
Transport create a position dedicated to addressing Aboriginal transport issues. The Review believes this suggestion has considerable merit, and recommends that the Ministry consider establishing such a role.
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Transport Development & Co-ordination Officers
The proposal to employ regionally-based Transport Development and Coordination Officers in the Ministry of Transport was also enthusiastically endorsed – though a small minority of stakeholders argued that these positions should be located in non-government organisations to ensure their independence from Government.
The Review, however, believes that it is critical that these officers be employed by the Ministry of Transport so they have the statutory authority of the Passenger Transport Act 1990 to plan and contract for services.
Other organisations recognised the need for the Ministry of Transport to have a regional presence and to play a lead role in regional service planning. They argue, however, for existing community-based positions to be maintained:
…PTDP also supports the presence of the regionally based MoT Transport
Development Officers tprovide the "missing link" in the transport stakeholder networks already established in the Northern Rivers Region... [However] such positions should not be at the expense of the currently funded community based transport development workers who have a vital role to play alongside any regional MoT positions. (Northern Rivers Social Development Council’s
PTDP)
The Review recognises the valuable work that has been done by communitybased transport development workers, particularly those who work closely with Aboriginal and other transport disadvantaged communities. Though there may be some cross over in the roles, the intention is not to replace the community-based workers who have already established important links in their communities. Ra ther, the Ministry’s regionally-based team should complement the existing network of community-based workers.
5.3 Regulating for service outcomes, rather than by mode
The Interim Report argued that the focus of the Passenger Transport Act
1990 on regulation by the mode of service – regular passenger (bus) services and taxi services – puts obstacles in the way of designing and delivering services that are tailored to the needs of individual communities, and the better use of available transport resources. The Report identifies 3 key hurdles:
 the provisions relating to operator accreditation (and driver authorisation);

the prescription of service models that do not meet the needs of country communities; and
 an inflexible contracting regime.
Service accreditation
Responses to the Interim Report have generally voiced strong support for a more uniform approach to service accreditation and a regulatory framework
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that would promote, rather than frustrate, service innovations. Lismore City
Council’s Public Transport Advisory Panel, for example, advised that rigidities in the current framework have prevented the implementation of a range of service solutions developed in response to local needs
– such as an acrossservice providers, demand responsive service for the Nimbin area – although another stakeholder could not see how it would work:
… a new regulatory model cannot be achieved, as there will remain different service modes complying with differing regulations.
One way around the problems posed by the existing regulatory framework is to use the existing exemption powers contained in the Act. Another option would be to consider legislative change.
The Community Transport Organisation also supports the introduction of more consistent accreditation standards, based on the 2002 Review of Community and Courtesy Transport (the CCT Review), and welcomed the opportunity for community transport operators to be fully accredited.
The CCT Review suggested a limited approach to accrediting community transport operators (and authorising drivers), primarily to ensure passenger safety.
Taking into account the recommendations of the CCT Review, the Ministry of
Transport should refine options for a more uniform accreditation model that will support the implementation of flexible service contracts and the efficient delivery of a range of services.
More responsive service models
The majority of stakeholders agreed that in rural and regional areas, the challenge is to develop service models that can respond to the diverse needs of communities. Several highlighted the important role that mainstream transport service providers could play in achieving those outcomes:
There are significant opportunities for bus operators to provide services at little additional cost that have the potential to deliver enormous benefits to the community by filling the gap between community transport and mainstream route bus services. (Consultation, DADHC)
Review the current MSL policy and contractual model to combine both fixed route and off route diversi ons for town service delivery. The latter may be ‘on demand’ or pre-booked. (Buslines Group)
A number of country operators also pointed out that where possible they do deliver more responsive services to their communities:
We, being a rural operator in the Sussex Inlet area, understand that we are in an ageing community so at present on our return ‘shoppers’ bus’ we endeavour, and do, deviate off our trunk route so as we can set down mainly
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elderly and disabled passengers, particularly with shopping, as close to their homes as possible. (Sussex Inlet Bus Service)
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As part of the Dubbo area case study, the Review examined the existing town service – which has been designed to comply with the Minimum Service Level requirements for a commercial ‘rural town’ bus contracts – and found that patronage is declining, even though the operator is providing services that exceed the MSL requirements. Figures show that regular (non-SSTS) passenger services in Dubbo attract on average fewer than 8 passengers (or about 10% of total patronage)
– while accounting for 34% of operating costs.
As highlighted in the Interim Report, there are a number of possible reasons for this.
First, the routes are too indirect and too infrequent to be attractive to the 95% of Dubbo’s non-bus users who have one or more cars in their households, and access to readily available, free parking. Mass transit solutions (like a fixed stop, fixed route services) are primarily designed to meet the needs of commuter markets – but in Dubbo, as was flagged in the Interim Report, only
0.3% of the workforce catches the bus to work, compared to the 75% who drive, or are a passenger in, a private vehicle.
Second, as a service model, fixed route, fixed stop bus services do not respond well to the needs of people who are transport disadvantaged – an older person or a person with a disability that affects their mobility, for example, who finds getting to or from a bus stop difficult.
Leaving aside other social indicators, the Australian Bureau of Statistics’ 2001
Census of Population and Housing data indicates that 1,015 households in
Dubbo
– comprising more than 6,000 people (or 15% of the town’s total population of 39,051) – do not have a car. This suggests that there is a significant market for a suitable passenger transport service in the town, and is borne out by the fact that most of the 8 passengers travelling on each nonschool bus are travelling on a concession fare.
As part of the case study, the Review looked at alternative service models and designed a more demand responsive service, summarised below, that might better meet the needs of transport disadvantaged people in Dubbo:
A more responsive service model for Dubbo
As outlined above, a hybrid ‘hail-or-dial-and-ride’ service has been developed as a more demand-responsive alternative to the fixed, regular route services currently operating in Dubbo.
The proposed service comprises 4 fixed hail-and-ride routes, which operate half hourly in 4 dial-and-ride zones to the North, East, South and West of Dubbo. All 4 services interchange each hour, on the hour, in the CBD, with the East and South routes interchanging each hour, on the half hour, at Orana Mall and the North and West routes interchanging on the half hour again in the CBD (see Map 9).
Built into the timetable is a lag of between 10 and 15 minutes (depending on the zone) to allow for diversions off the route.
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Generally, passengers can reach major patronage generators with one bus. For example, all zones operate to the CBD, three of the zones operate to Orana Mall, and two of the zones operate to Dubbo Hospital, TAFE College and University.
However, the need for multi-purpose trips can also be met though convenient interchanges as described above. In practice, a passenger who wants to get from
Yulong to a 10.15am appointment at Dubbo Base Hospital, and then to do some shopping at Orana Mall, would catch the West Zone bus that interchanges in the CBD at 10.00am, and get on the East Zone bus which travels express along Erskine Street and Cobbora Road to the hospital.
After their appointment, the passenger would then catch the North Zone Bus, which passes the hospital on its way to Orana Mall at approximately 10 minutes past the hour.
After they have finished shopping, the passenger can then catch the North Zone Bus heading back to the CBD and change to the West Zone bus to Yulong. If they have a lot of parcels, and /or mobility problems, they can ask to be dropped at their door.
This model ‘hail-or-dial-a-ride’ service could be implemented in Dubbo outside the school peaks using existing bus resources, and could easily be trialed with minimal start up costs (basically the costs of advertising the service).
Informal feedback from other stakeholders, including representatives from
DADHC and NSW Health, as well as the local commercial contract holder
(Dubbo Coaches) is that a service such as the proposed ‘hail-or-dial-and-ride’ service would provide an affordable, mainstream door-to-door service:
 that is suitable for a range of potential users, expanding service options for people who are transport disadvantaged but are either ineligible, or cannot get access to, a HACC funded service; and
 that should increase patronage and help to take some of the pressure off the demand for community transport services.
As well as taking some of the pressure off the demand for community transport services in Dubbo, this service model suggests that a new role for community transport organisations may be emerging. Where mainstream services are a viable option for their clients, community transport groups are well placed to provide paid staff and/or volunteers to:
 act as escorts, assisting those clients who cannot travel alone or need help getting on or off the bus; and
 help to ‘travel train’ clients who are not used to using bus services.
Contracting for better service outcomes
The Interim Report highlights the limitations of the existing non-commercial contract, arguing, among other things, that:
 as the Government has purchased the capacity necessary to deliver SSTS services, the community should get the full benefit from that purchase; and
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
new contracting arrangements for vehicles funded by Government should include availability requirements and charge out rates (based on benchmarked efficient operating costs) to specified groups.
Responses from some bus operators rejected this suggestion:
Whilst ever our buses are registered in our names, and we are responsible for the ownership and running cost of those vehicles, they are not community, or public assets. We will continue to work with the community, as we have in the past…. However, we will not release vehicles to community drivers; we will maintain control over our assets, our responsibilities and our liabilities.
It is stated in the Report that there are 1,829 vehicles that comprise the existing bus fleet and that these buses are “fully funded.” What the Report neglects to add is that the funding is for taking the children to and from school and that this job has been completed. The Report seems to imply that there is an ownership issue with these buses.
While ownership of these buses is not the real issue, control over their use certainly is: as the Interim Report points out, subsidies for school student transport represent a significant transfer of taxpayer funds to the private bus industry – more than $230 million in country NSW alone. For this kind of money, the Government should be procuring, on behalf of the community, a much broader range of services.
The Review believes that the Ministry of Transport should finalise the development of a new, more ‘modular’ model service contract that is capable of being readily adapted to the mix of services required in a given area; which contains the generic provisions outlined in the Interim Report and which ensures that:

where a vehicle has been purchased with Government funding, or
 where the Government has purchased a vehicle’s ‘capacity,’ that vehicle is made available to specified groups at specified rates.
5.4 Delivering better value for money
The Interim Report flagged the possibility of delivering better value for money outcomes, enabling Government to fund expanded services, through achieving economies of scale. The use of better planning to integrate services and competitive tendering were discussed as ways to realise that goal.
Competitive tendering for services
Operators disagreed with competitive tendering as a means of procuring services in country NSW, with the Buslines Group submitting that:
The suggestion that competitive tendering may be a solution to better procurement of transport in rural and regional areas is inappropriate. A partnership approach with performance based contracts will deliver far superior services.
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As with services in metropolitan NSW, the Review does not consider competitive tendering and performance contracts to be mutually exclusive, and notes that neither commercial nor non-commercial operators in rural and regional areas have ever faced competitive pressure, direct or indirect, for the right to hold service contracts.
As the Interim Report suggests, however, the approach adopted in rural and regional NSW should be flexible and outcome driven. There will be some situations in which competitive tendering will be appropriate, others in which a better result may be achieved through selective tendering or direct negotiation.
The Review also acknowledged that the implementation of reform will probably require a transition to competitive tendering, as in the metropolitan area.
Deriving economies of scale
Echoing the BCA’s submissions to both the Final and the Interim Report, some operators have argued that the Ministry of Transport should be encouraging single operator networks to deliver cost savings though economies of scale. Instead of a series of separate contracts held by different operators, they could be operated by the commercial operators in regional towns and non-commercial operators in smaller villages.
The idea that it is possible to achieve significant economies of scale is also reflected in Priors Bus Service ’ s submission, which suggests that the way to save money on the SSTS is to get more out of a smaller fleet of buses:
The government pays full costs for non-commercial buses, and can find costs spiralling if buses are being put on unnecessarily… [For commercial operators] the emphasis is on getting as many runs as possible out of each school bus. In
1992 when the government handed over responsibility for setting timetables for school bus services, most of our buses were doing only one school bus run each – now like most commercial country bus operators they are doing two or three runs both morning and afternoon – just so the Bus Company can stay viable.
Other operators were of the view that pursuing economies of scale would not necessarily deliver cost savings. One submission argued that:
The theory of “the economy of scale” is valid, but only works if there is a net gain to be obtained by combining operators. If non-commercial operators were over remunerated or making a motza, as is alleged, there would be a lot more large fleets, and fewer single or family operators.
As part of the Dubbo area case study, the Review team undertook a preliminary assessment of the savings that could be derived from restructuring the delivery of school student transport in the case study area.
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Under current arrangements, 24 non-commercial contract services transport
1,563 school students into Dubbo. In addition, Dubbo ’ s commercial contract operator transports about 6,700 students to and from school in Dubbo itself.
Indeed, school students comprise 85% of the service
’ s total patronage and the operator ’ s fleet costs are determined by this highly peaked demand.
Preliminary analysis suggests that operating these services as a single operator network could save about 4 buses, or a dollar figure roughly equivalent to the annual value of the 4 rationalised non-commercial contracts.
The Review notes, however, that these savings are indicative only and highly dependent on the ‘ mix ’ of services for the area that will be provided under new contracting arrangements proposed in this Final Report. A clearer picture of costs and savings will be available once the funding model has been finalised and further financial modelling undertaken.
The Review also acknowledges that the scope for this kind of exercise is probably limited to those areas in which there are reasonably large numbers of services feeding into a regional centre, and is unlikely to deliver similar benefits in smaller communities.
Exit strategies for rationalised services
In most of the submissions that addressed the issue of service rationalisation, industry stakeholders – the BCA, non-metropolitan commercial operators and non-commercial operators – argued for the need to establish ‘exist strategies’ for affected non-commercial service providers.
They suggest that these exit strategies could be funded from the savings that would be achieved by
– in the words of one operator – “removing the duplication and inefficiencies in service design and delivery” that are currently embedded in the system.
The Review does not, however, consider it appropriate for the Government to provide exit strategies for operators whose contracts may not be renewed as a result of a service restructure. This is because:
 The risk that contracts will not be renewed is built into the funding model, and taxpayers should not pay for that risk twice.
While ‘gross cost’ contracts carry a low commercial risk compared to ‘net cost’ models, the industry association and its members have consistently argued that the fact that non-commercial contracts are for a 5 year term – with no guarantee of renewal – warrants the significant risk premium (of about 14%) in the contract’s remuneration provisions.
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
Savings realised from the restructure of school student transport services are needed to pay for much needed service improvements in country areas.
The Government pays non-commercial contractors more than $112 million per annum just for school student transport, and this does not represent good value for the taxpayers’ money.
As discussed above, the need to restructure the provision of school student transport services is clear. Because the focus
– transporting school students, rather than delivering the package of services required by the broader community – has been too narrow, the Government has not realised sufficient return on its substantial investment in transport service delivery in country NSW.
As indicated in the Interim Report, operators wishing to stay in the industry are encouraged to consider submitting proposals for a collaborative approach to the delivery of required services. The Review also notes that, while the establishment of single operator networks will reduce the number of contracted operators, the number of driver positions will remain relatively static. Anecdotal evidence is that in country areas, there is always work for good drivers.
Re-focussing existing services
The Interim Report discussed the possibility of re-focussing existing services to meet a broader range of community needs and, by promoting aggregation of demand, to improve their efficiency and long-term viability. In particular, the
Interim Report flagged the need to look at CountryLink services which provide transport links to isolated communities, and the Parry Inquiry Final Report recommended that CountryLink services be included in the development of integrated regional transport plans.
CountryLink coach services provide an important ‘local’ transport link between isolated communities, and between those communities and their regional centres – rather than merely functioning as a branch line extension of the rail service to Sydney.
As part of the Review’s Dubbo area case study, and building on work done by the Far West Area Health Service and other stakeholders, the Review has focussed on the daily CountryLink coach service between Lightning Ridge (via
Walgett, Coonamble, Gulargambone and Gilgandra) to Dubbo.
Lightning Ridge, Walgett and Coonamble are all classified as remote. The coach trip from Lightning Ridge to Dubbo, for example, takes 4 hours and 35 minutes. Each town has a high Aboriginal population (of between about 20% and 25%), high unemployment rates (between 10% and 13%), and more than
25% of households in all 3 communities do not have a car. While not quite as remote, j ust under half of Gulargambone’s population is Aboriginal, and more than 38% of the households are ‘zero car households.’ Gulargambone’s unemployment rate is almost 15%.
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Dubbo is the major regional centre for each of these communities. As well as providing the majority of acute and specialist health care services at its regional referral facility, Dubbo is the nearest point of access for a range of government and business services, as well as recreational facilities, not available in Lightning Ridge, Walgett, Coonamble, Gulargambone and
Gilgandra.
The case study aims to assess whether changes to the existing service could the high levels of unmet demand for transport to Dubbo reported by
Government agencies and community organisations.
Better links for remote communities: re-focussing a CountryLink coach service
The CountryLink coach that runs a return service, daily, between Lightning Ridge and
Dubbo is scheduled to meet the XPT from Sydney, which gets into Dubbo at about 13:40.
It heads back to Lightning Ridge at 14:10 (which is the same time that the XPT departs on the return trip to Sydney), allowing about a half hour to 45 minute stop-over in Dubbo:
Time Town Time Town
08:50
09:50
11:00
11:50
12:30
13:25
Lightning Ridge
Walgett
Coonamble
Gulargambone
Gilgandra
Dubbo
14:10
14:55
15:30
16:00
17:35
18:30
Dubbo
Gilgandra
Gulargambone
Coonamble
Walgett
Lightning Ridge
As well as providing a connection to the XPT service, the Lightning Ridge to Dubbo
CountryLink coach is an important daily link between the isolated communities of Lightning
Ridge, Walgett, Coonamble, Gulargambone, and Gilgandra and their major regional centre. The importance of this link is demonstrated in the patronage data: the coach has a seating capacity of 46, and, on average, carries 31 passengers a day. 17 of those 31 passengers (slightly more than half) are travelling to meet the train. The remaining 14 are travelling to Dubbo.
It is believed that more people would use the service for ‘local’ travel to Dubbo if the timetable allowed for a reasonable stop-over – and, indeed, the demand for transport to
Dubbo to attend medical and other appointments is such that local stakeholders (the Area
Health Services, Aboriginal health organisations and community transport service providers) are considering putting on a community bus.
Rather than put on a new service, the case study has looked at amending the timetable to allow for a reasonable stop-over in Dubbo. One alternative is to start the coach in
Lightning Ridge about 2 hours earlier (at 6:55), so that it gets into Dubbo at 11.30, and delay the departure by about 2 hours, so that it leaves Dubbo at 16:00 and gets back to
Lightning Ridge at 20:20.
Time Town
06:55 Lightning Ridge
07:55 Walgett
08:20 Coonamble
Gulargambone 09:10
10:45 Gilgandra
11.30
Dubbo
Time Town
16:00 Dubbo
16:45 Gilgandra
17:20 Gulargambone
17:50 Coonamble
19:25 Walgett
20:20 Lightning Ridge
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Another alternative worth exploring is to reschedule the service so that it provides a stopover in Dubbo on Monday, Wednesdays and Fridays, and a direct link to the XPT on
Tuesdays and Thursdays, to balance passengers’ competing priorities.
It is worth noting that the proposed change to the Lightning Ridge to Dubbo CountryLink coa ch services integrates with the hybrid ‘hail-or-dial-and-ride’ service, developed as part of the Dubbo area case study as a suggested alternative to the existing town service (see section 5.3).
The Review believes that the proposed amendments to the existing timetable would:
 better suit the needs of the significant number of people using the coach to get to
Dubbo, and
 enable the existing spare capacity (an average of 13 seats) to be used to help to alleviate the high levels of demand for transport to Dubbo to attend medical and other appointments.
Further work should be done to confirm its feasibility and, if practicable, a trial of the change should be negotiated. This could be done in conjunction with the CountryLink
Solutions Team.
5.5 Funding & financial viability
Submissions on the issue of the financial viability of the non-metropolitan sector of the bus industry – most of which were received from country operators – strongly disputed the findings of the initial financial viability analysis, outlined in the Interim Report, which suggested that both the nonmetropolitan commercial (country commercial) and the non-commercial sector bus sectors:
 are currently financially viable at existing levels of remuneration; and

may possibly be over-compensated.
The suggestion in the Report that commercial and non-commercial operators are over funded is extraordinary.
It is extremely disappointing that the review attributes the viability of many rural operators directly to overremuneration. … No mention of responsible business practises, affective (sic) economic management, closer owner / manager involvement and diversity, simply that rural operators are more viable because they are over-remunerated.
The suggestion that ‘both commercial and non-commercial contract service providers operating outside the metropolitan area may be overremunerated’ is ill founded and anecdotal… Generally, operating revenue earned by bus operators in the metropolitan area is higher than regional bus operators. A higher EBITDA percentage is required by the regional bus operator to equate to the same EBITDA amount. Complying with average age requires continual reinvestment in the fleet, [and] it is the EBITDA that provides the funding required to purchase new buses.
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Further analysis: viability of the country commercial & non-commercial sectors of the industry
Further analysis of the financial viability of both the non-metropolitan commercial and the non-commercial sectors of the NSW bus industry, undertaken for the Review by INDEC Consulting, appears to bear out the initial findings of the Interim Report.
Country commercial
INDEC estimates that the country commercial bus sector is achieving earnings before interest, tax, depreciation and amortisation (EBITDA) of
23.5%, exceeding the EBITDA required for long term financial viability of the
Sydney metropolitan sector by 3.5% or about $8 million.
Country commercial operators argue that they require a higher EBITDA than metropolitan commercial operators because they get lower levels of utilisation out of their bus fleets. However, the counter argument is that these lower levels of utilisation are offset by:
 the higher fare scales applicable in country areas (which translate to higher SSTS payments), and

the lower contractual MSL requirements.
To date, the Review has not been provided with data that would enable it to determine whether the level of EBITDA required for the long term viability of the country commercial bus sector exceeds the EBITDA required by metropolitan operators. Based on the assumption of a 20% EBITDA requirement, this sector may therefore be over-remunerated by $8 million per annum.
Non-commercial
INDEC estimates that the non-commercial sector is achieving EBITDA of 29% of revenue and that for long term financial viability the sector requires an
EBITDA of 25%, taking into account the extremely low levels of utilisation of the non-commercial bus fleet. (Under current arrangements, non-commercial
– school – buses are only contracted to operate for an average of 650 hours per annum, compared to an average of 2,400 hours per annum in metropolitan Sydney.)
INDEC suggests that an alternative funding model, based on reimbursement of operating and capital costs and a 6.5% before-tax return on operating expenses, would lead to EBITDA of 25% and a reduction of about $7 million per annum in the total funding required for this sector.
Financial viability of individual non-commercial operators
While, as a sector, non-commercial contract operators may be being overremunerated, the available evidence is that individually, not all noncommercial operators are doing equally well.
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As a breakdown of the figures shows, while some are achieving EBITDA of significantly more than 40% of revenue, others appear to be struggling. The distribution of EBITDA by operator is illustrated in Figure 5.1 below:
Figure 5.1 Distribution of EBITDA by operator
EBITDA
60%
50%
40%
30%
20%
10%
0%
EBITDA
-10%
Cum. No of operators
The PwC model
INDEC suggests that the reason for the enormous disparity in the distribution of EBITDA is that the current funding model, the PwC model, is heavily skewed in favour of:

the 375 operators who hold multiple contracts (and, in particular, the 21 who hold 10 or more contracts), and
 those operators who are operating the larger category 3 and category 4 buses (and, in particular, those operators with short routes and low daily operating hours).
The key problems with the current funding model, as identified by INDEC, are summarised as follows:
 The fixed payment (which consists of bus-related costs, depreciation and return) does not vary with operating hours and route kilometres, so the funding model provides a straight return on capital investment, rather than rewarding operational effort.
As a result, an operator whose fleet is comprised of the bigger (more expensive) buses each running for an hour a day receives significantly more remuneration than an operator whose fleet is comprised of smaller buses each running for 3 hours a day.
 The methodology for calculating depreciation on the capital costs of a bus
(part of the fixed payment in the remuneration model) is based on the
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average age of the fleet during each contract period, so that it is 8 years for category 12 and 2 buses and 12 years for category 3 and 4 buses. To meet these ‘average age’ requirements, single bus operators must replace buses more frequently than larger fleet operators.
This significantly disadvantages smaller operators.
The extent to which the level of EBITDA correlates with the category of bus
– and the extent to which the current funding model over-rewards operators with low kilometres and hours – is illustrated in Figure 5.2.
Figure 5.2 Distribution of EBITDA by contract, bus category, & kilometre hours
EBITDA per contract - full contracts only
60%
50%
40%
30%
20%
10%
CAT 1
CAT 2
CAT 3
CAT 4
0%
0 10 20 30 40 50 million km hours
60 70 80 90 100
As well as being inequitable, the PwC model contains other flaws, the most significant being the fact that the indexed purchased cost assumptions appear to be out by up to a factor of 50%. To use the example of a category 4 bus purchased in 2001/02, the funding model assumes a cost of $192,727 but the real cost in that year was closer to $300,000. (An appropriate annual depreciation for this would, therefore, be $9,300 – $3,100 more than the amount that the PwC allows for the depreciation of a category 4 bus in
2001/01.)
The PwC model versus the ITS model
It is clear that a new funding model is needed to address the inequities and other anomalies in the PwC model. As part of the Independent Regulatory and Pricing Tribunal (IPART’s) 2003 fare determination process, the Bus and
Coach Association put forward a model commissioned from the Institute of
Transport Studies (ITS) as a possible replacement for the PwC model.
While the PwC model is enshrined in existing non-commercial contracts until they expire, IPART concluded that the ITS model was worthy of future
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consideration. The Review, therefore, commissioned INDEC to undertake a comparative analysis of the two funding models.
According to INDEC, the key differences between the PwC and ITS models are:
 the revised and re-allocated operating expenses among the reimbursable expense categories, and

the method and quantum of capital expense and return.
The impact of these changes is illustrated in Figure 5.3, which shows the result of simulations for the 2001/02 financial year using both the ITS and the
PwC models:
Figure 5.3 Simulation of SSTS payments under the ITS model for
2001/02: comparisons with PwC
Category
Change ($’000)
Cat 1
133
Cat 2
2,229
Cat 3
2,555
Cat 4
1,681
Total
6,598
Change (%) 1.5% 8.8% 10.4% 3.4% 6.1%
In dollar terms, the increase in total SSTS payments for that financial year is
$6.6 million over what was paid out under the PwC model.
As it is estimated that the current funding model already over-compensates non-commercial operators (as a sector) by in the order of $7 million, the
Review believes that it is not appropriate to consider a model which potentially increases the level of over-compensation.
The impact of the current funding & contracting arrangements on required EBITDA
The current funding and contracting arrangements artificially inflate the
EBITDA required for the non-commercial sector to be viable.
A limi tation of the ‘required revenue’ or gross cost approach to SSTS funding
– regardless of the whether the PwC or ITS model is used – is that it assumes that the operator is only using the bus to transport school students to and from school. INDEC’s estimate of the EBITDA required for the long term viability of the sector – 25% – does not take into account charter or other work that non-commercial contractors may be undertaking outside their school runs.
Non-commercial operators who made submissions to the Interim Report have stressed that while opportunities for additional work are not unlimited (and while their buses will always be idle for some of the time), they strive to get the best use possible out of their bus fleets. One operator, for example, advised that their buses are idle for only 32% of the time – with the buses used 42% of the time to transporting school students, 20% of the time to do
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charter work for local schools, and 6% of the time for other charter work. This breakdown is reflected in the following chart:
Figure 5.4 Breakdown of the utilisation of one non-commercial operator’s bus fleet
SSTS AM
Idle
School Charter
SSTS PM
Other Charter
As charter and other work increases bus overhead recovery, it reduces the levels of EBITDA required for a viable business.
A new funding approach, therefore, needs to be able to take into account revenues derived from other work, to ensure that it makes an appropriate contribution to the costs of the capital overheads already bought and paid for
– at least for the life of the contract – by Government.
The Review also notes that low fleet utilisation
– leading to higher EBITDA requirements for a sustainable business – is a further argument for achieving efficiencies through:

implementing single operator networks in larger regional centres; and
 new contracting arrangements that drive the better use of resources.
Payments in advance
As noted in the metropolitan funding chapter, under existing arrangements
SSTS subsidies are paid in advance. In light of standard commercial practice for payment once the services has been provided, the Review considers that this is not appropriate.
While it is preferable for consistent arrangements across the State for SSTS payments, the Review notes the potential cashflow issues for smaller
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operators and recommends that transitional arrangements be considered in making this change.
5.6 Transport information & communications
In a number of submissions to the Review, stakeholders raised the issue of the critical importance of the availability of good information in designing and delivering transport services.
Accurate, reliable data about travel patterns and transport demand is needed to inform service development and delivery. Effective communications will raise community awareness of the availability of services, promoting their use.
Better access to information, better access to services
As part of NSW Health’s Transport for Health program, the Macquarie Area Health
Service has established a telephone Transport Information Service to provide information to residents in the area about transport options (including any available subsidies and information about eligibility) and refer them to appropriate service providers. This includes a ‘phone triage’ service, to assess clients’ needs.
While primarily aimed at people living in the Macquar ie Area Health Service’s catchment area, and for people in need of non-emergency health related transport, access to the service is not restricted.
The Transport Information Service is also set up so that, for the first time, a comprehensive picture of who needs transport, where they are travelling, and why – as well as whether there is an unmet demand for a particular service – is being captured for the region.
This will be an invaluable tool for planning further services, providing demand estimates beyond the anecdotal.
The Review commends NSW Health and the Macquarie Area Health Service on this innovation, and recommends that the Ministry of Transport lead consideration to the potential for rolling out in other regions a transport information and referral service built on this model.
5.7 Recommendations
21. The Ministry of Transport should commence recruitment of regionally based Transport Development and Co-ordination Officers to facilitate the development of innovative transport solutions and the best use of available resources in country areas. Specifically, their role should encompass:

mapping existing services and needs;
 establishing regional co-ordination committees of relevant stakeholders to further advise on need, and assist with integrated service provision and planning;

monitoring the effectiveness of services;
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
working with stakeholders to identify and trial service improvement projects, funded by seeding grants; and
 working with the Operations stream of the Ministry of Transport to extract greater value from, and insert more flexibility in, bus contracts.
The Ministry of Transport should also consider establishing the Position of Aboriginal Transport Development Officer to develop transport solutions appropriate to the needs of Aboriginal communities.
22. As recommended in a previous review, community transport services should be recognised as playing a crucial role in the transport task, with safety and accreditation requirements applying where appropriate.
Barriers to the provision of flexible solutions involving the most appropriate vehicle type should be removed.
23. The Ministry of Transport should develop a new ‘ modular ’ service contract for country NSW that is capable of being adapted to the different service needs of different communites and addresses:
 services to be provided, including integration requirements with other modes;
 requirements in respect of availability for other charter and community work;
 uniform standards for service quality, performance and bus fleet specifications;
 reporting requirements to enable better perfomance monitoring and to inform ongoing service planning;

procedures for dealing with disputes and contract breaches;
 flexibility in the contract term, from 5 to 10 years;
 contract payment details that take into account income from charter and other work for specified groups;
 service planning and review processes, including participation in local co-ordination committees; and
 contract renewal opportunities and performance assessment processes.
24. The Ministry of Transport should develop a new financial model for rural and regional bus services that, subject to IPART endorsement, replaces the existing ‘non-commercial’ funding model. The model should:
 update the inputs in the current funding model to reflect efficient benchmark costs;
 link return to operational effort;
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
eliminate any biases in favour of multiple contracts holders/larger operations;
 recognise income derived from other sources (such as commercial charter work) and its contribution to capital costs while still providing incentives to take on this work; and
 establish a per kilometre charge at which the vehicle is to be made available for charter and other work for specified groups.
25. To provide service that better meet local needs and provide better value for money, consideration needs to be given to:

replacing regular route services in country towns with demand responsive, flexible services, recognising that commuter needs should not drive service planning in these areas. As a starting point, the proposal for a demand responsive service for the Dubbo township should be trialed as soon as possible and opportunities for similar trials identified; and
 the potential for:
 establishing single operator networks for the provision of school services in a given area (replacing the existing single noncommercial contracts) to maximise the efficient use of vehicles and achieve economies of scale,
 funding new services (including regular services to isolated communities) from any savings that may be realised,
 rescheduling CountryLink coach services so that they provide for an adequate stop-over in regional centres and better meet the needs of the broader community by providing a useful daily link between isolated communities and their regional centres; and
 rolling out a transport information and referral service (based on the system developed by the Macquarie Area Health Service).
26. The Ministry of Transport should negotiate with operators to move them onto new contractual and funding arrangements.
27. The Ministry of Transport should continue to work with NSW Health, the
Department of Ageing, Disability and Home Care, DIPNR and other government stakeholders to develop Integrated Regional Transport
Plans and Budgets as a mechanism for facilitating a whole-ofgovernment approach to planning, procuring and funding country transport solutions.
Agencies should commit to ensuring that any new services are procured through the integrated planning approach to maximise value for money and optimise service outcomes for the community.
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6.1 Fares, ticketing & concessions
The Interim Report put forward a range of recommendations as follows:

Adopt a consistent fare scale, as determined by IPART, across all metropolitan bus services.
 Apply a single fare scale to regional NSW. This may be higher than the metropolitan fare scale if there is evidence to support higher costs relative to passenger numbers for regional areas. Transition arrangements, to balance impacts on passengers and operator revenue, will need to apply.
 Under new contractual arrangements, require operators to offer a frequency of use discount, possibly in the form of a TravelTen or equivalent ‘travel bonus’ scheme.
 Apply a consistent suite of targeted concessions, based on those available on State Transit buses, across NSW, with the bus Pensioner Excursion
Ticket expanded to the greater metropolitan area.
 Implement the proposal from the Parry Inquiry Interim Report to increase the Pensioner Excursion Ticket to $2.50 and target its availability to
Pensioners and War Widow/ers. The ticket should not be available before
9.00am weekdays, when half fare concessions should apply.
 Introduce the proposed smartcard system with a very simple set of fares and a limited number of products only.
 Oblige operators under their contract to be involved in the smartcard ticketing system to ensure its full benefits are realised.
Responses to the Interim Report
Responses to the Interim Report included:
 General support for the alignment of fares in the metropolitan area, t
Though some submissions indicated that the required increases in State
Transit fares to the Transitway fare level may need to be phased in over time, and consideration given to broader road pricing, so current passengers are not encouraged to transfer to car travel.
 Qualified support for a regional fare scale noting though there may be varying circumstances across different regions.

Support for frequency of use discounts on bus services, particularly in areas currently serviced by private buses. However, several submissions indicated the level of discount should be at least 20%, not 10-15% as suggested in the Interim Report. Some submissions also pointed out the cashflow benefits to operators from these pre-paid ticket products. Others pointed to the multi-modal travel convenience offered by time-based fares such as TravelPasses in areas serviced by CityRail and State Transit buses and ferries.
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
Support for a consistent suite of concessions across bus operators.
The concessions available on Ttransitway services were put forward as an appropriate suite for all operators.
 Support for the expansion of the Pensioner Excursion Ticket to areas serviced by private buses. Qualified support for an increase in the ticket price, with many submissions claiming $2.50 is too high.
 Support for a very simple set of fares and products available on the smartcard. A range of issues was raised in relation to coverage and the appropriate fares and products to be made available on the card.
 Many submissions also acknowledged the potential benefits that the smartcard system will deliver in making quality travel data available.
The recommendation that operators be obliged under contract to participate in the smartcard system, to ensure seamless ticketing arrangements across the public transport system, was supported.
Fares
To ensure an equitable bus system, each new metropolitan bus contract area should offer the same core fares. The common fare scale should be the current Transitway fare levels.
The outcome of the Parry Inquiry Final Report provides for fare increases linked to the CPI over a multi-year price path (around 5 years), subject to operators meeting efficiency gains. Any further increases above the CPI during this period would need to clearly outline proposed service improvements.
Within these parameters, Government should request that IPART seek to align State Transit’s fares to the Transitway fare scale as a matter of priority.
As outlined in the Review’s Interim Report, State Transit’s current fare levels depend on significant contributions from taxpayers. No such payment is made to private operators, even though the public should be able to expect the same service standards from all bus operators.
The Review supports the approach outlined in the Parry Inquiry Final Report for the Department of Infrastructure Planning and Natural Resources and the
Roads and Traffic Authority to examine the potential for introducing electronic road pricing so any public transport fare increases, particularly for State
Transit services, are balanced against the cost of car travel.
To further remove any differences between the way in which State Transit’s and private bus operators fares are determined, IPART should set fare changes on the same basis for the entire bus industry. The IPART-set fares should then be directly translated into all bus contract fare schedules.
For rural and regional areas, the country town fare scale should apply.
Consistent with many submissions regarding fare levels, the Review believes that the rural fare scale – which is 20% higher than country town fare scale –
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is a disincentive for potential service users. A reduction of these fares may attract additional passengers in these areas.
To implement this change, as commercial contracts in regional areas expire, the country town fare scale should be written into new service contracts as appropriate so that, over time, all regional operator fares are aligned to the one scale. Where this approach impacts on an operator’s viability, the Ministry for Transport would need to consider these issues on a case-by-case basis.
Frequency of use discounts
The benefits of multi-ride discounts are demonstrated through the sales and usage of these ticket products on State Transit buses. These same benefits should be available in other contract areas to attract similar commuter markets to bus travel as those using State Transit services.
Private operators should be obliged to offer a TravelTen product (or equivalent), discounted at around 15% relative to single fares. This discount seeks to represent a balance between the need for operator financial viability and rewarding customer loyalty.
Over time, and consistent with issues surrounding State Transit’s single fare levels, the discount on State Transit’s TravelTen products (or equivalent) should be brought to a similar level. A 15% discount is similar to the discount available for many frequency of use tickets on buses in other cities such as
Perth, Brisbane and Melbourne.
These discounts should be mandated by Government to provide bus passengers with consistent arrangements. However, operators would continue to have the option of providing other discounts targeted at increasing the travel market within a contract area.
Implementing the proposed contract regions will necessitate merging of current bus operator contract areas. Ideally, the same fares and frequency of use discounts should apply where State Transit and private bus operators are within the same contract area.
TravelPasses offer multi-modal travel within defined zones. However, as with
Pensioner Excursion Tickets, they are not available in areas serviced by private bus operators.
More broadly, were TravelPasses to be applied to new bus contract areas, each operator would need to enter into complex revenue sharing arrangements with CityRail. The funding risks associated with this would need to be carefully modelled against expected benefits, based on the current proportion of bus to rail trips (less than 20% of all bus trips).
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Concessions
As recommended in the Parry Inquiry Final Report, the same concessions should be available on government and private operator route services. Either the State Transit or the Transitway suite of concessions provide a basis for the standardisation of concessions within the new contractual arrangements for metropolitan bus services.
The outcomes from the Parry Inquiry Final Report will see a $2.50 Pensioner
Excursion Ticket available for travel across the greater metropolitan area on
CityRail, State Transit and private bus and ferry services. The PET will also be indexed. As a basis of comparison, the 60 Plus ticket available in
Melbourne is currently priced at $2.80.
The PET will remain available to both pensioners and NSW Seniors Card holders and can be used in the AM peak. However, in accordance with the
Parry Inquiry Final Report, once implemented across the greater metropolitan region, the purchase and usage of PETs during the AM peak period will continue to be monitored by bus operators and CityRail to quantify any impacts.
The PET should be made available to areas serviced by private bus operators as soon as new contract areas are formed and contractual arrangements are in place.
Prior to the implementation of the smartcard, consideration should be given to alternate ways of reducing the impact of on-board ticket purchases. The ability to purchase multiple PETs may provide a means of reducing on board sale related delays. This issue was raised in consultations and the Review believes that it has merit.
A requirement to carry and produce photo identification to verify concession entitlement status would need to complement this initiative to protect against fraud, and this approach is likely to be supported by key stakeholders:
Transport fraud control services would be assisted by the introduction of photo identification…(NSW Council on the Ageing)
The introduction of smartcards will ultimately remove the need to bulk purchase PETs, as the ticket can be automatically loaded onto a smartcard when a passenger first enters a bus railway station or ferry, reducing the potential for on-board delays.
Outside of the metropolitan area, the PET may be made available on bus services in large country towns where service levels are sufficient to generate a demand for the product. However, the alternative transport options within those communities should be tested, particularly the potential for community transport services to meet travel needs.
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As indicated in the Parry Inquiry Final Report, the targeting of concessions needs to reflect the Government’s social policy objectives. The Transport
Services portfolio is not best placed to identify and target those in most need of transport assistance. A range of agencies including NSW Department of
Ageing, Disability and Home Care, the Department of Education and Training, the Commonwealth Department of Family and Community Services and the
Department of Veterans Affairs need to play a central role in identifying and targeting concessions at those most in need. It is the role of transport agencies and operators to then apply those social policy objectives.
Ticketing
The smartcard system will represent a significant change to how customers pay for and access public transport services.
The smartcard is based on principles of providing single ticket access to train, bus and ferry services; a platform to simplify an over-complicated fares system; and, for the first time, quality travel data to assist with planning and appropriately funding public transport services.
Government operators currently offer a multitude of ticket products. Some of these are popular, such as multi-ride ticket discounts, while others have relative small sales, including many TravelPass products.
The smartcard will offer the same convenience as a TravelPass. However, unlike the restricted availability of TravelPasses, the smart card will provide access to CityRail, State Transit and private bus and ferry services.
To ensure the convenience benefits are maximised and the system is easy to use, only very few fares and products should be available for loading onto the smartcard. A suggested approach is outlined below:

Each smartcard should only allow single fares and one ticket product per operator to be loaded at any time.
 Single fares and a multi-ride discount on buses should be available for loading on smartcards commencing in 2005.

Remaining single fares purchased using cash should be set at a premium or a ‘no change’ policy could apply to reflect the additional costs of continuing to collect these fares.

Tourist tickets such as DayTrippers and SydneyPass should only be available on disposable smartcards.
 TravelPasses should be reviewed against alternative fares and ticketing options proposed on smartcard.
To ensure customer acceptance, the system needs to be easy to understand and use. Regardless of the final arrangements and depth of discount for multiride tickets, this principle should continue to apply.
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Additional facilities such as auto-loading of multi-ride discounts via direct bank debit should be heavily promoted for commuters to further enhance convenience.
Only when smartcards are taken up and accepted in a simple form should further consideration be given to either different ticket products, such as equitably defined and applied TravelPasses, or alternative fare structures.
Even if these were considered, to continue with the principle of simplified arrangements, any new products could be restricted to disposable smart cards so the core fares and discounts don’t again become over-complicated as with current arrangements.
6.2 SSTS issues
Submissions
The proposals put forward in the Interim Report elicited strong reactions from education bodies, parent groups and other organisations.
There was almost unanimous support for paying operators for carrying SSTS students on the basis of actual travel undertaken.
Most submissions, however, were opposed to the idea of giving schools direct control of transport budgets and responsibility for purchasing transport services, which the Interim Report suggested should be given further consideration. As the Catholic Education Commission stated:
The business and expertise of schools is not in organising student transport with government and private operators. That specialised operation needs to stay with relevant experts.
The Catholic Education Commission al so highlighted that the Government’s response to this proposal, when first put forward in the Parliamentary Public
Accounts Committee’s Inquiry into SSTS, supported the preference of relevant stakeholders for the Scheme to remain the administrative responsibility of the Ministry of Transport.
The Review acknowledges that giving schools responsibility for purchasing transport services would give them greater control over key transport issues and could ensure greater accountability for education decisions with transport implications. However in light of general opposition to the proposal and evidence indicating the cost efficiency of better integrating school services with regular route services, the proposal is not supported by the Review.
Submissions were generally in favour of the establishment of a Memorandum of Understanding (MoU) between the Ministry of Transport and education bodies to progress key SSTS administrative tasks essential to the effective running of the scheme. The NSW Teachers’ Federation (and others) stressed that these administrative tasks need to be regarded as a cost to the scheme, and this should be factored into any MoU.
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A number of other issues raised by submissions in relation to SSTS concerned eligibility and the current distance criteria, all of which are outside the terms of reference of the Review.
One proposal put forward was the development of an integrated transport pass, concession card and student identity card as part of the reform process.
This is linked to the trial of the smartcard system for SSTS travel, discussed below.
Recent developments
Since the release of the Interim Report, the Minister for Transport Services has announced that the use of the smartcard system for SSTS travel will be piloted in the second half of 2004. If successful, students eligible for the SSTS will be issued with smartcards from 2005.
This will enable the collection of accurate patronage data and allow for the payment of operators on the basis of actual travel undertaken. It also (along with other administrative reforms proposed) has the potential to significantly reduce the administrative workload for schools in relation to SSTS. While schools will still be the holders and gatekeepers of critical student information, there will be less of a need for them to participate in activities such as the monthly exchange of information with operators on student movements and end of semester audits.
It will be critical to gain in-principle agreement from education bodies to participate in the smartcard trial. The Ministry of Transport has initiated discussions with the Department of Education and Training to enlist their cooperation and to facilitate consultation with staff, unions and parents. Such discussions will also need to take place with the other education bodies.
In light of these developments, it makes most sense to develop the MoU discussed above following the smartcard trial. This will enable a better understanding of how the smartcard system will work, its impact on schools, and respective roles and responsibilities under the new system. While it is anticipated that schools’ administrative responsibilities (and associated costs) will lessen, this issue will need to be considered in the context of the trial.
Consideration should also be given to the issue of transition costs in moving to the new system.
Proposals such as a travel pass that also serves as a concession card and student identity card are worthy of consideration at a future point. In the short term, the focus must be on trialing the smartcard system and ensuring its effective implementation across the network.
SSTS hours of travel
One issue raised with the Review in consultations following the Interim Report concerned the hours during which an SSTS pass can be used. The Transport
Workers’ Union expressed concern that bus passes can only be used at the
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beginning and end of each school day for travel between home and school.
Union representatives indicated that this meant that if a child has to go home earlier in the day because of illness or some other legitimate reason, or come to school later, the bus driver cannot allow them to travel on their pass and must request that they pay a fare.
In response to this very issue, the Ministry of Transport published and issued, in the second half of 2003, Guidelines on Hours of Travel. These state that, as a guide, 9.30am can be used as the latest time for commencement of SSTS travel in the morning and 2pm as a guide for the earliest time of commencement of SSTS travel in the afternoon.
However the guidelines stress that there may be legitimate reasons for students making their entitled home to school journey after 9.30am or the return trip before 2pm. In these circumstance the guidelines advise that operators/drivers should ascertain if the trip is a legitimate SSTS entitlement or if a fare should be charged. Fares should only be charged if there is reasonable evidence that a student has already used their daily return trip entitlement.
The guidelines were e-mailed to those operators and schools who are registered on the Ministry of Transport SSTS website. The BCA also agreed to assist in publicising the guidelines and they are available on the Ministry of
Transport public website.
However the fact that the issue has been raised with the Review by the
Transport Workers’ Union suggests that not all drivers are aware of the guidelines. The Ministry of Transport in conjunction with the BCA will need to take additional measures to ensure that operators and drivers are aware of the guidelines
6.3 Governance arrangements
The Ministry of Transport has the dual functions of providing strategic policy advice to the Minister for Transport Services, as well as overseeing the contracting, funding and regulation of passenger transport services in NSW.
The Interim Report considered that there was benefit in separating these operational functions from the policy role, ideally through the establishment of a new organisation
– the Passenger Transport Authority – but in the interim by co-locating them in a separate division within the Ministry.
The new bus contracting regime proposed by this Review represents a significant reform initiative. There will need to be detailed and ongoing assessment of the capabilities, resources and operational aspects required to implement the proposal successfully. As such, the Review supports the approach of the Ministry of Transport to organise its various functions under two streams – Policy & Strategic Co-ordination and Operations, with the following responsibilities:
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Policy & Strategic Co-ordination
 Provision of independent policy advice to the Minister;
 Co-ordination of broader transport portfolio issues; and
 Forward planning and sustainable funding strategies.
Operations
 Contracting of passenger services, including service standards and other contract requirements across regular, community transport and school transport services;
 Service network planning and design, in cooperation with operators and
DIPNR;
 Community and regional transport service co-ordination;
 Management of payments to service providers;
 Management of funded schemes and advice on fares;

Management and delivery of the smartcard and Integrated Transport
Information Services contracts; and
 Licensing and accrediting transport services providers.
This approach will enable a better understanding, over time, of the functions and requirements of this expanded operational role, and whether there is a need for a separate authority.
As the Ministry currently has limited service planning and design capability, the Operations stream will need to acquire the necessary skills and resources to perform this task. In this regard, it is recommended that the bus service planning function of the State Transit Authority be relocated to become part of the Ministry’s Operations function. Importantly, State Transit will still need to retain a level of expertise to fulfil its service planning and operational needs under the proposed contracting model. Transitional arrangements to enable the smooth transfer of this function at the same time that the new contracting regime is being implemented, will need to be considered.
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6.4 Alternative asset management
The Review received submissions from a number of financial institutions indicating support for the concept of separating the operation of bus services from asset ownership, as outlined in the Interim Report.
It was indicated to the Review that in the United Kingdom and Australia, banks were involved as investors and asset owners due to their:

access to low cost capital;
 ability to provide long term funding;
 proven systems to manage and administer large volumes of assets; and

ability to take advantage of taxation benefits available.
The advantages flowing from the separation of operations and assets were outlined in the Interim Report. In addition, such an arrangement should be seen as providing, during the transition period, an avenue through which bus proprietors wishing to exit the industry can dispose of their assets in an orderly manner.
Other advantages identified by financiers relate to initial purchase cost and maintenance savings available due to economies of scale, and the opportunity to standardise bus fleet design for more efficient manufacture.
Issues such as the cost of leases through such an arrangement require further assessment. The perceived advantages of the approach need to be considered against other mechanisms to achieve an orderly exit for operators
(if required) and to give Government greater control of assets when needed
(such as through the inclusion of provisions like step-in rights in the contract).
Other issues requiring further consideration in relation to this approach to asset management include:

whether the arrangement should apply to existing buses, new buses, and/or both private and Government buses; and
 opportunities for operators to pursue such arrangements on a voluntary basis without Government involvement.
The Review therefore recommends that the proposal receive further detailed analysis. In the meantime, new contractual arrangements should include provisions such as step-in rights and call options to give Government greater control of assets when necessary.
6.5 Recommendations
Fares, ticketing & concessions
28. To ensure an equitable system, a consistent bus fare scale should be progressively implemented across all metropolitan bus services and
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operators should be required by contract to offer the same core fares, concessions, and ticketing arrangements.
29. Government should request that IPART seek to align State Tr ansit’s fares to the Transitway fare scale (equivalent to the private operator fare scale) as a matter of priority.
30. As commercial contracts in regional areas expire, a single fare scale, consistent with the country fare scale, should be applied so that over time all regional operator fares are aligned to the one scale.
31. Private operators should be obliged to offer a TravelTen (or equivalent) product, discounted at around 15% relative to single fares. Over time, the discount on State Transit’s TravelTen (or equivalent) should be brought to a similar level.
32. Once the smartcard system is implemented, only single fares and a more limited number of products (such as TravelTens and the Pensioner
Excursion Ticket) should be allowed to be loaded onto the smartcard, to promote ease of use.
33. The proposal, recommended in the Parry Inquiry Final Report and supported by Government, to increase the Pensioner Excursion Ticket to
$2.50 and expand it to areas within the Greater Metropolitan Region serviced by private operators, should be implemented as part of new contractual arrangements.
34. Once the Pensioner Excursion Ticket is available across the metropolitan area, operators should be required to monitor and report to the Ministry of Transport on the extent and impact of Pensioner
Excursion Ticket holders travelling during the morning peak.
35. Prior to the implementation of smartcard, consideration should be given to allowing the purchase of a multi-trip Pensioner Excursion Ticket, as a means of reducing on-board ticket purchases and resultant delays, particularly during peak times. Photo identification should be required for purchase and use of the ticket, to protect against fraud.
36. The Pensioner Excursion Ticket should also be available for use on bus services in large country towns where community transport cannot provide an equivalent service.
SSTS
37. In-principle agreement should be sought from education bodies to participate in the smartcard trial during the second half of 2004, and in the broader implementation of the system in 2005. The trial should include:

consultation with school staff, unions and parents;
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
consideration of ways to minimise the administrative load for schools; and
 the identification of any transition costs.
38. Following the trial, a Memorandum of Understanding should be entered into between the Ministry of Transport and relevant education bodies.
This should outline respective roles and responsibilities in relation to the administration of SSTS under the smartcard system to ensure its effective roll-out and implementation.
39. Once fully implemented, the potential of the smartcard system to make
SSTS more responsive to the changing educational and social needs of students and families should be explored.
40. The Ministry of Transport and the BCA should jointly identify and implement strategies to ensure that operators and drivers are aware of the recently developed SSTS Guidelines on Hours of Travel, which enable some flexibility in determining when during the day an SSTS bus pass can be used.
Governance arrangements
41. The Ministry of Transport should proceed with the establishment of an
Operations stream that will consolidate service planning, contracting and funding responsibilities for passenger services under a single management arrangement. To ensure these arrangements commence with the introduction of the new contracting regime, an assessment of the capability, resources and operational requirements needed should be undertaken as a priority.
42. As part of the above, discussions should commence to enable the transfer of State Transit’s planning capability to the Ministry of Transport, concurrent with the signing of new contracts with State Transit.
43. The effectiveness of the Operations stream should be monitored over the contract period prior to any further consideration being given to the establishment of a Passenger Transport Authority.
44. In the longer term, serious consideration should be given to the establishment of an appropriate entity to enable the separation of asset control from the operation of services, to realise a range of benefits as outlined in this Report. As a more immediate measure, contracts need to provide for step-in rights and call options to enable Government control over assets where necessary to ensure continuity of services.
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7.1 Principles & parameters
The proposed changes outlined in this Final Report for planning, contracting and funding arrangements in both metropolitan and rural and regional areas are significant. As many submissions to the Review have highlighted, the process of implementation will, to a large extent, determine their success or failure.
While the Final Report sets a clear direction and plan for the future, there is obviously much detailed work required to turn this vision into reality. It is the
Ministry of Transport’s responsibility to oversee and implement the new bus contracting regime, and work is already underway on this next phase, commencing with consultation and negotiation with existing operators.
The Review believes that the implementation of the first round of new contracting arrangements should be guided by the following principles and parameters:
 the Ministry of Transport should deal with one lead operator per region;
 all operators who wish to remain in the industry should be given the opportunity to do so, provided they meet required standards and efficient costs;
 smaller operators should not be unfairly disadvantaged in the organisation of regional arrangements, nor in negotiations with the Ministry;

standards of service and other requirements should not be eroded or able to be ignored through any sub-contracting or joint venture arrangements that might apply;
 implementation of the new regime should be on a cost neutral basis;
 there is a need for a transitional period (of approximately 2 years) before new arrangements are bedded down, with a degree of flexibility and opportunity for review over this period;

the lack of critical information and data to inform the development of new arrangements must be acknowledged and steps taken to collect this over the transition period;

a whole-of-government approach to oversee and monitor the implementation of the new regime should be established;
 the BCA, on behalf of their members, should have the opportunity to comment on and put forward suggestions in relation to implementation; and
 the process and timeframe for implementation should be made public to provide information and certainty for passengers and the community.
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7.2 Key steps: metropolitan areas
The Passenger Transport Act
The starting point for the implementation of the new arrangements is amendments to the Passenger Transport Act 1990. As the Interim Report highlighted, the Act is overly prescriptive in a number of respects – such as the requirement for MSLs, contract lengths, renewal on the same terms and conditions, exclusivity rights, and fares
– which severely limits the ability of the
Ministry of Transport to enter into flexible arrangements or to vary the terms of the contract, even on renewal.
Ideally, the Act should empower the Director-General to enter into contracts for the provision of bus services, with the detail of the contract to be set out, by and large, in the contract itself. The Transitway provisions in Division 3 and
4 of the Act are premised on this basis, and would be a good starting point in considering amendments in respect of non-Transitway bus services.
As discussed in Chapter 6, it is also desirable to amend the Act to enable
IPART to determine private operator, as well as State Transit Authority, fares.
This will provide independence and consistency in the fare setting process.
Another problem with the current legislation is that it is ambiguous with respect to community transport services and whether they are covered by provisions within the Act relating to regular passenger services. Given that the
Review considers that community transport should be considered as part of the mix of services within a particular region (metropolitan as well as country), and should be better integrated with other services, it is important that this anomaly be corrected. Appropriate safety and accreditation requirements as well as service standards must apply.
A number of transitional provisions will also be required within the Act, to enable smooth implementation of new arrangements. These should include the ability, where necessary, to terminate existing contracts and the ability to enter into contracts on a temporary basis to assist with the transition to the new regime.
Operator negotiations
While legislative change is required to implement the new regime, negotiations with operators can commence prior to this to give them as much time as possible to determine their positions and organise themselves. The
Review is aware that the Ministry of Transport commenced the negotiation process late last year, with an initial briefing for operators, region by region, on 19 December 2003.
Operators were asked to commence discussions amongst themselves and to report back to the Ministry in early 2004 with a proposal outlining organisational arrangements that would enable the Ministry to deal with one
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lead operator per contract region. Options canvassed at the briefing included joint ventures, consortia and contractor/subcontractor arrangements.
The Review believes that, consistent with the principles outlined at the beginning of this Chapter, operators who wish to remain in the industry should be given the opportunity to do so. With the co-operation and goodwill of all parties involved, it should be possible to develop regional arrangements that meet the needs of individual operators and the Ministry of Transport, at the same time as providing workable service solutions.
In the event that such arrangements are unable to be agreed upon within the required timeframe, however, the Review proposes that the next step should involve calling for Expressions of Interest from operators whose contract areas fall within the proposed region, to take on the lead operator role. Again, in keeping with the principles outlined earlier, Expressions of Interest should be assessed, in part, on the extent to which they are able to provide satisfactory solutions for other operators within the region.
Transition arrangements
Bus operators and the general public require certainty as to new servicing and contracting arrangements as soon as possible, both in terms of what these will be and when they will be implemented. While it will not be possible or desirable, from an administrative perspective, for all regions to commence under the new arrangements at the same time, it will be important to ensure that any lag time is not great. This would create inequity and confusion and would work against a consistent, whole-of-network approach.
The reforms will also have flow-on effects to other parts of the bus industry, such as the manufacturing arm. In the course of the Review, a visit to Custom
Coaches (the major manufacturer of buses and coaches in NSW) highlighted the dependence of the bus manufacturing industry on a steady flow of orders from Government and private bus operators throughout NSW. While the firm directly employs 200 people, it has a range of suppliers who are also reliant on a stable and ongoing bus industry for their economic well-being.
It would appear that the level of uncertainty in the industry at the moment has impacted on the placing of orders for buses in the medium term. Any changes to key policies such as the average age of buses can also impact on the supply side. These less obvious issues need to be considered in any reform program, as the long term interests of the bus transport system would be affected if manufacturing capabilities were lost to the state, potentially leading to increased costs and a less immediate service.
Operators and the Bus and Coach Association have also highlighted that current uncertainty as to future arrangements can make it difficult for operators who need to negotiate finance with their bank or other lending institution.
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The Review’s preferred outcome is to provide future certainty for the bus industry through new contracting and funding arrangements. As already stated, implementation should be undertaken as soon as possible to avoid confusion and ongoing uncertainty, recognising the need for a transition period before new arrangements are bedded down.
Ideally, new contracts should commence in the second half of 2004, with all signed up (at least for the Sydney metropolitan area) during 2005. This should help to resolve concerns of the bus manufacturing and finance industries, as well as provide certainty to bus operators and the public.
7.3 Key steps: rural & regional areas
As with arrangements for metropolitan areas, the starting point to introduce new arrangements in rural and regional areas is to amend the Passenger
Transport Act 1990. This needs to be done with a view to enabling a more flexible contracting regime as well as:
 encouraging the development of service models that are tailored to the needs of individual communities;
 introducing greater flexibility in the accreditation process so that the most appropriate service solution can be provided regardless of vehicle type; and
 recognising the role of community transport services in filling service gaps to meet local needs.
At the same time that legislative changes are being implemented, the Review recommends (as already noted in Chapter 5) that the new contracting and service funding models be finalised as soon as possible, in consultation with the Bus and Coach Association and rural and regional bus operators.
Subject to IPART’s endorsement of the proposed funding model, negotiations should then commence to move operators onto the new arrangements. This is a key step in the introduction of a more flexible approach in rural and regional areas, that will facilitate the introduction of other changes over time.
Discussions at a central level between the Ministry of Transport, NSW Health, the Department of Ageing Disability and Home Care, representatives of transport service providers and others need to continue to progress and formalise arrangements for the integrated planning, budgeting/funding and procurement of transport services in rural and regional areas. Ideally, as new funding becomes available or as current service arrangements expire, the coordinated approach to regional services procurement
– involving regional coordination committees – should commence. It would be beneficial to establish a Memorandum of Understanding to formalise agreement on, and the introduction of, this arrangement.
Paralleling the work that needs to be done at a central level, regional coordination committees should be established to progress initiatives from the
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ground up. The Review believes that there would be merit in commencing a pilot program in a regional area to kick-start this process.
Given the work already undertaken as part of the Dubbo are case study, this area may be the most appropriate candidate. Alternatively, a number of stakeholders in the Lismore area have suggested that it would be a suitable location to trial a new approach to service provision, and the submission from the Community Transport Organisation has also listed a range of locations across NSW that would be suitable for pilot programs. The newly established
Community Transport Group in the Ministry of Transport should liaise with these and other relevant stakeholders to determine where and how such a pilot program should be established.
7.4 Recommendations
Metropolitan areas
45. To enable the implementation of new arrangements, the Passenger
Transport Act 1990 and other relevant legislation should be amended to allow for:
 removal of automatic renewal rights;
 extinguishment of existing contracts where necessary;

performance standards and penalties;
 payment of SSTS on actuals;
 the creation of defined contract regions and the identification of strategic corridors;

a partnership approach to service planning and the replacement of
MSLs with service planning guidelines;
 IPART determination of State Transit and private operator fares;

recognition of the role of community transport in the provision of local services and/or services to meet the needs of particular groups; and
 flexibility in relation to contract periods, including temporary contracts and termination provisions.
46. To provide certainty, the introduction of new contracting arrangements should be progressed expeditiously, with the aim of being in place across the Sydney metropolitan area by 2005. The first 2 years should be viewed as a transition period, to enable the collection of relevant information and data, and the review and refinement of arrangements as necessary.
47. A whole-of-government taskforce, comprising the Ministry of Transport,
Treasury, The Cabinet Office and other relevant agencies should be established to oversee and monitor implementation of new contracting arrangements for metropolitan areas. Updates on progress with
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implementation should be published quarterly on the Ministry of
Transport’s website.
Rural & regional NSW
48. For rural and regional NSW, the Passenger Transport Act 1990 should be amended to provide for:
 a more flexible contracting regime;

a more flexible accreditation regime;
 recognition of community transport providers; and
 transitional provisions which recognise a gradual roll-out of new service delivery, funding and contracting arrangements.
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An effective public transport system must be a viable alternative to the car and provide people with attractive transport choices.
Improving public and community transport options, particularly in rural and regional NSW, is critical to ensuring people can effectively access employment as well as education, health and other services.
In the metropolitan area, buses do not form an integrated network. In rural areas, communities must find opportunities to use existing resources such as school buses to provide a better mix of local transport options.
That’s why Michael Costa, has appointed former Premier and Transport
Minister the Hon Barrie Unsworth to undertake the first comprehensive review of services since buses replaced the tram network.
The Unsworth Review has been tasked to consider:
 The opportunity provided by integrated ticketing to establish a consistent state-wide fare regime;
 The potential benefits of a network of strategic bus regions across the
Greater Sydney metropolitan area which integrate with rail services and other travel patterns;
 Improving the structure of the network to respond to changes in the future capacity of rail, and the future development of the metropolitan area;
 Improved Bus Priority measures, Transitways and other options that may impact on services and suggested desirable service standards;
 Improved use of resources in rural and regional communities to ensure more flexible solutions to local transport needs;
 Funding, contractual and regulatory arrangements and any legislative changes required to implement these improvements; and

The best mix of recommendations to achieve improvements in a cost neutral manner.
The Review will take into account the findings of the Public Transport Funding
Inquiry being undertaken by Dr Tom Parry and will provide an interim report to the Minister in November 2003 and a final report in February 2004.
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Action for Public Transport
AW & MC Hunter, Coolah
Baptist Community Services (Wagga Wagga)
Baxter’s Buslines
Beaumont’s Mullumbimby
Blanch’s Bus Service, Ballina
Brisbane Transport
Bus and Coach Association of NSW
Bus Industry Confederation
Busabout
Buslines Group
Busways
Charles Sturt University
Clarence Community Transport
Combined Pensioners’ and Superannuants’ Association
Commonwealth Bank of Australia
Community Connections
Community Transport Organisation
Commuter Council
Council of Social Services of NSW (NCOSS)
Council on the Ageing NSW
Department of Ageing, Disability & Home Care
Department of Community Services
Department of Education & Training
Department of Environment and Conservation
Department of Infrastructure, Planning and Natural Resources
Department of State & Regional Development
Dio n’s Buses, Wollongong
Disability Advocacy Network
Disability and Aged Information Service
Disability Council of NSW
Dubbo Chamber of Commerce & Industry
Dubbo City Council – Lord Mayor Clr Greg Matthews and Council Officers
Dubbo Coaches
Dubbo Community Services & Information Centre
Dubbo Radio Cabs
Fearnes Coaches, Wagga
Forest Coach Lines, Terrey Hiulls
Fremantle Central Area Transit
Gordon Centre, Dubbo
Harris Park Transport Company
Hopkinsons
Housing NSW
Hunter Business Chamber
Illawarra Business Chamber
Institute of Transport Studies
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Junee Buses
Kirkland’s Coaches, Lismore
Kyogle Busco
Lismore City Council
– Lord Mayor Merv King and Counicl Officers
Lismore Taxis
Lismore Unlimited
Local Government and Shires Association
Macquarie Area Health Service
Macquarie Bank
Metro-Link
National Roads & Motorists’ Association
Newcastle City Council – Lord Mayor, Clr John Tate and Council Officers
Newcastle Trade Hall Council
Northcott Centre
Northern Rivers Community Transport
Northern Rivers Public Transport Development Project
NSW Health
NSW Police
NSW Taxi Council
NSW Treasury
Ogden Coaches, Wellington
Parramatta City Council – Lord Mayor Clr Paul Garrard and Council Officers
Parry Inquiry
Perth Central Area Transit
Penrith City Council
Planning Research Centre
Police Citizens Youth Club
Premier’s Department
Priors Bus Service
Rail, Tram and Bus Union (RTBU)
RG Allen & Co, Coolamon
Roads and Traffic Authority
Seniors Citizens Management
Serco Call Centre
Social Justice Reference Group
Southern Coast Transit (Perth)
Southern Cross University
State Rail Authority (now RailCorp)
State Transit Authority
Surfside Buslines
Swan Transit (Perth)
Sydeny City Council – Lord Mayor Clr Lucy Turnbull
TAFE NSW
The Cabinet Office
Tolland Aboriginal Corporation
Total Environment Centre
Transitways
Translink (QLD)
Transperth
Transport Workers’ Union
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Wagga City Council
– Lord Mayor Clr Kevin Wales and Council Officers
Wagga Taxis
Wagga Wagga Chamber of Commerce & Industry
Warren Centre
Westbus
Western Australia Department of Planning and Infrastructure
Western Sydney Community Forum
Western Sydney Regional Organisation of Councils
Wollongong City Council – Lord Mayor Clr Alex Darling
Youth Action Policy Association
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2011 Residents Association
2MBS-FM
Action for Public Transport (NSW)
ARPA Over 50s Association
Association of Independent Retirees
Australian Citizens Committee for Civil Concerns
Ballina Shire Council
Bankstown Public Transport Working Party
Bay & Basin Community Resources
Birrong Branch, ALP
Bishop Austrans
Blacktown City Council
Blacktown City Community Services Network
Blue Mountains Integrated Transport Forum
Bus and Coach Association
Business Central Coast
Buslines Group
Busways
Camden Council
Campbelltown City Council
Campbelltown and District Commuters’ Association
Cardinal Freeman Village
Carool Public School Parents’ & Citizens’ Association
Castle Cove Progress Association
Catholic Education Commission NSW
Catholic Women’s League Archdiocese of Sydney
Central Coast District Council of Parents’ & Citizens’ Associations
Cessnock City Council
CityBus Direct
City Sightseeing
Coffs Harbour City Council
Combined Pensioners’ and Superannuants’ Association of NSW
Combined Pensioners’ and Superannuants’ Association of NSW (Bathurst)
Commonwealth Bank of Australia
Communication Employees’ CEPU – Retired Members’ Association
Community 2168, Liverpool City Council
Community Transport Organisation
Commuter Council Member
Coolah School Bus Advisory Group
Council of Catholic School Parents
Council of Retired Union Members Associations of NSW
Council of Social Services of NSW (NCOSS)
Council on the Ageing (NSW)
Country Labor Parliamentary Group
Crowther’s Buslink
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Curlewis Public School Parents’ & Citizens’ Association
Custom Coaches Group
Department of Environment and Conservation
Department of Infrastructure, Planning and Natural Resources (DIPNR)
Disability Council of NSW
Dubbo Students’ Association of CSU
East Forster Progress and Preservation Association
Engineers Australia, Sydney Transport Panel
Eurobodalla Shire – Action Plan Access Committee (APAC)
Fairfield City Council
Far West Area Health Service
Forster-Tuncurry District Senior Citizens Association
Gerringong Buses
Gosford City Council
Greenwich Seniors Citizens Association
Harris Park Transport Company
Health Promotion Unit, Central Sydney Area Health Service
Hornsby Shire Council
Hunter Transit Authority
Hunter Transport Consulting
Hurstville City Council
Inner West Forum of Access Committees
Institute of Transportation Engineers
Institute of Transport Studies, University of Sydney
International Association of Public Transport
Isolated Children's Parents' Association of NSW
Jonathan Falk Planning Consultants
Kellam Bus Lines
Kennedy’s Bus and Coach
Kilsby Australia
Kincoppal
– Rose Bay, School of the Sacred Heart
KPMG Corporate Finance
Kurrajong Hills Bus Safety Committee
Lachlan Shire Council
Lake Macquarie City Council
Lane Cove Council
Lane Cove Seniors’ Centre
Law Society of NSW
Lismore City Council, Public Transport Advisory Panel
Lower Hunter Public Transport Liaison Group
Macarthur Greens
Macquarie Bank
Manly Council
Manly Greens
Manly Warringah Young Labor Association
Maryland/Fletcher Progress association
Matraville Saports High School
Maunsell Australia
Member for Bligh
Member for Canterbury
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Member for Coogee
Member for Drummoyne
Member for Heathcote
Member for Heffron
Member for Manly
Member for Port Jackson
Member for Peats
Member for Penrith
Member for Strathfield
Member for Tamworth
Member for Throsby
Member for Willoughby
Metro Transport Sydney
Mid North Coast Area Health Service
Mosman Council
Ms Lee Rhiannon, MLC
Mt Druitt Priority Regional Communities Project
Mt Druitt Community Solutions and Crime Prevention Project Team
NamoiROC
National Roads & Motorists’ Association
National Seniors’ Association, Macquarie Branch
NSW Ministerial Advisory Committee on Ageing
NSW Parents’ Council
NSW Teachers’ Federation
Newcastle & Hunter Business Chamber
Newcastle City Council
Newcastle Community Transport
North Arm Cove Residents’ Association
Northern Rivers Social Development Council PTDP
Nowra Coaches
Older Womens’ Network (Newcastle)
Peninsula Public Transport Coalition
Penrith City Council
Petition
– Castle Cove Residents
Planning Institute of Australia (NSW Division)
Planning Research Centre
Prior’s Bus Service
Rail, Tram and Bus Union (RTBU), Bus and Tram Division
Randwick Labor Club
Rankin Springs Community
Residents’ Committee of Adelene Retirement Village, Wyoming
Retired Teachers’ Association NSW
Roads and Traffic Authority
Roads and Traffic Authority, Transitways
Rose Bay Residents’ Association
Round Corner Village Residents’ Association
Rover Wine Country Coaches
RPA Hospital
Seniors’ Economic Forum Unity Action Group for Retirees
Seniors’ Social and Friendship Club
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South Sydney Council
Shoalhaven City Council
State Transit Authority
Strathfield Council
Shoalhaven Public Transport Working Party
South East Sydney Bus Action Group (SESBAG)
St George Council
St Michael’s School, Parents’ and Friends’ Association
Sussex Inlet Bus Service
Sutherland Shire Council
Sydney U3A
The Benevolent Society
The Chartered Institute of Logistics and Transport
The Engadine Area Traffic Action Group
The New South Wales Council for Intellectual Disability
The Newcastle Graduate School of Business, University of Newcastle
The Park Seniors Walking Group
The Vaucluse Progress Association
The Warren Centre
TMA Software
Total Environment Centre
Transdev Australia
Transit Planners
Transit Systems Australia
Transport Planning and Management
Transport Workers’ Union (TWU)
TripFinder
Tweed Shire Council
University of Western Sydney
War Widows’ Guild of Australia NSW
Wards River District Progress Association
Water Board Former Employees’ Club
WEA Ramblers and Naturalists
Wentworth Area Health Service
Westbus
Western Sydney Community Forum
Wilmot Residents’ Action Group
Willoughby City Council
Willoughby South Progress Association
Wollongong City Council
Woollahra Municipal Council
WSROC
Wyong & North G osford Residents’ Association
Wyoming and North Gosford Residents’ Association
Wyong Shire Council
Youth Action & Policy Association
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Metropolitan network & service planning
1. Develop a network of Strategic Corridors for Sydney, Wollongong,
Newcastle and the Central Coast providing fast, frequent, direct and convenient links to regional centres.
2. To support this network of Strategic Corridors, establish 10 contract regions for the Sydney metropolitan area, 2 for Newcastle and one each for Wollongong and the Central Coast.
3. Integrate planning of strategic and local bus services, with the
Government leading network design in partnership with operators.
4. Target bus priority on all Strategic Corridors under an expanded Bus
Priority Program, supported by effective regulation and enforcement.
5. Replace the Minimum Service Level policy with more flexible service and frequency guidelines that respond to identified travel demand and support the Strategic Corridors.
6. Develop innovative solutions to ensure access to local transport services, such as better integration of community transport services with the bus network and demand responsive services.
7. Provide greater integration of metropolitan planning with transport planning policies to support regional centres, encourage development along Strategic Corridors and restrict parking.
8. Encourage local councils to implement local planning policies under which developers contribute to public transport costs, developments better accommodate public transport services, and councils and transport planners co-ordinate to anticipate service requirements.
9. Investigate the provision of free CBD bus services – jointly funded by councils and Government – in Parramatta, Newcastle and Wollongong.
Metropolitan contracting
10. Phase-in the introduction of competitive tendering as current contracts expire. In transitioning to this arrangement, stringent cost and performance benchmarking and monitoring should apply.
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11. Establish new contracting arrangements with terms and conditions that include or reflect:
 a duration of 5 years;
 new planning and funding arrangements (such as mechanisms to determine service frequencies, negotiate service changes and promote partnership planning);

a comprehensive set of measurable service standards and specifications (such as punctuality and reliability requirements, complaint handling processes, community consultation/notification mechanisms);
 driver training and work safety priorities (such as induction, customer relations, safety and personal security aspects);
 reporting requirements and patronage and service data to be provided;
 uniform fares, ticketing, concessions and SSTS arrangements;
 Smartcard arrangements, including the installation of new technology hardware on buses; and
 a series of graduated remedies, such as a penalty regime, to deal with contract breaches, and termination and step-in rights (as necessary) as a last resort.
Metropolitan funding
12.
Modify the current “net cost” funding model, where operators retain the fare revenue, to incorporate:
 payment of school student transport on actual travel only using
Smartcard technology;

reimbursement of concession travel at an agreed rate or fixed sum; and
 payment of transparent service subsidies for agreed outcomes at efficient costs, in those areas where it is determined (either on the basis of efficient costs benchmarking or competitive tendering) that fare and other revenue will not be sufficient to enable service requirements to be met.
13. Over time, align subsidy payments to State Transit and private operators as fare levels are equalised, to be part of an industry-wide subsidy payment as outlined in recommendation 12.
Rural & regional NSW
14. Introduce Integrated Regional Transport Planning as a vehicle for a whole-of-government approach to planning, contracting and funding transport services in rural and regional areas.
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15. Establish Transport Working Groups in identified transport regions
– aligned with the planning areas used by NSW Government human service agencies – to involve stakeholders in identifying and developing strategies to meet the region’s transport needs. These groups would bring together state and local government agencies, service providers, community organisations and representatives of service users.
16. Employ, in the Passenger Services Division of the Ministry of Transport, regionally based Transport Development Officers with responsibility for co-ordinating, in consultation with the Transport Working Groups:
 the development plans that identify needs and the package of services required;
 procurement of services; and
 ongoing contract management and performance monitoring.
17. Implement a new regulatory model, with a focus on service delivery outcomes rather than different service types, and a more uniform approach to accreditation across service providers to promote innovative service solutions.
18. Implement flexible arrangements for procuring the identified “package” of services required for a particular area. Local service providers should be encouraged to work co-operatively and submit collaborative proposals for meeting identified service needs. Competitive tendering could be an option where collaborative efforts are not possible, and/or there is a likelihood of reasonable competition.
19. Assess service provision proposals on the basis of:

maximising available resources and minimising duplication of effort;
 effectively meeting identified community need;
 the ability to provide services at efficient cost; and

ensuring fair and equitable opportunities for all accredited service providers.
20. Implement a more flexible contracting regime, based on services to be provided rather than a specific region or route and incorporating the following:
 a 5-year term;

planning and funding arrangements;
 arrangements in relation to SSTS, fares, ticketing and concessions
 measurable service standards and specifications for the mix of required services;
 appropriate reporting requirements to enable better monitoring of performance and assist with service planning, and
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 mechanisms for dealing with dispute resolution, complaints, breaches of the contract, and reassignment of the contract in certain circumstances.
Contracts with service providers that involve use of Government funded vehicles would also include availability requirements and charge out rates to specified community groups (based on benchmarked efficient marginal operating costs).
21. Obtain cross agency support for establishing Integrated Regional
Transport Budgets through pooling existing funds from SSTS payments, concession reimbursements, community transport funding, and other
NSW Government agencies’ rural transport programs.
22. As part of the new contractual arrangements, implement a funding model that:
 as appropriate, encourages service providers to collect and retain fare revenue;
 enables specific services to be purchased on a per kilometre basis;
 reimburses any SSTS or concession travel provided on the basis of actual travel and/or at an agreed (efficient cost) rate;

enables the provision of targeted subsidies (from the Integrated
Regional Transport Budget) where the above funding streams will not be sufficient to enable the provision of services identified through the planning process; and
 enables any savings from the pool of funding to be directed towards increased service provision and/or the purchase of additional services.
23. Develop a proposal for an Integrated Regional Transport Planning model
(as outlined above) for the Dubbo area, incorporating a Transport
Working Group, a Transport Development Officer, new contractual arrangements and an Integrated Regional Transport Budget. This should then form the basis of discussion and consultation with relevant government agencies, service providers and other stakeholders.
Following refinement and agreement, the model this should then be trialed in Dubbo.
Statewide fares, ticketing & concessions
24. Adopt a consistent fare scale, as determined by IPART, across all metropolitan bus services.
25. Apply a single fare scale to regional NSW. This may be higher than the metropolitan fare scale if there is evidence to support higher costs relative to passenger numbers for regional areas. Transition arrangements to balance impacts on passengers and operator revenue will need to apply.
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26. Under new contractual arrangements, require operators to offer a frequency of use discount, possibly in the form of a Travelten or equivalent “travel bonus” scheme.
27. Apply a consistent suite of targeted concessions, based on those available on State Transit buses, across NSW, with the bus Pensioner
Excursion Ticket expanded to the greater metropolitan area.
28. Implement the proposal from the Parry Inquiry Interim Report to increase the Pensioner Excursion Ticket to $2.50 and to target its availability to
Pensioners and War Widow/ers. The ticket should not be available before 9:00am weekdays, when half-fare concessions should apply.
29. Introduce the proposed Smartcard system with a very simple set of fares and a limited number of products only.
30. Oblige operators under their contracts to be involved in the Smartcard ticketing system to ensure its full benefits are realised.
SSTS administration
31. Implement the Parry Inquiry Interim Report’s option of introducing a $30 annual copayment for SSTS, with “safety net” exemptions for those families who cannot afford to pay.
32. Give further consideration to the Public Accounts Committee’s Inquiry into the SSTS proposal to give schools direct control of transport budgets and responsibility for purchasing services.
33. Develop a Memorandum of Understanding between education bodies and the Ministry of Transport to progress key SSTS administrative tasks that are essential to the effective running of the Scheme.
Statewide governance arrangements
34. In the long term, establish a NSW Passenger Transport Authority with responsibilities for planning (in co-operation with providers), contracting, funding and monitoring passenger services, including buses, and for regional co-ordination in relation to community transport.
35. In the interim, establish a Passenger Services Division within the
Ministry of Transport to undertake the above functions.
36. Further consider alternative asset management arrangements that would separate asset ownership from service operations.
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