Competitive tendering in local bus services. Effects on rural service levels and on administrative costs

Previous studies have shown that competitive tendering is associated with cost reduction for the procuring authority. This report analyses its effects on service level in rural areas and on administrative costs. It is shown that during the last 5-10 years, service levels have increased more in urban areas than in rural ones, and seemingly more so in areas relying on competitive tendering. Rising service levels in cities, however, are mostly due to political subsidy priorities in favour of urban areas during the last 10 years, agreed on both local and national level. The analyses also show that competitive tendering is associated with rising administrative costs for the local government. The cost increase is, however, closely connected to the shift from net cost to gross cost contracts, and to the authority’s take-over of planning and design responsibilities.