Quality Contracts - Alternative to Competitive Tendering for Public Transport in Oslo. Supplementary report

This report discusses the consequences of the introduction of quality-dependent subsidy contracts in Oslo, i.e. a practical and manageable model which will provide most effective utilisation of the subsidies to AS Oslo Sporveier seen from the standpoint of a service to the public. Our calculations show that the introduction of quality-dependent subsidies will provide a social-economic benefit of about NOK 300 million p.a. without the need for increased subsidies. The efficiency potential will depend upon the framework for such a contract. The details of this subsidy contract and possible transitional adjustments must be the subject for negotiation, thereby influencing the “optimal” level for the individual subsidy elements. The report recommends that a quality-dependent subsidy arrangement is introduced in Oslo on a trial basis for a five-year period and that this contains a “safety net” in the form of minimum demands which must be met in order that the contract is not rescinded.