One for the other
Analyzing a very interesting development that happened.
The LTA announced with SBS Transit that it would shift the DTL operation contract to the New and Improved version of the NRFF. Apparently the issue with the old one was that the operator assumed far too much revenue risk. That’s not a scenario anyone wants while DTL ridership remains depressed both due to current events as well as multiple competing modes for a relative lack of development. Though the latter is in the long and slow process of getting a fix, such as seen with Tampines West BTOs and perhaps some of the service changes in the Bedok Reservoir area.
In the same breath it was also revealed that five of the seven bus packages they currently hold were also being extended. Along with the previously-given three year extension to the Sengkang-Hougang bus package, that means SBST will not have to fight a competitive tender for bus operation packages until at least 2023, which may have consequences.
To me, this sounds like those rare cases where everyone gets what they want.
It is important to note that when most bus services were transitioned over to contracting, 9 out of 14 were done so through negotiations instead of putting the packages on the auction block. Why they chose to do this I have no exact idea, but presumably a key reason is the lack of proper LTA-owned infrastructure such as buses and depots; keeping the existing operators on board gives us time until these infrastructure can come online. At least 5 depots are under construction — 3 of them integrated with MRT depots, which ties their opening times at least to the same time as the line.
So at that time, I find it likely that operators had the upper hand and could name their price. To me, this could be one of the sources of the billion dollar losses in bus contracting — the LTA may have had difficulty haggling down the operation cost because the operators had nothing to lose. Well, it looks like this time, SBST had something to lose.
Tying the bus contracts to the DTL is essentially a give and take scenario — and a pretty smart one, I must say. As compensation for taking on rail-related losses and also having to hand out additional subsidies due to these losses, the LTA benefits from lower bus service fees. On paper, the financial situation for both parties may look the same as today in the short term, even if some money is shifted from one accounting column to another.
However, the LTA is also in a position to recoup these losses. Putting the financial burden of the DTL on them should likely mean a greater emphasis on making the most of their money. In other words, and you know it’s a long-running theme here, they now have a greater impetus to think twice about any bus routes doing the same job as the MRT line. Then, as people shift from bus to rail, something can then be done about underperforming or marginally useless bus routes. Along with increasing rail ridership, that means both lesser subsidies and lesser service fees; which could be offset to a certain point by increased rail and bus operation levels in the right places.
Furthermore, the negotiation process may also include provisions to financially compensate SBST for the replacement of their old Euro III and IV buses in favour of new ones from the LTA storage pool, under something akin to the Early Turnover Scheme. The pool originally comes from the acceleration of the bus replacement cycle; so it would make sense to logically bring forward the retirement cycle of old vehicles anyway. If this happens, it could also give them the cheap political win of having all buses be at least Euro V by the end of 2023 or something, which can potentially be greenwashed into some form of environmental progressivism.
With this done, we can make the most out of available bus operation resources; if increases in fuel efficiency can be obtained from newer vehicles to lower the cost of fuel, even better. With coverage a problem solved, money can and should be better spent on improving public transport availability and reliability, which can include services turning up more often, or more frequent checks and training, or the technology to facilitate the above.
The revolution betrayed?
But yet, the fact that the LTA saw fit to extend the current operating terms of SBST’s bus packages might point to all not being right with the concept of bus contracting, or even with contracting in general.
The idea behind contracting was to infuse some new ideas into the current bus industry. This brought in Tower and Go-Ahead, and while their practices such as interlining have been controversial amongst some, I think it quite fair to say that the man on the street, and drivers too, have seen some improvements in quality of service and quality of life.
Negotiating contracts may spit in the face of all this. As mentioned, there may be an argument for negotiation with LTA’s facilities not ready and the operators’ facilities not being up to scratch. It might make some sense to extend the existing contracts, avoiding the need for the outgoing operators to transfer ownership of their existing facilities and potentially another troublesome mid-package move to the permanent depot, all of which means money is thrown into the black hole of administrivia.
Still, renegotiation plays up the incumbency advantage offered to the current operators. Without a threat of their lunch being stolen, there may not be much of a point to deliver additional value even if the LTA is able to drive a hard bargain and lower the actual dollar sums paid out. Tying the desired bus outcome to a renegotiated rail operating contract is a card that can only be played once.
Might outcomes get worse? It’s hard to say so, and would require such a microanalysis of operations that only makes sense to do if you’re either the LTA tenders team responsible for reviewing the bids, or a busfan with too much time on your hands and potentially some childish vendetta. Let’s see what happens next year if and when tendering opens for someone to replace SMRT as the operator of the CCK-BP and Woodlands bus packages when they expire in 2023. It may be the right thing to do, but will it happen?
There’s also considering that as existing players get entrenched in the system, other newer players may not be that interested in bidding for operation packages here, as CNA warned about in 2019. The risk of this is real looking at the amount of bids for even the combined Bulim and Sembawang-Yishun packages; and the current mammoth size of SBST’s operations here,
The last question we may need to ask is, are the sizes and lengths of packages sufficient? 5 years may see far too much turnover between operators and prevent institutional memory from forming, and perhaps even incur extra administrative overhead due to the frequent handovers and time required to manage tenders (around a year?). And if the supposed options to extend the contract for “good performance” keep being extended regardless of actual performance, then it might be a better idea to just make the base terms of future contracts longer, with performance reviews taking the form of a favorable tender review for the next term. I’d say about somewhere between 7 to 9 years could be good.
Relatively short contracts without the “option” to renew their employment with the existing company at a package handover may also present far more disruption to the lives of bus drivers as they switch employers and have to adjust to the culture of the new employer. We saw this with the mass walkout of Go-Ahead staff when they first came in and the drivers couldn’t adjust to Go-Ahead’s policies; imagine going through that every five years. Longer terms also give employees time to settle down and make themselves at home — to understand the contracting company’s culture and practices.
The other dimension that needs to be understood is size. There are currently 14 bus packages, though it may not be entirely fair to just divide that by the amount of bus services with the varying length of services, as well as the hubs they are run out of. I was at Clementi interchange the other day and found it extremely odd that Tower Transit only operated feeder services out of Clementi — especially 284, most notably the shortest bus service in Singapore.
Can we build 14 bus depots, though? And will 14 bus depots be able to efficiently serve most of Singapore, especially in an electric era with limited vehicle range and with an expanding rail network? London has at least 70 — five times what we have here, and with only double the amount of bus routes. Granted, we do overbuild bus interchanges to the point where they might be able to almost completely support some level of operations on their own with buses only returning to the depot for scheduled maintenance.
With that in mind, perhaps some package consolidation in terms of locations, by reducing the amount of locations a package operator may have to operate, might also help with sustainability by reducing administrative overhead. This would probably be done by service planning introducing more loops, and services short enough (~10km) to operate as loops, such that offices need not be operated at both ends of a route; even if those offices can be automated away with self-service timekeeping terminals.
On the rail side of things, since packages are fixed by the length of the train line, another possible outcome could be to get rid of contracting as is implemented now, and the associated middle management costs. We can then move to a leasing model very similar to the HSR AssetCo, where suppliers are given full responsibility over the availability of their products. This would be a logical extension of existing long-term service agreements. Like with schoolteachers and doctors, station and control room operational staff can then be hired either directly or indirectly by the government (hello MOH Holdings), or through a manpower supply agreement. With automated trains, there should not be a need to hire so many train drivers either.
Lies, damned lies, and statistics?
But this doesn’t really change anything since the onus of route and capacity planning still remains with the LTA. Contracting means they pay for what they order, and if they still continue to order excessive services where it’s unnecessary resulting in unacceptable levels of losses, they now have no one to blame but themselves.
Hot on the heels of these changes to rail and bus contracting was a drastic cut of service for Bedok Reservoir residents, who in one fell swoop stood to lose three bus services — 22, 66 and 506. 66 is understandable — for 70% of its route it follows either the DTL or the large amount of alternate bus services. And frequencies are trash — 15 minutes being at the limit of turn up and go, and you’d probably still come out ahead if you went downstairs and took the train. The only part of 66 worth keeping is 66C which only operates to Beauty World, and they have kept that.
22 might have a stay of execution while we wait for Circle Line capacity enhancement works to complete. Or perhaps 24 might get put on the block considering it’s a long airport loop service, and long loops are after all more prone to delays or disruption especially considering the Singaporean driver’s propensity to crash his car. Keeping 22, and perhaps a frequency increase, might make sense as a replacement.
506 is the one that has incurred the most indignation. But again the LTA’s problem is that they do not explain themselves properly, and it looks like they need me to do the explaining for them again. Let’s be fair, the ridership data is extremely grim. According to the data, in October 2021:
- 165 passengers a day use 506 between Bedok and Toa Payoh
- Another 20 use it between Bedok and the Jurong East area
- Another 66 between Bedok and Bukit Batok
At average 15-minute frequencies and a 16-hour day, that means only around 4 to 5 passengers are going that far on a typical 506 departure from the Bedok area. You could multiply that by 3 or something to account for public health-related ridership drops, but that still won’t get far. Why the poor numbers? For one, 506 is an express service, and its express fares can be a turnoff. Secondly, in the name of the express service, key transfer stops like St Andrew’s are missed, albeit that is somewhat made up for by making local stops within Toa Payoh Lorong 6. Even 284, the second shortest bus service in Singapore, achieves several times more ridership than that.
Some people might think it better for the whole thing to go, but if your problem is with the number and not the route, then I think you might have bigger issues to work through. The intention might be to provide a northeast-to-Jurong route — while it may not be so necessary with the Circle Line, if they think they want to charge express fares for comfort, then so be it. As mentioned, what I think is more important is frequency and reliability —trains and buses should come often, and come predictably, even in the off peak. This will help reduce the pain of transferring and thus ease demand for direct services, but the money has to come from somewhere.
What is in store?
But this is just one example. With extended flexible working and some other employers likely to commit to that for the foreseeable future even if the government lifts the mandate, the flattening of the curve will be upon us. This means that an excess of trains and buses, if initially justified because of very high amounts of peak services required, may now no longer be such a good idea. Things may not be the same again.
Again, it has to be said: every dollar saved in transport operations can be reinvested by the government into other fields, most notably healthcare. Want to know why? Go ask the Health Minister. Or maybe you might not, if you’ve spoken to healthcare frontliners. Paying the healthcare sector more might be quite necessary to restore respectability to the job and get locals into the field. Interestingly, the positive effects of increased pay can already be seen in transport, where paying bus drivers more has actually made it a more worthwhile career compared to where we were in 2012.
But we’re digressing. In light of this, it’s useful to note that the Network Capacity Factor actually penalizes taking their time and rewards immediate action after a new rail opening — albeit we pay and not them. In a sense, the recent fare increase could potentially have been staved off had they managed to reduce the wasted operating-km earlier. So we have an interest in keeping the NCF down, assuming they still find it even relevant after 2022.
It is actually interesting to also point out that in 2021, the allowable fare increase without the NCF was actually negative, due to the economic impact of the public health situation, cushioning the impact of the 2020 exercise’s 4.4% increase. 2022 will likely tell a very different tale considering the current pace of the economic recovery, which looks likely to result in uncomfortably large year on year jumps — inputs which the current fare formula is predicated on.
What the NCF also doesn’t account for is high asset acquisition and renewal cost, mainly in vehicles themselves, because of the need to deal with high peak travel but much reduced off-peak travel volumes. Putting our assets to better use by increasing off peak service would be welcome, especially if off peak travel volumes recover faster than in peak and so off-peak trains and buses are fuller on a per-vehicle basis. Demand micro-management based on big data models could also help especially on the automated MRT lines, but the scope of intervention is far lesser for buses due to the need to assign shifts and the like.
In any case, the LTA’s operational cost-cutting drive — infrastructural value engineering is another thing altogether — will only go so far if they aren’t willing to ask themselves hard questions on things like, for example, the continued relevance of City Direct and express bus services in light of the social changes in work and the growth of multimodal transport options. A further battle may also be brewing with east coast and Jurong region bus services as we approach the opening of the respective MRT lines, and they would probably be fools to not prepare for that in advance.