Scandinavian Working Papers in Economics

Working Papers,
Swedish National Road & Transport Research Institute (VTI)

No 2009:13: QUALITY INCENTIVES VERSUS QUALITY OUTCOME IN PROCURED PUBLIC TRANSPORT - CASE STUDY STOCKHOLM

Kjell Jansson () and Roger Pyddoke ()
Additional contact information
Kjell Jansson: Royal Institute of Technology Stockholm, Postal: Institutionen för transporter och samhällsekonomi, Teknikringen 78 B, 1 tr, 100 44 Stockholm, Sweden,
Roger Pyddoke: VTI, Postal: Dept. of Transport Economics, P.O. Box 55685, SE-102 15 Stockholm, Sweden

Abstract: Gross contracts appear to be the most common contract form for procured public transport in Sweden and elsewhere. This contract form, it has been argued, gives weak incentives for operators to deliver the desired quality level. Therefore many procuring public transport authorities amend contracts with quality incentives. This paper is probably one of the first studies to examine how such quality incentives influence quality outcomes with focus on cancelled departures and delays. The main findings are that the introduction of quality incentives are correlated with both increases and decreases in measured quality outcomes. We do not think, however, that the incentives in themselves have negative effects but hypothesize that the results are driven by underlying cost changes for achieving desired quality objectives that exceed the possible revenues from the incentives. In interviews with the Stockholm public transport authority (SL) and some operators, two central observations surface. The first is that there are causes for quality failures that are not solely the responsibility of operators and that these are therefore not fully reached by the incentives, and the second is that the operators believe that they have exhausted what they can do under the current contracts.

Keywords: procured; public transport; gross contract; net contract; quality; incentive

JEL-codes: R48

23 pages, October 29, 2009

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