Costs

Costs
Understanding and managing costs is critical for efficient bus operations. They form the basis of benchmarks and indicators that measure the bus system’s financial performance.

Cost structure
The cost structure of a public transport service is complex. Some costs are fixed in the medium term, regardless of the level of activity. Some costs vary with the number of buses, and some with the number of kilometers operated.

It’s important to understand the characteristics of the various cost elements in order to be able to establish with reasonable accuracy the cost of any activity, such as the cost of operating the full service on a particular route, or the cost of an individual journey in the bus timetable.

Cost level of detail in the financial model
Presenting the appropriate level of operating cost and capital cost detail in the financial model will depend, in part, on how the bus operator’s accounting system captures operating and Capital costs. The authority has to organize the costs provided by the bus operator into a cost structure that can readily construct and measure financial benchmarks and indicators.

Reliability of cost data
Another important factor in cost assessment is the reliability of the cost information. Ideally, the authority should use cost figures that have been audited by an independent external accounting firm, although this is rarely the case in most developing countries. More often the authority will have to rely on the operator’s management information system or their financial reports for cost data.