In almost all cases, instituting a public monopoly structure is inadvisable. The experience of developing countries around the world shows that public monopolies fail to deliver a sustainable public transport service. Even where a management contract is used, the results do not usually meet expectations.
There are several inherent disadvantages of a public monopoly system. Poor service because of a lack of competition is a typical example. Another is the inability of public monopolies to generate sufficient funds to pay for bus maintenance and investment in infrastructure.
Public Monopoly with Management Contract
If all bus services within a city or urban area are provided by one publicly-owned undertaking it’s a public monopoly.
The senior management team of this system might not be on its payroll. Instead, a specialist team of managers, usually from the private sector, may be engaged under contract, selected by tender or other means. This situation is called a public monopoly with management contract.
- Typically, the management team would consist of a:
- General manager
- Operations manager
- Engineering manager
- Marketing manager
- Chief accountant
- Human resources manager
- Corporate affairs manager
- Senior administrative and secretarial staff
Major disadvantages of a public monopoly with management contract
- Absence of competition often results in poor service.
- Conforming to government guidelines for staff terms and conditions often results in over-staffing with high salary costs.
- As a government agency the operator cannot voice opposition to political edicts even where these are detrimental to bus operations.
- Public monopoly operators are often unable to secure adequate fare increases, or to secure funds for investment in new buses.
- There is a tendency for the operator to become more powerful than the regulatory authority.
- Frequent management changes will result in poor continuity within the organization.
- The management team is limited in its powers since most of the staff remain on local government terms and conditions.
A public monopoly should only be considered under limited circumstances
- No private companies are interested in investing in the bus industry.
- An exclusive franchise or operating right to a route or area cannot be enforced.
- Previous attempts to improve the services provided by private sector operators have failed, for reasons beyond the authority’s control. For example, because of criminal activities or failure by government to fulfill its obligations.
- There is a desire to bring in professional management while retaining ownership of the assets.
- There is a desire to introduce some competition for the right to operate the system.
System design for a public monopoly with management contract must take into account: