Public Monopoly with Management Contract / Legal Aspects / Legal Instruments / Management Contract

Management Contract
A management contract is an arrangement where the owner of an enterprise entrusts the management and operational control of that enterprise to an unrelated party (the management company) for an agreed period of time, in return for compensation. Implicit as the basis of the management contract is the separation between ownership of the enterprise and its actual management.

The management company provides an integrated package of managerial, technical, financial, marketing and other skills required to develop, run or rehabilitate the enterprise. Management contracts involve not just selling a method of doing things, but require — on the part of the management company — actually doing them.

Three entities are involved in the kind of business relationship created and governed by the management contract.

The owner of the enterprise in need of managerial services, which in a public monopoly with management contract is either a municipal government or a public transport authority (henceforth “the public monopoly”, unless it becomes necessary to differentiate between the two).
The management company (the manager could be an individual, but because the party in question is more often a company, private or public, we will speak only in terms of management company).
The enterprise itself, which in a public monopoly with management contract is either
a department of the municipal government, a separate company owned by the municipal government, a statutory public transport authority or a legal or functional subdivision of it.

Typically, in a management contract between a public monopoly and a management company, the former owns the vehicles and other facilities and employs the drivers and maintenance personnel while the management company provides an experienced and qualified management team, various technical, financial and marketing support, and control over the day-to-day operations. However, the management company's control over the affairs of the enterprise is not absolute since it can rarely set fares or choose routes or play a key role in labor negotiations.