Area Contract (Gross Cost) / Legal and Regulatory Framework / Gross-Cost Area-Contract / Monitoring and Enforcement

Monitoring and Enforcement
Monitoring is important
A gross-cost area-contract should contain realistic and effective provisions for the monitoring and enforcement of its terms. Like many other provisions contained in the contract, the contents of the monitoring and enforcement clauses must balance various conflicting needs and interests.

The interest of the bus operator is to be able to manage and operate bus services without undue interference from the transport authority and without having to justify every operational decision it makes.

The transport authority, however, needs to retain the ability to ascertain in a timely manner whether the bus operator is properly fulfilling its obligations under the contract. The authority also needs to be able to intervene, in a timely manner, if obligations are not met properly.

How the transport authority can intervene is generally set out in each relevant provision of the contract. The options available to it can range from doing nothing, in the case of an isolated event, to terminating the contract if the bus operator is guilty of repeated poor performance.

Two main elements of proper contract monitoring

Self-reporting by the bus operator through the disclosure of all relevant information to the transport authority.
Periodic inspections and audits of the bus operator by the transport authority.

Disclosure of all relevant information
The gross-cost area-contract should provide for a series of different reports from the bus operator to the transport authority. These might include financial, operational, technical, procurement, legal and marketing reports. These reports are either informational or designed to elicit a decision from the transport authority on a specific issue.

Proper financial and operational information is especially important. These reports should be comprehensive and submitted at fairly frequent intervals. Not all the information listed below will necessarily be of use to the transport authority. But it does represent the kind of financial and operational information that a transport authority might reasonably need.

Financial information
During the contract period the bus operator, as soon as practicable, should provide the transport authority with information on:

Revenue from bus services in the area
- Total revenue received for the period
- Total revenue received from fares
- Additional breakdown by day (Monday to Friday, Saturday and Sunday)
- Additional breakdown by volume and value of each ticket type sold, by day
- Other sources of revenue

This information will help the transport authority under a gross-cost area-contract to monitor whether all the revenue collected by the bus operator is returned to the transport authority.

Operational information
The bus operator should provide the transport authority, on a regular basis as determined in the gross-cost area-contract, with the following operational information concerning the bus services:

Passengers
- Total for the period
  Passengers/km during that period
- Classified by day(Monday to Friday, Saturday and Sunday)
- Classified by class (e.g., adult, child, pensioner)
Scheduled trips
- Operated: Total for the period (Classified by day: Monday to Friday, Saturday and Sunday)
- Not operated : Total for the period classified by reason of failure (staff shortage, failure of staff to show up to work, mechanical or vehicle failure, traffic incidents or congestion, other) and classified by day (Monday to Friday, Saturday and Sunday)

The first type of information is useful both for general information purposes and as a back-up source of data for the farebox revenue collected by the bus operator. The second type of information is useful for determining penalties or deductions under the contract.

All further additional information reasonably required
In addition to specific financial, operational, technical, procurement, legal and marketing reports required from the bus operator under the terms of the gross-cost area-contract, the transport authority should allow itself some leeway, through appropriate provisions to that effect in the contract, to request from the bus operator any additional information that it may reasonably require from time to time. When asking for such additional information the transport authority should bear all legitimate costs, if any, associated with its production.

Inspections and audits
Under the gross-cost area-contract, the transport authority should also reserve to itself, whether through its own employees or through third parties hired by it, the right to carry out at its own cost:

Inspections — in the form of scheduled or random monitoring and review of the quality of the bus services provided by the bus operator, including:

adherence to schedule
safety
driving standards
quality of the personnel assigned to the operation of the buses
staff attitude to customers
scheduled or random monitoring and review of all activities associated with revenue collection by the bus operator

Audits — of any information provided by the bus operator under the contract, including the right to have reasonable access to all relevant equipment and facilities, records and accounts.

Because the bus operator will have a number of self-reporting obligations under the gross-cost area-contract the emphasis on the inspections and audits by the transport authority should not be to comprehensively review everything the bus operator does. It should be to ascertain that the bus operator’s self-reporting is accurate.

The contract should provide for penalties to be paid by the bus operator if it fails to report or for under-reporting failures and deficiencies.