Net-Cost Area-Contract
A gross-cost area-contract is a legally binding agreement between a transport authority and a bus operator whereby the transport authority grants to the bus operator the exclusive right to provide bus services in one or more specified areas.
If the bus services are unprofitable, the bus operator retains all revenue received by it in the course of providing the bus services. The transport authority pays the operator a predetermined amount. This is established on the basis of the expected difference between the revenue to be collected and the estimated cost of providing the bus services.
If, however, the bus services are profitable, the transport authority is handed back a predetermined fixed amount. Alternatively, the operator receives either a percentage of the revenue collected by the bus operator in the course of providing the bus services or all revenue collected above a predetermined level.
The two key elements which differentiate this bus contract from other types of bus contracts, such as: gross-cost area-contracts, gross-cost route-contracts, and net-cost route-contracts, are:
- the type of network unit awarded to the bus operator (namely an area)
- the basis of payment for his services (namely by net cost).
See also
General contract design
Allocating risks and responsibilities
Payments
Monitoring and enforcement
Resolving disputes
Duration
Legal aspects
Regulatory framework
Tendering documents
