Net-Cost Route-Contract
A net-cost route-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 on one or more specified routes.
If the bus services are unprofitable, the bus operator retains all revenue it receives in the course of providing the bus services. The transport authority pays a predetermined amount 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, either a percentage of the revenue collected by the bus operator or all revenue collected above a predetermined level is given to the authority.
The two key elements which differentiate this bus contract from other types of bus contracts, such as: gross-cost route-contracts, gross-cost area-contracts, and net-cost area-contracts, are:
- The type of network unit awarded to the bus operator (namely a route).
- The basis of payment for his services (namely by gross cost). [3.6(ii)g]
See also
General contract design
Allocating risks and responsibilities
Payments
Monitoring and enforcement
Resolving disputes
Duration
Legal aspects
Regulatory framework
Tendering documents
