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A key attribute of competitive tendering for the periodic selection of operators of subsidised public transport services is to secure the provision of specified services at efficient cost levels. This has proved particularly effective where services were previously provided by an inefficient monopoly operator. The arguments for the adoption of competitive tendering in preference to negotiation with the incumbent operator may be less clear-cut in other cases. Consideration is given to both theoretical and practical insights into the relative merits of competitive tendering and negotiation approaches in such situations. The limited literature on the topic is reviewed and insights and lessons identified. Influencing issues include prior conditions, the nature of the supplier market, features of contracts, negotiating and competitive tendering strategies and practice, accountability and transparency, and long-term market implications. The evidence suggests that ‘one size does not fit all’, and the choice will depend on specific circumstances. The relative merits of the two approaches for renewal of bus contracts are considered with regard to Adelaide, for contracts which have previously been awarded through competitive tendering. The paper draws out the main factors that could influence the authority’s choice between the options, and discusses the relevance of the findings to other situations.

Competitive tendering has become the preferred option in many cities for the selection of operators of subsidised public transport services. Its main merit is seen as securing the provision of services at efficient cost levels, particularly in cases where services were previously provided by an inefficient monopoly operator. Creativity in service design and improved management of the workforce may be other objectives. However, once efficient cost levels have been established, the case for the continuing use of competitive tendering in subsequent contract rounds in preference to negotiation with an incumbent operator may be less clear-cut. Similarly, in cases where services have previously been provided through negotiation with an efficient (usually private) operator, albeit on a monopoly basis, the case for competitive tendering may also not be clear-cut. This paper provides an assessment of the relative merits of competitive tendering (CT) or negotiated contracts (NC) for the provision of bus services in Adelaide (South Australia) following the expiry of the current (competitively tendered) contracts in April 2010. It is based on work undertaken by two of the authors (Ian Wallis and David Bray) working as consultants to the South Australian Department for Transport, Energy and Infrastructure, Public Transport Division (then headed by the third author, Heather Webster). Surprisingly limited consideration has been given in the international literature (including past Thredbo series conferences) to the relative merits of competitive tendering and negotiation approaches for the procurement of public transport services. The paper reviews the limited relevant literature and identifies the insights and lessons that it provides. This review indicates ‘that one size does not fit all’, and it identifies a number of factors pertaining to the performance of the current contracts/-operators and the likely market appetite that will influence the relative merits of the alternative approaches. The paper then examines the Adelaide situation and assesses the extent to which the various influencing factors are present in Adelaide and hence the extent to which either a CT or NC strategy would be preferred. This assessment is supported by a complementary assessment that examines whether a CT or NC approach is likely to be more effective in addressing a range of SA Government objectives affected by the choice of procurement strategy. The paper then draws conclusions on the preferred strategy for adoption in the Adelaide situation, and finally discusses the wider relevance of these findings to the procurement strategy choices that are likely to be faced in many other cities internationally.