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Beware the pitfalls of privatising Adelaide's trains and trams


Privatising Adelaide’s public bus services worked well – for a time – but what about the trains and trams? Former State Government public transport planner Tom Wilson details the questions that would need to be answered before privatisation is extended to rail.

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As a public transport planner who worked for the Passenger Transport Board and its descendants through the period when Adelaide’s bus services were “privatised”, I feel it is necessary to comment on the latest news about the possible privatisation of our train and tram system. I am not rusted-on Liberal nor Labor and neither for nor against privatisation. My aim is to see that decisions are made on the facts and that an outcome is a good public transport system for Adelaide.

Firstly, some people refer to the proposal as “selling off”. The bus system was not sold off when it was privatised, and neither should the rail system. The State Government-owned buses and depots were made available to the bus service contractors to use. Since that time, some contractors have also purchased some buses of their own. The Government continues to purchase new buses for the contractors to use.  Contractors have also built their own smaller depots, closer to bus terminating points, to provide the bus services more efficiently.

I would presume that if the rail and tram network were privatised, the same system would apply and that the Government would retain ownership of all the tracks, trains, stations and depots.

When the contracting-out of the public transport system was proposed by the Liberals in 1993, it was intended that the operation of the buses, trams and trains would all be contracted out. By April 2000, the buses were all operated by private contractors. For reasons never fully explained, the same contracting-out system was never applied to the trains and trams.

… a rail contractor who is much cheaper than any competitor and has little public transport experience is sure to ensure a poorer service.

The contracting-out of the buses saved the Government a huge amount of money, including because of greater efficiencies with private operation, but primarily due to reduced labour costs. Services were not reduced – in fact there were many improvements made, including the Go Zones which provided improved bus services on major routes, and the night and Sunday bus services, which had been severely cut by Labor in 1992, were reinstated. The result was an average annual increase in bus patronage of 2.6 per cent between 2000 and 2010. The service increases were assisted by an incentive payment made to the contractors for additional passengers carried.

The privatised bus system did not result in increased fares other than what would have happened anyway. The private contractors do not keep the fare revenue – that is paid back to the Government.

Unfortunately, some mistakes were made when new bus contracts commenced in 2011.

Firstly, the potential savings by bus privatisation had all been made in the period to 2000 and could not be expected to repeat themselves every time new tenders were called. The Government had been advised of this and that it should just renegotiate with the then-contractors. Unfortunately, it did not heed this advice.

A contractor with little experience won two contract areas because it had the lowest priced tender, and the contract areas it won in 2011 were taken away from a very experienced contractor who had been responsible for many of the service improvements made between 2000 and 2010. According to many media reports and ministerial statements at the time, the new contractor made a hash of things and could not run the services anywhere near on time. The Government had to keep propping it up.

Eventually, in 2018 that contractor gave up and sold its services to the contractor from whom they had been taken. The lesson learnt from this is that it would be extremely difficult for the current Government to make even more savings in running bus services unless there are very significant service cuts.

Secondly, the Government decided to drastically reduce the incentive payment that contractors were paid for attracting additional patronage. The result was that the average annual increase in bus patronage between 2010 and 2018 dropped to 0.3 per cent (compared to the average of 2.6 per cent in the previous 10 years). If this Government wants to increase bus patronage, it needs to reinstate the earlier incentive payments. Why otherwise would a private contractor have any desire to increase its patronage?

A third important lesson learnt is that if you are going to privatise, you need very experienced contractors who are committed to providing a good service.  This same principle should be applied if the rail and tram system is privatised, not just handing it over to a company whose only interest is in profits.

Could big savings be made now by contracting out the rail and tram systems? In the 1990s, it was considered that those savings would be very significant. I understand that savings were subsequently made by the then-TransAdelaide by implementing improved efficiencies and the like. I also understand that running costs for the electric trains introduced in 2014 are less than those for diesel-electric trains. Only experts or market testing could tell you whether further savings could be made. The contracts would need to have many standards and key performance indicators that would need to be met.

Based on the post-2011 experience, employment of a rail contractor who is much cheaper than any competitor and has little public transport experience is sure to ensure a poorer service.

It is also important to remember that the complexities of a rail system would make it much more difficult to effectively handle a contract than with a bus system. In addition, a rail system doesn’t lend itself to the flexibility of easily changing routes to more effectively meet changing demands and increasing patronage.

Tom Wilson is a retired State Government public transport planner.

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