Competitive tendering versus performance-based negotiation in Swiss public transport

The purpose of this study is to assess di¤erences in the levels of cost e¢ ciency of bus lines operated under competitively tendered contracts and performance-based negotiated contracts. Following the revision of the Swiss railways act in 1996, regional public authorities were given the choice between two di¤erent contractual regimes to procure public passenger transport services. We directly compare the impact of competitive tendering and performance-based negotiation by applying a stochastic frontier analysis to the complete dataset of bus lines (n=630) operated by the main Swiss company (Swiss Post) at the same time (in 2009) throughout the country. The overall results show that the di¤erences in the levels of cost e¢ ciency between the two contractual regimes are not signi…cant. Our …ndings are in line with recent evidence of cost convergence between competitive tendering and performance-based negotiation, and suggest that the practice of using both contractual regimes is challenging for the operators in terms of competitive pressure. The threat of competitive tendering may have a disciplining e¤ect on negotiation since it prevents bus companies from bargaining inadequate rents and inducing asymmetric information advantages. Keywords: public bus contracts, competitive tendering, performancebased negotiation, cost e¢ ciency. JEL classi…cation: C21, D24, H57, L92. Institute of Economics (IdEP), Università della Svizzera italiana (USI); Department of Management, Technology and Economics, ETH Zurich, Switzerland. yDepartment of Management, Technology and Economics, ETH Zurich, Switzerland. zDepartment of Management, Information and Production Engineering (DIGIP), University of Bergamo, Italy; Institute of Economics (IdEP), Università della Svizzera italiana (USI), Switzerland. Corresponding author. E-mail address: [email protected].