The Manila Times

Where to focus service contracting in 2022

Robert Y. Siy is a development economist, city and regional planner, and public transport advocate. He can be reached at mobilitymatters.ph@yahoo.com or followed on Twitter at @RobertRsiy.

ONE of the positive developments during the pandemic is the recognition that public transportation is an essential service — it needs to be reliable and predictable. Many Filipinos depend on public transport to get to places of employment and to reach vital social services. Public transport therefore needs to be placed on a stable and sustainable financial basis — it should continue to operate in good times and bad, just as government hospitals and public schools do. Services cannot be purely dependent on private initiative; with many passengers or few, their operations are crucial. This is why service contacting is an important and meaningful reform.

Under service contracting, transport operators have long-term contracts to deliver services according to an agreed plan and based on standards covering aspects like cleanliness, timeliness and driver behavior. To motivate the delivery of high-quality services, performance is monitored using IT/ electronic devices, inspections and passenger surveys — penalties are applied when service standards are not met.

Service contracts were introduced by the government in late 2020 to restore public transport services when lockdowns and physical distancing significantly reduced passenger numbers and revenues. At that time, many transport operators were going bankrupt; drivers were unable to make a decent living driving buses or jeepneys. Despite the availability of a budget of P5.6 billion under the Bayanihan 2 Recover as One Act passed in 2020 and another P3 billion under the 2021 General Appropriations Act, implementation was affected by delayed processing of payments, the absence of self-sustaining financial arrangements and the lack of reliable methods for performance monitoring.

In 2020 and 2021, service contracting came

to be associated with “Libreng Sakay” where operators are paid to provide the service but no fare is collected. As a result, the service remains financially unsustainable, the contracts short term (lasting until the budget is consumed) and operators left with significant uncertainty about the future. “Libreng Sakay” may be a fast way to consume a budget but is not a financially viable option.

The national government budget for service contracting in 2022 is still being determined but it may not be enough to fund most public transport operations nationwide. The 2022 budget should therefore be used judiciously and strategically. It should aim to test, refine and demonstrate the key elements of the service contracting model so that appropriate policies, rules and administrative systems can be developed for long-term application in the Philippine context.

Because service contracting is a new concept, a key objective

is to learn by doing, derive key lessons from the pilot experience and share such lessons widely. Practices or systems that work well in pilot routes can then be replicated. To facilitate learning, it would be desirable for the Department of Transportation to create a multi-stakeholder committee to monitor the experience on pilot routes, extract lessons, discuss implementation issues and offer policy guidance. There should be a focus on selected routes and localities where the local government is keen, transport operators and drivers are ready and receptive, and there is good potential for learning as well as for demonstration of the service contracting model.

Because financial sustainability is crucial, it makes sense to work with institutions that are able to collect and retain fare revenues and earmark such to pay for service contracts. Local government units (LGUs) are the logical option because they already have powers under the Local Government Code to operate public enterprises for vital services and to collect fees to sustain their operations. Good routes for piloting would be those where the vast majority (if not all) of existing operators are already

consolidated in a single cooperative or corporation and willing to work under common fleet management principles.

On pilot routes, it would be desirable for fare collection to be through “cashless” or automatic fare collection systems — the revenues collected then serve as the main fund for paying out the service contracts. Cashless fare collection is an important pillar of a financially sustainable public transport system. Apart from reducing collection “leakages,” cashless fare collection enables fare revenues to be captured in a common “pot” for use of the public transport agency or LGU to finance service contracts. An example of a national-level agency that could collect fares and issue service contracts is the Philippine National Railways, which is allowed under its charter to operate buses anywhere in the country, including, for example, those on the EDSA Busway.

Of course, there is the possibility that a service contact will result in an operating deficit — when fare revenue may be insufficient to cover the full contract cost. A subsidy may then be required. This is where the 2022 service contracting budget will be very useful, serving as a contingency fund to fill a financial deficit an LGU or national agency may incur. There are other funding options: an LGU can develop alternative sources such as from advertising, parking fees, taxes on nonresidential parking spaces and even road congestion charges (as in London and Singapore). The LGU could also use its own budget resources to provide a subsidy for public transport operations, given its importance for its citizens.

The Philippines’ road-based public transport sector requires a transformation from the current industry business model to one that delivers reliable and sufficient services for commuters and a stable and sustainable future for those in the public transport industry. Service contracting takes us in the right direction. The change process needs to begin with a few small but deliberate learning steps. This is what we hope for in 2022.

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2021-12-04T08:00:00.0000000Z

2021-12-04T08:00:00.0000000Z

https://manilatimes.pressreader.com/article/281818582115771

The Manila Times