Public Values in a “privatized” Public Transport
system
Carlo Carli
RMIT, Melbourne, Australia
Abstract
This paper addresses private sector involvement in the delivery of public transport. It
is part of a larger project to investigate the question: What should government
control in a “privatised” urban public transport system in order to safeguard the
public interest?
The paper will outline the evaluative framework being prepared to analyse three case
studies of cities that have pursued the privatisation of public transport provision.
Public values we expect governments to protect in transport will be identified. The
paper investigates various methodologies to evaluate social benefits in a privatised
public transport model and adapt them to provide a Public Value evaluative
framework to compare the ability to innovate and more effectively deliver on those
public values.
The framework enables different examplars to be compared on their ability to deliver
various social benefits. The public values are: social inclusion, economic
development, safety and congestion, environment, public administration, quality, and
value for money.
Introduction
Urban public transport systems are under stress due to the continued growth of cities, and
competition between cities. Growing pressures include increased congestion, the demands
of mobility, environmental constraints and greenhouse gas reduction targets. These
pressures are being experienced during a period of fiscal constraint that limits public funding
availability. In response to these demands, there is a trend in many cities is to increase the
role of private operators and increase competition. This is done to reduce costs and raise the
efficiency of the service. Privatisation models range from deregulation, to competitive
tendering and performance-based contracts.
The privatisation of public transport provision means considerable public funds are spent on
engaging private operators to run public transport. Yet we do not ask ourselves obvious
questions about how this approach impacts on service outcomes that people really care
about.
Public Value theory has developed as a response to the need to understand and measure
what people care about in relation to service provision. Public Value theory looks at issues
like what governments should take responsibility for, what outcomes people want, how the
public sector creates and implements public values, and whether the public interest is
protected. The central argument in Public Value theory is that the public interest cannot be
reduced to singular, economistic measures (Alford & O’Flynn, 2007; Talbot, 2008).
This paper proposes that we can draw on theorizing and research about public values to
develop ways to answer the questions we should be asking about whether public transport
delivers. Using a number of readily available existing indicators of public values we can
create a Public Value Framework that we can use as a mechanism for examining how
privatization affects the embodiment of public values in the provision of public transport.
The paper is the first part of a larger project that poses the question of what government
should control in a “privatized” urban public transport system in order to safeguard the public
interest. The study will include case studies in three different cities - Melbourne, Bordeaux
and Amsterdam - examining whether and how public values are affected in the privatisation of
public transport services.
Public Value – a paradigm shift
The provision of public transport is essential to support economic and social activities in the
modern city. It generates recurring public values, which governments seek to protect through
public intervention - through direct service provision, regulation and financial subsidy
(Veeneman & Koppenjan, 2010; Veeneman & van de Velde, 2006). Public values can also
conflict when it comes to implementation. For example, it is possible to cut costs to the point
of deteriorating service quality, or to introduce high frequency commuter routes at the
expense of routes that provide mobility to isolated and disadvantaged groups.
Public Value theory provides a paradigm shift in our understanding of public management
(Collins, 2007; O’Flynn, 2007; Stoker, 2006). Public Value recognizes the importance of
relationships between providers, users, manufacturers and public authorities. It provides for a
more complete understanding of the complexity of relationships than the purchaser/ provider
split mediated by a contract that underpins much of the literature. Stoker argues that a new
public management paradigm and public value management in governance is emerging, “In
its definition of the public interest, approach to service delivery, and commitment to a public
service ethos” (Stoker, 2006:43). O’Flynn (2007) also argues that Public Values Management
is a new paradigm, challenging existing models and providing a paradigm shift from both the
traditional model of public administration and New Public Management (NPM). Public Value
management has emerged as a response in the mid-1990s to New Public Management. It
was a reaction to overdependence on applied private sector management concepts and
techniques in the public sector to improve the performance of those organizations (Collins,
2007; O’Flynn, 2007; Stoker, 2006).
Public Value asserts the need for public agencies to work with citizens to co-create and
articulate public values, and asserts the need to establish legitimacy and trust for public
policy. Public Value recognizes that public authorities operate in an adaptive and fluid system
that is qualitatively different from simple market forms, and should not simply follow private
sector business principles. Public Value management reclaims the centrality of public sector
managers in realizing public values. This is in contrast to the NPM model, where managers
create value by mimicking organizational and financial systems used by private business.
Moore’s work on Public Value recognizes three aspects of performance for public agencies,
which he defines as a strategic triangle:
“be aimed at creating something substantively valuable (i.e. constitute public value);
be legitimate and politically sustainable (i.e. attract sufficient ongoing support – and
concomitant resources – from the authorizing environment, that is, from political and
other stakeholders taken as a whole, with due recognition of their differential power);
and
be operationally and administratively feasible (i.e. doable with the available
organizational and external capabilities needed to produce it)” (Moore, 1995:71).
Moore proposes that Public Value is both a practice and a normative objective. It is a
practice whereby providers work with users to produce outcomes that genuinely meet users
needs. It also provides the underlying normative objective for public officials, both public
sector managers and politicians. This collaborative form of governance is what Moore calls
‘co-production’ (Moore, 1995). In this model, users and providers work cooperatively to make
public institutions work. Stoker argues that a new context of networked governance prevails
and that Public Value Management is more suited to networked governance than either
traditional public administration or the New Public Management (Stoker, 2006).
Analysis of public management tends to use three key approaches:
• the traditional bureaucratic command and control paradigm;
• a competitive market-based NPM paradigm; and
• the emerging public value management paradigm.
Traditional
In Traditional Public Management politicians make policy that public managers implement
(O’Flynn, 2007; Stoker, 2006; Talbot, 2008). According to Stoker, traditional public
administration draws on the Weberian view of the world in which three institutions provide
order to the governance process: political leadership, political parties and bureaucracy.
Elections provide the crucial mechanism with political leaders competing in the democratic
process (Stoker, 2006). Traditional Public Management assumes a hierarchical bureaucracy
with a command-and-control mechanism for provision of services.
NPM
New public management (NPM) is the approach that has characterized much public
policymaking in the English-speaking world in recent years (Dunleavy et al, 2005). It has
pushed technical efficiency as the goal of public bodies at the expense of democratic
processes and social values. NPM proponents argue that public sector bodies are subject to
being captured by those who work in or are regulated by them. The NPM response was
competitive tendering. It used economic markets as the new model for relationships in the
public sector. Public managers would focus on output targets rather than orient themselves
towards the changing nature of political legitimacy (Blaug et al, 2006; Dunleavy et al, 2005;
Stoker, 2006).
Public Value
Public value management provides a renewed emphasis on relationships between service
providers and government. It recognizes the role public sector managers can play in
maintaining an organization’s legitimacy in the eyes of the public. Rather than a return to
monopolistic public services, public value embraces notions of valued public services,
outsourcing and efficiency. It calls for more political accountability to citizens and politicians.
Public value management avoids top-down models that focus public managers on meeting
centrally driven targets and performance management (Alford & O’Flynn, 2007; Blaug et al,
2006; O’Flynn, 2007; Talbot, 2008).
Using Public Value to assess impact
Veeneman and various collaborators have drawn together a diverse series of indicators of
public value to assess the impact of privatization on transport provision (Veeneman &
Koppenjan, 2010; Veeneman & van de Velde, 2006; Veeneman, van de Velde, & Schipholt,
2006). They use indicators that are measurable and recognize the public values found in a
public transport system.
In studies of privatization and competition in Dutch public transport, a number of recurring
public values were identified by Veeneman et al. They comprise: social inclusion, economic
development, safety and congestion, public administration, quality, and value for money
(Veeneman & Koppenjan, 2010; Veeneman & van de Velde, 2006). Veeneman et al
identified public values as those constantly emphasised and articulated in the political arena.
People vote for parties that promote certain values or provide different strategies to
implement those values. Emphasis and implementation can shift between governments and
over time.
Veeneman et al found that the public values defended by government and used by
government to justify funding of public transport are relatively constant (Veeneman &
Koppenjan, 2010; Veeneman & van de Velde, 2006).
Indicators of public value of the kind identified by Veeneman et al can form the basis of a
Public Value Framework that we can use as a mechanism for examining how privatization
affects the embodiment of public values in the provision of public transport.
Restoring the political
Interest in Public Value management theory arises primarily from the critique of NPM (Stoker,
2006). Public Value management shares with traditional public management theory the belief
that the public sector is fundamentally different from the private sector, and rejects NPM’s
assumption that democratic governance resembles consumer choice in the market. Stoker
stresses an expansion of the scope and role of the ‘political’ as central to the public value
approach. Hence public value management contrasts with both traditional public
management and NPM, both of which emphasize the role of politicians and political
processes to initiate service provision and then step aside to allow the bureaucracy or
outsourcing to deliver the service.
Rhodes and Wanna have argued that public value management in fact strengthens the role
and authority of public sector managers at the expense of politicians and political parties, “We
argue against downgrading the ‘primacy of party politics’. We criticize the notion that public
managers should play the role of Platonic guardians deciding the public interest” (Rhodes &
Wanna, 2007:407). However this critique seems unfair as the political process not the public
servant ultimately defines public values. As Moore noted in his seminal work on Public Value:
“In the end none of the concepts of ‘politically neutral competence’, ‘policy analysis’ and
‘program evaluation’, or ‘customer service’ can finally banish politics from its pre-eminent
place in defining what is valuable to produce in the public sector. Politics remains the final
arbiter of public value just as private consumption decisions remain the final arbiter of private
value” (Moore, 1995:38).
Public values exist in a state of dynamic interaction. Public values do not belong to a
managerial class or to a political party. Both political parties and managers have to make a
case on which public values they are promoting and which values they are creating. Public
values are defined and redefined in social and political interaction. In particular, governments,
political parties and citizens seek to clarify what role they want governments to take and in
turn that is mediated by the public service.
For Stoker, the five apparently indispensable elements of a public service ethos are: a
performance culture; a commitment to accountability; the guarantee of universal access;
responsible employment practices; and a contribution to community wellbeing (Stoker, 2006).
Public value emerges from this public service ethos in its broader interaction with networks
and communities. As Stoker noted, public values arise from the dialogue established by
ethical people working both within networks and partnerships and with their wider
communities.
This dialogue and interaction with the political means public values that inhere in the public
realm in both government processes and outputs are irreducibly plural. This presents
potentially an intractable problem of how to measure public values. Talbot provides a
relatively simple device of recognizing ‘competing values’ and applying them to the
measurement of organizational success in public services (Talbot, 2008). “The common
‘solutions’ to these multiple values is either aggregation and/or choice – so, for example,
political parties represent both aggregation of some values within each party and choice
between them” (Talbot, 2008:3).
Comparing indicators
In preparing a Public Value Framework, a review of existing transport benchmarking projects
was undertaken to examine the indicators used. These included the following three studies:
Australian Industry Commission Inquiry, Urban Transport (1994)
European Commission, Managing and Assessing Regulatory Evolution in Local
Public Transport Operations in Europe project (MARETOPE) (2003)
European Commission, Urban Transport Benchmarking Initiative (2003-2006)
The Australian Industry Commission inquiry report Urban Transport (1994) presented a rather
disturbing picture of the state of public transport in Australian cities. The Commission found
the problems with Australia's urban transport systems included: high costs, increasing road
congestion in the larger cities; poor public transport quality, particularly in terms of reliability
and frequency. As a result, the Industry Commission identified a need for greater competition
and contestability in the provision of public transport services to improve the attractiveness of
the services, increase innovation and provide for greater economic efficiency.
The inquiry identified a number of economic indicators and performance outcomes for the
sector. The Industry Commission identified many problems in the provision of public transport
in Australia. However its use of indicators was quite narrow and centred on economic
efficiency and service quality.
In Europe there had been similar debates on the efficiency and quality of public transport
services and a trend towards greater competition and greater contestability. The Managing
and Assessing Regulatory Evolution in Local Public Transport Operations in Europe
(MARETOPE) was a European Commission research project which assessed 31 European
cities and their experience of regulatory change in a period of increased privatisation and
contestability for service contracts. This study provided a cross section of experiences of
competition and private sector involvement in public transport provision. Its focus was on
economic efficency, and the indicators were economic and financial measures, which covered
the industrial performance of the public transport operators, network coverage and patronage.
MARETOPE found that a limited competition model, but not a deregulated public transport,
provided most improvements in cost efficiency and quality standards (MARETOPE, 2003). It
found outsourcing provided the most effective pressure to improve overall efficiency. The
MARETOPE study furthermore found that a “deeper involvement of the operators was
needed to cope with a ‘new mission’ of public transport in the improvement of urban living
conditions” (MARETOPE, 2003:28). This new mission acknowledges the limitations of its own
economistic methodology, which focused on economic efficiency and performance and not on
broader values and objectives or on the importance of relationships between operators, public
authorities and other stakeholders.
The Urban Transport Benchmarking Initiative was a European Community initiative creating
benchmarks for the performance of public transport, cycling and walking in 26 European cities
for the three years from 2003 and 2006. The Urban Transport Benchmarking Initiative
developed a number of common indicators of readily available measures. The indicators were
consistent with a previous European Community project Citizens’ Network Benchmarking
Initiative, which established indicators based on which transport services people want, and
how well the system meets those requirements.
This approach is similar to the Public Value framework proposed for this study. It moves away
from the idea that a good performance measurement system would be one which focuses
attention on a small number of economic output measures. As with a Public Value approach,
it demonstrates the need for more diverse and numerous measures, since the effect of public
transport policy and implementation produce quite a large number of important effects on
society.
In the literature, the indicators that have been most commonly used to assess the operational
performance of privatized public transport are financial efficiency, and service quality
indicators (Eboli & Mazzulla, 2009; Hensher & Stanley, 2003; Hensher, Stopher, & Bullock,
2003; Hensher, et al., 2007; Litman, 2010, 2011; Stanley, Betts, & Lucas, 2005; Vuchic,
2005). The expectation is that competitive markets will provide improvements in financial
efficiency and will therefore drive down the cost of the service. Measuring service quality has
developed alongside the tendering of services to ensure that the objective of securing
financial efficiency is not the sole measure of tendering services. Improvements to quality by
improving comfort and convenience will influence choice and modal shift towards public
transport travel, and therefore increase the number of discretionary passengers who could
otherwise drive (Litman, 2011). While these indicators are important they are too narrow to
assess fully what public values are produced in the provision of public transport services.
A public value framework accepts the public values of economic efficiency and quality, but
stresses the importance of broader social objectives, relationships and the political. As Blaug
et al noted, “What is unique about the public value approach is that it does not cast existing
performance management frameworks into the dustbin, but suggests instead that the act of
measurement can either fail to capture adequately what value is created or lead to the
destruction of public value” (Blaug et al, 2006:8).
Performance measures need to be broad and fit for purpose.
Building relationships
We used to think the answer to protect the pubic interest was to better identify what should go
into contracts. We have moved beyond that, it is about relationships. Yet we want to protect
relationships from the danger of regulatory capture. In the literature there is a now a
recognition that the relationship between operators and public authorities needs to develop
beyond the contractual requirements of financial efficiency and service quality. It is also
recognized that contracts are invariably incomplete. Service improvements therefore depend
on deeper relationships (Hensher, 2010; Hensher et al, 2007; Macário, 2007; Stanley&
Longva, 2010). Hensher suggests that an emphasis should be on building deeper and longer
relationships between public authorities and operators and that government should seek
value for money arrangements which he defines as: “provide a good quality, integrated and
continually improving transit service for a fair price, with reasonable return to operators that
gives value for money under a regime of continuity” (Hensher, et al, 2007:412).
Hensher identified that contracts in the bus industry remain inevitably incomplete as
circumstances continue to change, and found that a trusting relationship was needed to
provide clarity on the specifications and obligations of the contract in its practical application
(Hensher, 2010). However, Hensher is unclear about the nature and basis of this relationship.
Unless there is clarity on the public values that this trusted relationship is based on, the risk is
that there will be regulatory capture by interest groups who act for their own self-interest
rather than the public interest. In arguing for trusted relationships, it becomes imperative to
define shared public values and be clear on how they are strengthened through this
collaboration.
The call for a model of deep relationship does not make it clear whether the relationship is
between operators and regulators or more broadly with other stakeholders, nor does it clarify
the objectives of this relationship. It also remains silent on the role of politics in setting
transport objectives. Public Value theory engages with these omissions and provides a tool
to manage the relationship that reveal the achievement of public value goals. Public Value
provides a framework for assessing the role of private operators and competition in achieving
social outcomes, so that selected market forces can help to ratchet up public sector
performance.
Innovation
Public values arise from relationships and these relationships drive innovation in the
provision, quality and enhancement of public transport. Innovative generally demands close
cooperation between clients, public authorities, project managers, contractors, technology
providers, and operators. Private operators can bring skills, experiences, and technologies –
in short innovation –and not just economic efficiency. “Organisations rarely innovate alone:
they do so in association with others, including their suppliers and customers” (Dodgson &
Gann, 2010:17). Roy Rothwell has agued that firms adept at innovation strategies are highly
integrated, with partners - including lead customers - demanding and co-developing
innovation. He called this cooperative relationship an “integration and networking” model
(Rothwell, 1992; Rothwell & Dodgson, 1991).
Public transport studies have identified increased innovation with the introduction of
competition amongst operators (Hensher, et al, 2007). Dodgson and Gann have noted the
challenge of innovation for the public sector, “The privatisation in many countries of previously
publicly held assets in energy, transportation, and telecommunications has removed a direct
lever governments once possessed to improve innovation. Instead, new regulatory authorities
have been established and their roles in supporting innovation in the private sector have to be
explored and extended” (Dodgson & Gann, 2010:127). In a study of competitive tendering in
Holland, Veeneman and Koppenjan found that the competition between operators created
many, often small, innovations in processes, technologies and practices” (Veeneman &
Koppenjan, 2010).
Public Value Framework
The public value indicators chosen are a range of readily available measures either collected
by transport authorities or which are available to the researcher. They allow for a
straightforward comparison to be made between cities. The public values include those
identified by Veeneman and Koppenjan’s in their work on Dutch public transport services
(Veeneman & Koppenjan, 2010) with the addition of the public value of the environment. This
was added because public transport provides more efficient use of energy and space and is
increasingly valued for contributing to a cleaner environment. Many of the indicators have
been drawn from the previous studies discussed in this paper, especially the European
Commission’s Urban Transport Benchmarking Initiative.
In the framework there is an indicator for public participation and the policies of political
parties as important indicators of public values. This is important as Public Value
management has a strategic, role for public servants, politicians and citizens in both
defending and developing the services.
The public value of innovation sits alongside each of the public values. This is because
innovation is how new ideas, technologies and practices are brought into implementation, and
therefore innovation can impact on all the various public values. In understanding the role of
innovation there is a further need to assess the growing importance of relationships and
networks in meeting the challenges and improving the performance of public transport
provision. A key element in this research is to examine how public values are sustained and
promoted in the contracting-out of public transport services, whether it is through contracts or
the more complex relationships, which generate shared values.
Value for money is used as the public value, rather than economic efficiency. In part it
provides a proxy measures for economic efficiency. This is because of the difficulty of
comparing the cost per passenger of public transport services across different cities. There
are considerable differences in the size and geography of different cities, the composition of
the network and the method by which costs are calculated. For example there are
considerable differences in running costs of a train network compared to tram or bus services.
Furthermore the economic efficiency of outsourcing generally has been realised in the first
round of contracting. Savings cannot be readily identified and few are realisable in
subsequent years. The following indicators provide measures that compare various areas of
performance, service improvements and innovation during this period of increasing
competitive pressure on the operators.
Table 1 Public Value Framework
Public Value Objective Indicators
Social Accessibility for disabled Proportion of low floor vehicles
inclusion
Affordability for less well off Availability and extent of concession tickets
Service provision Increase in service levels in last 5 years
Availability across city Assess service levels in outer areas
Economic City development Area of city and number of residents
development Length of network by mode
Quality of city living Number of vehicles by mode
Length of bus lanes and segregated right of
Mobility within city way for trams.
Quality Quality vehicles and Observe conditions of shelters and vehicles:
infrastructure, comfort and they are clean, comfortable, have good
cleanliness; simple transport information and are wheelchair accessible.
information.
Quality indicators Compare satisfaction surveys.
Environment Integration with other sustainable Observe provision of bicycle facilities
transport modes
How many vehicles in the city’s Number of vehicles
bus fleet can be described with
clean diesel:
Euro 0 rating – Pre 1993, Euro 1
rating – 1993-95, Euro 2 rating
– 1996-99, Euro 3 rating –
2000-2004, Euro 4 rating –
2005 onwards
How many vehicles in the city’s Number of vehicles
bus fleet can be described as:
powered with liquid petroleum
gas (LPG), powered with
compressed natural gas (CNG),
powered with Bio fuel, other
fuels
Powered with ethanol
Powered with electric
Powered with another
sustainable fuel (please state)
Value for Increase in patronage last 5 Increase in person trips per day by mode
money. years
Reliability of services Percentage of late arrivals
Service intervals by mode in Proportion of <15 minutes services
peak hour
Average cost on public Cost of weekly tickets
transport
Safety and Average speed Km per hour
congestion buses/trams/trains in peak
hour
Number of injuries or deaths on Road toll within city
road system
Public Public participation Observe public participation practices
administration
Legitimacy Compare political party policy positions on
public transport including outsourcing and
role of private operators
Conclusion
Much of the literature on the privatisation of public transport has focused on economic
efficiency and quality of service. Private operators and competitive pressures have been used
to drive efficiency and quality. However public values are broader than just the provision of
efficient and quality services. These two are public values, but they do not adequately cover
all the other public values that governments are trying to realise in the provision of public
transport.
The Public Value Framework returns to the question what people value from a public
transport system, and the role of public authorities and broader political processes in the
provision of public transport. The Public Value Framework provides measurements of the
performance of private operators and competition in creating public value.
Increasingly in the literature there is an emphasis on trusting relationships and their
importance to innovation. This results from an increasing realisation that contracts do not
cover the complexities and demands present in an urban transport system (Hensher, 2010 ;
Hensher et al., 2007; Stanley & Longva, 2010). Public values provide the basis from which to
understand and develop such relationships. Fully realising public values involves public
authorities, through a dialogue with stakeholders, identifying the values they need to pursue
and the strategy to further foster these values.
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