Wednesday, October 14, 2015

British and homegrown firms submit lowest prices to run Loyang bus package

OCTOBER 12, 2015

SINGAPORE — Eight firms are still in the running to clinch the Loyang bus package — the second put up for tender by the Government to date — after two bidders dropped out of the running for failing to meet the Land Transport Authority’s (LTA) quality criteria. 

LTA today (Oct 12) released the prices which the eight bidders are seeking to operate the package for five years. Britain-based The Go-Ahead Group has the lowest asking price by some margin at S$497.7 million, 6.5 per cent lower than homegrown Woodlands Transport Holdings’ second-lowest bid of S$532.5 million.

The ones with the highest asking price are Australia’s Busways Group (S$631.4 million) and France’s RATP Dev Transdev Asia (S$603.7 million). Public bus operators SMRT and SBS Transit had the third- and fifth-highest asking price, at S$598.1 million and S$545.9 million, respectively.

Other shortlisted bidders were France’s Keolis and the consortium of Tian San Shipping and Kumho Construction and Engineering (HK).

The bids would be evaluated based on quality and price, the same factors used for the first tender. The successful bidder will operate 25 bus routes in Punggol and Pasir Ris from the second half of next year. The winner will be announced by the end of the year.

Under the bus contracting model, buses and infrastructure are owned by the Government, which collects and keeps fare revenue. The operator runs the routes and meets specified service standards.

The two bidders that did not make the cut were a joint bid from local operator Travel GSH and China’s Jiaoyun Group, and a consortium between China’s Jinan Public Transportation Consortium and Singapore’s Kok Tong Transport and Engineering Works. This is the second time that Jiaoyun Group-Travel GSH has failed to make the shortlist. Travel GSH owner Chai Yin said he was disappointed, but he has yet to be informed by the authorities where the consortium fell short. On whether the consortium would participate in a third bus contracting tender, Mr Chai said he would have to discuss it with the Jiaoyun Group, which has a larger stake in the consortium.

In May this year, the first bus contracting package to operate 26 routes from Bukit Batok, Clementi and Jurong East interchanges was awarded to London-based Tower Transit. Tower Transit, which had submitted the third-lowest bid among those that met the quality criteria, is expected to receive about S$556 million over five years.

[$556m for 5 years is about $111m per year for 26 bus routes.

That's about $4.27m per route. 

The main operating costs per route is of course the Driver's salary and compensation. Buses are owned by the govt so there is no maintenance costs. 

What about fuel? Here's a question: Have you ever seen a bus refuel? Where do they refuel? At the depot? How often do they refuel? Once a day?

LTA provides information on Diesel consumption. A Heavy Good Vehicle (which is somewhat similar to a Bus) consumes about 15 litres per 100 km. I have no idea how large the fuel tank of a bus is, but I'm guessing at least 100 litre, which means it can run about over 600 km before needing to refuel. 

Bus Service 51 total route length is 37 km and is one of the longest bus routes. It takes about 2 hours to run the route one way. Assuming bus drivers work 12 hours a day, the driver would make 5 to 6 runs on this route. At 6 runs of almost 40 km, it would have run less than 240 km in a 12 hour period, But it is unlikely for the bus to remain idle after just 12 hours. it may run another 6 hours either with a relief driver, or with the driver working overtime. Effectively, the bus would make 9 runs of about 350 km which is well within the range of the fuel tank.

Service 141 route is less than 10 km long. Probably one of the shortest trunk service

Service 162 route is 21 km. But it doesn't really matter the route length. Longer routes have fewer runs per bus in 18 hours. Shorter routes have more runs along the route because of faster turnaround. Over an 18 hr period, the distance run would be about the same - 350 km.

For simplicity, let's assume that fuel is NOT part of the operator's costs. I believe it should be, but we'll leave it out for now, and add it in later.

The cost for each route will then depend on the number of drivers needed. Longer routes need more drivers. A two hour route with an average frequency of 10 minutes will mean needing at least 13 drivers - 12 with one resting just to cover the route one way. To cover it two ways means 26 drivers.

For a shorter 1 hour route with an average frequency of 10 minutes, you just need 7 drivers one way, or 14 drivers in total. That is just for one shift.

Let's assume that on average a route is 90 minutes long one way, and for any shift, 10 drivers are needed one way, or 20 drivers both ways. Services operate for about 18 hours a day, 7 days a week, or 126 hrs a week. If we do not want to pay overtime, we will need 3 teams working 42 hours a week,or 60 drivers to staff one service route.

On average.

So how much can a Bus Driver earn? Well, the news article from Nov 2013 suggests that they can earn UP TO $3500 including overtime and performance bonuses. Starting at about $1625, to an average of $2500 take home. 

We'll do a high estimate and use $3500 per month. Then add annual bonus, Employer's CPF, and other benefits (medical?). This means the costs per driver is about $53k a year. A team of 60 drivers would costs about $3.2m.

Longer routes would need more drivers, and a bigger team - approximately 80 drivers for a 2-hour route.

But what this means is that on average, a bus route would cost about $3.2m to hire sufficient bus drivers to run the service . So 25 bus routes would cost about $400m over 5 years in wages for the drivers alone. Then there are support staff and management salaries, and other expenditure. 

With the $4.27m contracted price per route/service, and the $3.2m cost per route, there is still about $1m surplus per route, for support staff and other expenses.

Or based on the $400m costs, and the $556m contract, there is still $156m to go to other costs, managerial and support staff salaries, and profit.

This is assuming fuel is not part of the costs. If it is, how much would it be?

Each bus over 18 hours would cover about 350km. At about 15 litres per 100 km, 350 km = 53 litres of diesel. Diesel is currently about $1.25 per litre. So 53l per day works out to about $65. Let's say $70 per bus per day. One 90-min route may have as many as 20 buses. So per day, the fuel cost for one route is $1400. For 365 days, its $511k. For 25 routes, it will be $12.5m, say $13m. For 5 years, it will be $65m.

So the $400m Driver's wages, plus $65m fuel costs = $465m.

The $556m contracted price now only has about $90m to cover other costs, other staff salaries, and profits.

The lowest bid at $497m is cutting it pretty close, if they have to pay for fuel. But the estimates above are all high estimates. So there may be some buffer to play with. Also the specifics of each route will also matter. If all or most of the routes are short routes, there may be fewer drivers needed and that can reduce wage costs.]

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