K2 project examines competition in the bus market
How can competition in the Swedish bus market be improved and the many procurement reviews reduced? This question is at the centre of a new K2 project in which researchers at VTI are collaborating with Linköping University and Karlstad University.
The background to the project The journey towards fair competition in bus transport: market structures, business models and procurement reviews is that both contracting authorities and operators have found it increasingly difficult to navigate the bus transport market. Many contract awards are reviewed, tender prices are perceived as failing to reflect quality, and profitability is stated to be unsustainably low in many cases. All of this weakens competition and undermines the basic idea behind deregulation and public procurement: to create incentives for innovation and efficiency. In short, to deliver more value for money.
“Weak competition increases the risk of ‘saturated’ suppliers and unauthorised collaborations. Unhealthy competition rewards the wrong strategies and operators and shifts the focus to speculation and pricing oneself into the market,” says project manager Ivan Ridderstedt, K2 researcher and transport economist at VTI.
Working methods to promote fair competition
The new project aims to increase knowledge of how public transport authorities can develop working methods and procurement practices to promote fair competition. The latter is defined as a competitive situation in which many operators are encouraged to develop and streamline their operations over the long term, in line with the contracting authorities’ objectives.
Particular focus will be placed on how contracting authorities can manage heterogeneous markets with both large and small companies as well as different financing and business models. The risk of, and reasons for, procurement reviews will also be an important issue.
“Reviews increase the already high administrative costs associated with procurement. We will investigate whether it is possible to make procurements simpler and clearer, or design them differently, in order to reduce this risk.”
Various trade-offs
Ivan Ridderstedt adds that issues surrounding competition often involve trade-offs and balancing different interests. One example is price versus quality. When different markets were deregulated, it may have been sufficient to bring in new actors and “shake up” old structures, but since then the challenges have become more complex.
“I personally believe strongly in lowering the barriers to participating in public procurement and in contracting authorities rewarding fair competition through well-directed incentives,” he says.
The project, which will also involve the recruitment of a doctoral student, began in January and is due to be completed by the end of 2028. Helene Lidestam, Linköping University and K2 researcher, and Carolina Camén, Karlstad University, are also participating in the project. A reference group comprising representatives from both large and small public transport authorities and bus operators is also linked to the work.
Read more:
The journey towards fair competition in bus transport: market structure, business models and procurement reviews – K2
Text: Mikael Sunne, VTI. The text was previously published on VTI’s website.
Image: Mostphotos.