Sunday 10 May 2015

London-based Tower Transit wins first Government bus contract to run services in Jurong

By Karamjit Kaur, Senior Correspondent, The Straits Times, 9 May 2015

A FIRM that runs buses in London and Australia has beaten SMRT and SBS Transit to the right to operate an inaugural government bus contract, despite not putting in the lowest bid.

Tower Transit, which had the third-lowest bid among eight shortlisted firms, was yesterday awarded a five-year contract by the Land Transport Authority (LTA) - the first major step in a restructuring of the public bus industry to raise service levels for commuters on the back of direct government subsidies.

The London-based firm bid $556 million for the five-year contract, higher than the lowest bid by local SMRT at $453 million. The highest bid came from a British firm, Go-Ahead, which put up a price of $693 million.

The contract, which effectively breaks a three-decade-old duopoly held by incumbents SMRT and SBS Transit, involves operating the new Bulim Bus Depot - off Jurong West Avenue 2 - and 26 bus services from the Jurong East, Bukit Batok and Clementi bus interchanges.

The services currently run by the incumbents will be progressively transferred to Tower Transit from the second quarter of next year.

Tower Transit will not own the buses and other infrastructure such as bus interchanges as these will be held by the Government.

But the firm will operate, manage and maintain the assets, and this includes hiring bus drivers for its operations.

The new tender will also mean that the fleet serving the area will expand from 290 buses to 380.

Tower Transit will not keep revenues from fares but it will be paid an estimated total fee of $556 million over the contract period.

In return, it must meet stipulated service standards, including scheduled headways of no more than 15 minutes in both directions during the morning and evening peaks. Feeder services will have to run at shorter intervals of six to eight minutes.

Asked why the contract did not go to SMRT, which had submitted the lowest bid, LTA chief executive officer Chew Men Leong said at a media conference that the focus was on quality, more than bid price.

"Tower Transit had the highest combined total score for quality and price," he said, without disclosing further details on the evaluation process and how each variable was weighted.

Service will only get better: Tower Transit
Head of new bus operator is confident and cites company's solid track record
By Karamjit Kaur, Senior Correspondent, The Straits Times, 9 May 2015

THE chairman of the London- based firm that won the new bus tender believes maintaining service standards here will be a simple task.

In fact, Mr Neil Smith, chairman of Tower Transit, promised commuters that service will only get better.

This is because the traffic in Singapore is nothing compared with the daily traffic "nightmare" situation in London, he said.

As part of the contract put out by the Land Transport Authority (LTA), Tower Transit, which runs bus services in Britain and Australia, will have to meet stipulated service standards, like ensuring feeder buses arrive every six to eight minutes during peak periods.

"In London, you can have a bus route that takes an hour to do something on a Monday and on Tuesday, it takes two hours. So we have training regimes and the experience to keep buses in the system which we will bring here.

"The traffic here is nothing like what it is in London," Mr Smith said at a press conference at LTA yesterday after the winning bid was announced.

Commuters can feel reassured as the firm has a solid track record in the business, he added.

Tower Transit operates 650 buses in London and Cambridge, employs over 2,000 people and carries more than 150 million passengers a year.

The bigger challenge for the firm, which was awarded a five-year contract to operate buses from Jurong East, Bukit Batok and Clementi interchanges, is manpower. More specifically, how to attract and retain bus drivers, given that Singaporeans are unwilling to do the job and there is a limit on how many foreigners the firm can employ.

Mr Smith said: "When we first came to Singapore, most people said it was impossible to solve the labour issue and told us to go back to England."

Undeterred, Tower Transit, which aims to hire 700 bus drivers over the next year, decided to stay and offer an employment package that "will be better" than what is currently offered at SMRT and SBS Transit.

A key focus is to instil a sense of pride in bus drivers and offer them training that will allow them to move on to better jobs in the larger logistics sector after several years of driving.

Mr Smith said that while the "radical" strategy will mean a higher turnover rate than in many other sectors, it is "unrealistic to expect someone to want to be a bus captain until retirement".

Higher staff costs is probably one reason why the firm's bid is not the lowest, he said.

Some residents are still keeping their fingers crossed, hoping that things will not get worse.

Medical clinic assistant Catherine Goh, 56, who commutes to work daily on one of the affected services, said: "I hope there will be no change to the route. Otherwise, I'll have to find a new way of getting to work, which would be so troublesome."

Like several other commuters, she also expressed concern over a possible drop in service standards. Courtesy and safety are paramount, said Ms Goh.

Apart from manpower development, Tower Transit also aims to boost service levels by providing better information at bus stops and interchanges on arrival times and the bus network, as well as how to move around in the city.

Dr Park Byung Joon, an urban transport management expert at UniSIM, said that while the move to improve the bus sector is a step in the right direction, it remains to be seen if Tower Transit can deliver on its promises.

"In London, the rail, more than bus services, is the backbone of public transport. But here, it is different. There is a high percentage - about 30 per cent - of commuters who rely on buses, so we will have to see how the new operator meets their needs," he said.

Additional reporting by Gilaine Ng Rui

The welfare and interests of bus captains, technicians and other bus workers remain a key priority during the transition...
Posted by Land Transport Authority – We Keep Your World Moving on Friday, May 8, 2015

Tower Transit shifts focus to attract bus drivers
By Joy Fang, TODAY, 9 May 2015

After winning the much-coveted contract for the first package of bus routes, Tower Transit has turned its focus to making sure it delivers on its promises and plans, such as its proposal to make the bus driver occupation more attractive to groups including women, the young, and those looking to switch careers.

The United Kingdom-based company is conscious of the manpower issues in the Republic, and the general perception that people here have of bus drivers.

For the young, it has proposed a work-and-train programme under which school-leavers or those who have completed their National Service can work for their company, obtain a vehicle licence and at the same time get a qualification that they can also use if they wish to go into the logistics or shipping industry.

To draw women or those making a mid-career switch to become bus drivers, the shifts can be made more flexible, and three-day weeks or shorter work days could be introduced.

Tower Transit chairman Neil Smith said: “We believe our (proposals) will bring a lot of people into the bus industry who’ve never really considered it before, because we will be able to offer a job where compared to say, working for the retail sector, the earnings are far, far better and we’ll be able to offer shifts.”

The company will conduct a training programme here for all its staff, including the drivers, to equip them with “customer focused skills as well as technical skills”. Some employees will undergo training here as well as in Sydney.

Mr Smith said he would be glad if bus drivers who have been trained leave the company for better prospects. “We actually have a strategy of training people ... so that they move on. You have to do that in a bus company because the number of management jobs is very small compared to the number of bus captains,” he said.

“Our ambition would be that people would say, ‘If we recruit someone from Tower Transit, that person has been trained properly ... and they are an attractive employee’.”

Announcing the results of the tender yesterday (May 8), the Land Transport Authority said Tower Transit’s bid stood out due to its strict maintenance regime for bus assets and infrastructure, on-route reliability and comprehensive manpower plans.

On its maintenance regime, Tower Transit group chief executive officer Adam Leishman said the company runs a rigorous maintenance regime under which its buses are frequently serviced and maintained. The vehicles are also equipped with on-board diagnostics, he said.

Tower Transit won the contract even though its tender price, at S$556 million for five years, was not the lowest. Mr Smith said the company’s cost structure reflects what it would cost to offer a quality service reliably. “You can always do the cheapest delivery of service but if you want reliability on a bus service you need a buffer, a provision to be able to adjust when things go wrong,” he said.

While it was set up in the UK in 2013, Tower Transit is the sister company of Australia’s Transit Systems, which has been operating public bus networks in Perth, Sydney and Adelaide for over 19 years. Transit Systems has about 1,000 buses in its fleet and more than 2,100 employees.

In the UK, Tower Transit runs about 650 buses in London and Cambridge, with 2,000 employees and carries more than 115 million passengers a year.

Tower Transit’s bus drivers went on two 24-hour strikes in December last year and January, after about a fifth of them cited pay disparities and voted in favour of strike action.

Mr Leishman said the union landscape in London is very different compared to Singapore, and that the company has had some “very fruitful discussions” with the National Transport Workers Union here.

The operator requires 900 staff — out of which 700 are drivers — to run the 26 services under the first package of routes that it has won the contract for. With the services set to be rolled out by the second quarter of next year, Tower Transit is in a race against time.

“Our assumption is that many of these bus captains will be conservative and will have a bias towards staying with their existing employer,” Mr Smith said. “There is a very major recruiting task ahead of us.”

Additional reporting by Valerie Koh

We’re excited to share that Tower Transit Group Limited will be the operator for the first tendered bus package. It...
Posted by Land Transport Authority – We Keep Your World Moving on Friday, May 8, 2015

Tender results a ‘wake-up call’ for SMRT, SBS
Award to more costly bidder ‘shows Govt places greater value on quality than price’
By Kelly Ng, TODAY, 9 May 2015

Transport analysts yesterday (May 8) hailed the fact that a foreign operator clinched the first package of routes put up for tender under the Government’s bus contracting model, saying the development would shake up the public transport sector and serve as a “wake-up call” for public transport operators SMRT and SBS Transit, which failed in their bids.

Tower Transit’s winning bid would see the United Kingdom-based company getting from the Government a fee of S$556 million over the five-year contract period — 22 per cent higher than the lowest fee submitted by SMRT.

The gap in the bid prices, said National University of Singapore (NUS) transport researcher Lee Der Horng, sends a positive signal that the Government pays greater attention to technical components instead of the price.

The Land Transport Authority (LTA) used the two-envelope process during the tender evaluation, with the quality of the proposals evaluated first. It only looked at the price proposals after the bids have passed the quality evaluation.

Nanyang Technological University transport economist Walter Theseira said an evaluation process that places greater weight on quality than price is in line with the idea behind the bus contracting model.

“The Government will suffer if they award to a company that (asks for a low fee) but can’t perform ... The last thing the public wants is business as usual,” he said. “LTA is welcoming foreign operators, hoping (their) practices will be brought to Singapore.”

SIM University (UniSIM) transport analyst Park Byung Joon said Tower Transit’s clinching bid also offers a reference point and maintains keen competition for subsequent tenders.

“If LTA had awarded it to the lowest bidder, it would have dampened the spirit as foreign companies would not see the contract as profitable as they thought (it would be),” he said.

Given that incumbent operators would have a better understanding of local operating conditions and thus be in a position to tailor their tender proposals accordingly, Tower Transit must have proposed “new concepts, ideas and management practices that made them look more attractive”, said Assistant Professor Theseira.

Even so, experts and observers foresee several hiccups a foreign operator would have to overcome.

For one, Asst Prof Theseira said there will be no “honeymoon period” for Tower Transit, whose venture here is its first foray in Asia.

“The public’s expectations for the foreign operator will be higher — also because they won with a higher bid. If they come in and promise to change the way things are done but don’t deliver, people will ask why they are paying so much,” he said.

Adapting to the local expectations and recruitment are other challenges.

UniSIM’s Dr Park said commuters in Asia have different expectations from the Western markets that Tower Transit has been operating in because buses form part of the “transport backbone”, rather than being seen as a complementary service.

So, faster and more frequent services will be demanded, he added.

On top of the unique commuting habits, Tower Transit would have to learn to work with the union and the authorities, who may have management styles different from what it is used to, said Mr Seng Han Thong, a member of the Government Parliamentary Committee (GPC) for Transport.

Agreeing, NUS’ Prof Lee said Tower Transit will have to make adjustments to its practices, instead of directly transplanting them wholesale from its existing operations.

In terms of manpower, some current drivers may be less comfortable working for a foreign firm, experts said. Recruiting locals, especially those who are younger, could be tricky.

“Although (Tower Transit) has presented an attractive hiring and training plan, it has proven difficult to get young Singaporeans to join the industry today,” said Prof Lee.

“It is about changing the mindset of the industry. And of course, practical Singaporeans are looking out for good salary prospects,” he added.

Transport GPC chairman Cedric Foo said he hopes Tower Transit can innovate and improve softer aspects of bus services, as well as provide greater assurance for employees’ career growth.

Interest in 2nd public bus tender undimmed
At least 5 firms that did not succeed in first tender planning to try again
By Karamjit Kaur And Danson Cheong, The Straits Times, 12 May 2015

FIVE of the seven firms that bid unsuccessfully for the first government bus contract are not giving up.

They plan to bid for the second Land Transport Authority contract to operate 25 bus routes in Punggol and Pasir Ris - the so-called Loyang tender, which was issued last month.

Only the two incumbent bus operators, SMRT and SBS Transit, declined to say whether or not they would bid for the second contract.

London-based Tower Transit, which won the first contest, is also not saying if it will participate again. Its focus now is on gearing up to take over the services running from the Jurong East, Bukit Batok and Clementi interchanges, which are currently run by the two incumbents.

Tower Transit was awarded a five-year contract as part of a major restructuring of the public bus industry to a government-owned but privately-operated model.

A spokesman for British firm Go-Ahead, which submitted the highest bid for the first contract, said: "We remain interested in contributing towards enhancing the quality of public bus services in Singapore. We will draw on the experience we have gained through the process of the first tender, as we study the tender for the Loyang package."

Also keen is home-grown private bus company Woodlands Transport. General manager Roger Wong said: "Woodlands Transport has been in the business of transporting commuters safely and reliably for the past 40 years. We hope to be able to extend our services to the public commuter in the near future."

Injecting competition into the public bus market, including from foreign players, should raise overall standards, said transport experts.

Associate Professor Michael Li, a transport economist at Nanyang Technological University's Nanyang Business School, said: "An international group coming to Singapore shows that our transportation system is internationally viable.

"I think they will encourage the competition. They will surely create pressure on the two incumbents, and this will show in their service."

However, one challenge for any of the successful bidders would be finding enough drivers for the expanded services, said National University of Singapore transport expert Lee Der Horng.

He said: "I've done studies on manpower issues in the Singapore bus industry. At the moment, it's very difficult... to get Singaporeans to become bus drivers... regardless of how much you pay them. It is an industry that requires a lot of sacrifice."

Tower Transit, which will start operating its routes progressively from the second quarter of next year, will need to hire about 700 bus captains in all, due to a bigger fleet. That is more than the 400 or so existing SBS and SMRT staff whose jobs would be affected when services are transferred to the new operator.

Their interestsremain a key concern, said National Transport Workers' Union executive secretary Ong Chin Ang.

Tower Transit has pledged to offer employment to each affected worker at similar or better terms, said chairman Neil Smith.

Bus captains on other routes told The Straits Times that they are in no hurry to jump ship.

"Unless there is a significant pay increase, there is no point," said a Singaporean in his 30s who has been driving for eight years.

His 62-year-old colleague said the change will not affect him. "What's the difference? It's just a different boss, and I'm used to working here," he said.

Failure to win bus tender ‘a boon’ for SMRT, SBS Transit
Both SMRT and SBS Transit are losing money in their bus operations, so not winning the tender is a good thing, say analysts.
By Tan Weizhen, TODAY, 13 May 2015

A foreign operator beating out SMRT and SBS Transit, along with a host of other hopefuls, to nab the first package of bus routes put up for tender might have left the two incumbent public transport operators disappointed, and led to some transport analysts describing it as a “wake-up call” for SMRT and SBS Transit.

But as far as investors and market watchers are concerned, the failure to land the contract was a boost to the two public-listed companies: On Monday (May 11), the first trading day following the announcement last Friday after market hours that United Kingdom-based Tower Transit won the contract, the share prices of both SMRT and SBS Transit went up.

SMRT’s share price increased to S$1.635, from S$1.61, while SBS Transit’s shares were priced at S$1.825 each, up from S$1.80. On Tuesday, the share prices of SMRT and SBS Transit closed at S$1.625 and S$1.85, respectively.

Over the contract period of five years, the Government will pay Tower Transit an estimated S$556 million. SMRT asked for the lowest fee at S$453 million while SBS Transit, owned by ComfortDelGro, sought S$600 million.

While losing out on the contract could erode the market shares of SBS Transit and SMRT, investment analysts pointed to the fact that the two operators are losing money in their bus operations. With SMRT submitting the lowest bid, they felt that it had dodged a bullet.

Phillip Capital Research investment analyst Richard Leow said in a research note: “On the assumption of a 10 per cent operating margin for Tower Transit ... SMRT could potentially have entered into a loss-making contract.”

A two-envelope process was used to evaluate the tender: LTA evaluated the quality of the proposals first. It only looked at the prices after the bids had passed the quality evaluation. Tower Transit’s winning bid achieved the highest combined score for quality and price.

Deutsche Bank research analyst Joe Liew said in a research note that the outcome was a positive development for stocks in the sector. “The market feared that the margins under the (Government Contracting Model) was going to be very unattractive after seeing SMRT’s low bid,” he said.

Under the new Government Contracting Model announced in May last year, the Land Transport Authority will own and fund all bus infrastructure - such as buses, depots, and fare systems - while contracting bus routes out via a competitive tendering process.

From the second quarter of next year, Tower Transit will operate the new Bulim Bus Depot and ply 26 bus services from the Jurong East, Bukit Batok and Clementi interchanges. Of these 26 services, SBS currently operates 17 of them and SMRT, nine.

Investment analysts said that market share of SBS Transit - the biggest bus operator here - could potentially be eroded from 75 per cent to 56 per cent. SMRT’s market share could potentially go down from 25 per cent to 19 per cent.

Mr Nicholas Teo, market analyst at CMC Markets, said: “SMRT and SBS Transit have been losing money in all these bus operations, because they are bogged down by maintenance and depreciation of fixed assets. Now they can put away these fears, and focus on mining their service for a fee.”

Agreeing, Mr Eugene Chua, Investment Analyst at OCBC Investment Research, added: “Looking at the bigger picture, both incumbents are still incurring losses from core bus operations (with) negative operating margin, and with the remaining nine packages to remain with the incumbents until 2021, the transition to the government contracting model will see bus operations for both ComfortDelGro and SMRT turn profitable from second half of 2016.”

Under the model, the bus routes across the island would be split into 12 packages. Mr Chua said even if SBS Transit and SMRT fail to win any of the three packages that would be tendered out first, it would not be a concern.

Yesterday, SBS Transit reported a 44.6 per cent jump in first-quarter profit as it benefited from higher fares and ridership as well as lower fuel and electricity costs. For the three months ended March 31, net profit totalled S$4.8 million, up from S$3.3 million in the corresponding period a year earlier, SBS Transit said after the market closed.

However, the core bus operation suffered a loss of S$3.7 million in the quarter, narrowing from a loss of S$4.7 million for the same quarter last year, it said. Total revenue rose 10.9 per cent to S$247.2 million during the period.

We’ve handed Bulim Bus Depot over to Tower Transit Singapore, marking a milestone in Singapore’s transition to bus...
Posted by Land Transport Authority – We Keep Your World Moving on Thursday, July 30, 2015

No comments:

Post a Comment