Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Memorandum by Somerset County Council (TBS 12)

TENDERED BUS SERVICES

  At the beginning of March 1999, Somerset County Council submitted evidence of tendered bus services in our county via the Association of Transport Co-ordinating Officers to the Transport Sub-Committee of the Environment, Transport and Regional Affairs Select Committee.

  Since the submission of this evidence, the situation in Somerset (as well as Dorset and Devon) has changed radically with the acquisition of the GAG Group of companies by First Group Plc. This took place on 9 April 1999.

  Therefore, we wish to submit a more detailed report to the Sub-Committee.

ISSUES AFFECTING PUBLIC TRANSPORT FUNDING IN SOMERSET

1.  INTRODUCTION

  Somerset is predominantly a rural county with a population of approximately 487,000. It is divided into five District Areas comprising Mendip, Sedgemoor, South Somerset and West Somerset District Councils and Taunton Deane Borough Council. It is commercially focused on the three major centres of Bridgwater, Taunton and Yeovil but is greatly influenced to the north by Weston-super-Mare and the regional centres of Bristol and Bath.

  The northern part of the county comprising Sedgemoor and Mendip has a population of roughly 203,000 and has Badgerline, a First Group company, as its dominant bus operator.

  The western half of the county—Taunton Deane and West Somerset—accounts for roughly 132,000 residents and also has a dominant bus operator in Southern National Ltd, which was bought by First Group on 9 April 1999.

  The remaining South Somerset area is largely served by Southern National (42 services) but also with two long established independent operators, Wakes Services (based in Wincanton) and Safeway Services (based in South Petherton); together, they have small but important networks of rural and town services in the area.

2.  EVIDENCE OF LOCAL BUS MONOPOLIES OR CARTELS

  The two major operators, with their wide-ranging network of commercial services, are recognised as being the traditional bus providers in their respective areas with other operators providing minor add-ons or a very localised influence. The two companies have, almost without exception, tendered for bus service contracts in their own area of operation in the past.

  The Rural Bus Grant has allowed us to construct certain contracts so that they operated across the whole county and through both operators' territories. Some services were deliberately fragmented into separate contracts to enable parts of the same service to be operated by different operators and to encourage the smaller companies to bid for operations within their manageable capacity. This has certainly led to these two dominant operators having to work together for the first time to provide jointly operated services, recognising common fares and conditions.

  Nevertheless, a certain amount of reluctance was shown by First Badgerline in the Wincanton area to providing a service outside their traditional operating territory on a Sunday, along a route served by Southern National during the rest of the week. In the interests of economy and to provide guaranteed connections, the tender combined two services meeting in Yeovil. First Badgerline had to be persuaded to tender for the combined service and, having won it, needed considerable help and direction in an "unfamiliar" area.

3.  TRENDS IN COSTS AND PREMATURE TERMINATION OF CONTRACTS

  The shortage of drivers in the county has led to problems for Southern National in the operation of their commercial Taunton town centre shuttle services. This has led to critical articles and letters appearing in the local press. Talks were held with the Manager of the Bus Company who outlined a short-term strategy to cope with the operational problems while a sustained recruitment campaign was launched. Luckily, the need to reduce the town centre frequencies was not implemented as the recruitment drive proved successful.

  Badgerline admitted slight driver problems but managed to cover the situation by importing drivers from other parts of the country to cover services.

  With the exception of Wakes Services, no contracts have been prematurely terminated. Wakes are experiencing problems with driver retention/recruitment and have given early notice on a couple of contracted services. They also show reluctance to service development in their area and lack of flexibility in upgrading existing services.

4. COMPETITION FOR TENDERS

  The lack of competition for new services using Rural Bus Grant funds has been disappointing with only three contracts being won by smaller operators, few of whom have actually bothered to tender, as shown in the table.

  As part of the drive to improve the quality of services in Somerset, vehicles of five years old or newer and in certain circumstances, low floor buses have been specified, but this has deterred many smaller operators from tendering. First Badgerline have invested heavily in new buses as part of Group policy but Southern National have not aspired to vehicles offering greater accessibility until very recently when two vehicles have been purchased to fulfil contract commitments to provide low-floor buses, with a further six accessible buses on order.

Service NumberNo. of tenders dispatched No. of returned tendersSuccessful Operators Unsuccessful Operators

901241 BGLN/A
902182 S_N & BGLN/A(2 contracts)
915172 S_NRexquote
926251 BGLN/A
928192 S_NRexquote
929242 S_N & BGLN/A(2 contracts)
954231 S_NN/A
961232 S_NN/A
969262 S_N & BGLN/A(2 contracts)
976212 BGLS_N
984171 BGLN/A
602(1)162 BGLBakers
602(2)162 S_NBakers
602(3)162 BGLBakers
602(4)162 S_NBakers
682201 S_NN/A
676231 BGLN/A
28191 S_NN/A
15181 S_NN/A
54241 S_NN/A
30172 S_NRexquote
685223 Cooks CoachesS_N & D&W
669222 BGLBakers
831212 BakersBGL
906244 D&WA1, S_N, Wakes
19C&19D221 S_NN/A
TOTALS533 44

29 contracts in total: Bagerline won 38 per cent. Southern National won 53 per cent. Bakers Coaches won 3 per cent. Darch & Wilcox won 3 per cent. Cooks Coaches won 3 per cent.

Key:S_NSouthern National

BGLFirst Badgerline

D&WDarch & Wilcox (part of the GAG Group who also own Southern National)


  The impact of such a large Rural Bus Grant has caused some problems with cross boundary subsidy. North Somerset Council has indicated that it may not be able to support one cross boundary service in the next financial year as they face budget cuts compounded by a relatively small Rural Bus Grant.

  Overall, the cost of tenders has increased although it is difficult to quantify precisely as the Rural Bus funding has been used to provide 13 Sunday and seven evening services which are completely new to the County. Comparison of costs is therefore not possible. However, the level of tender prices has been much higher than anticipated and did curtail aspirations for a more comprehensive network, with some contracts not being awarded.

  Mendip District Council has worked with the County to secure additional services by committing funds accrued from raising car parking charges throughout their area. This has assisted in supplementing; in particular the evening network between the Mendip Towns, offering connecting links from the core service penetrating the County between Bristol, Wells and Yeovil, introduced as part of the Rural Bus Grant policy.

  The remaining District and Borough Councils do not currently fund public transport to this degree. However, the lead set by Mendip District Council may encourage them to investment in services in the future.

5. ACHIEVING THE OBJECTIVES OF THE INTEGRATED TRANSPORT WHITE PAPER

  Increased costs through lack of competition means that the chance of subsidised services becoming wholly commercial diminishes.

  If the Rural Bus Grant is withdrawn or reduced after March 2001 then the Local Authority will have to look carefully at its Capital Allocations for rural bus infrastructure under the LTP process. There is little point in spending money on bus stops and information if the services do not survive. The LTP requires Local Authorities to show its expenditure is giving Value for Money (both capital and revenue) and is achieving its set targets.

  The rural bus services become vulnerable because it is difficult to show Value for Money in large expenditure from Local Authorities and the chance of commercial viability is low.

ISSUES AFFECTING SCHOOL TRANSPORT

1.  INTRODUCTION

  Somerset County Council provides home to school transport for nearly 11,000 children (860 with special educational needs) each year at a cost of over £5 million. Table 1 below shows how these children are conveyed to school:

Table 1

Modes of TransportNumbers Conveyed

Contracted bus etc9,180
Local bus service638
LEA vehicle306
Parent groups270
Petrol allowances177
Volunteer drivers16


  The cost of providing transport to mainstream schools has increased by more than 45 per cent since April 1995. Transport costs into Special Needs establishments have increased by 36 per cent over the same period. The increase in cost for School Transport cannot be explained by just general inflation; set out below are some of the factors that have caused the cost of School Transport to spiral.

2.  BUDGET PRESSURES

The Driver Shortage

  Operators are reporting that finding drivers to cover routes is becoming increasingly difficult. The driver shortage is becoming a nation-wide problem and has been extensively reported in the trade press. In particular, the procurement of part-time staff to cover school runs is now a major problem. Some operators are now employing drivers on a "full-time" basis, even though there is not enough work between school runs to justify their full-time status.

Seat Belts

  The legislation requiring the fitting of seat belts for school children has increased costs to operators in two ways. Firstly, the initial costs of providing and fitting belts to vehicles (many of which were never designed to have seat belts) and, secondly, the need to maintain and replace the belts. Vandalism is cited as a major cause of these secondary costs.

Competition

  A lack of competition in some areas of Somerset is almost certainly exacerbating the cost situation. The lack of competition has two effects: firstly, operators are more likely to terminate contracts with a view to re-tendering if they are aware of their dominant position locally and, secondly, are more likely to grossly inflate their prices.

  In the Yeovil area, there are three large and two small coach/bus operators. This would appear to be a reasonably competitive situation. However, the three largest operators are all owned by the same parent company, GAG Ltd and one of these companies is Southern National Ltd.

  Five years ago, in the Taunton area, tenders for coach/bus contracts could be sent to eight operators; this figure is now down to four. One of these companies is Southern National Ltd.

  The situation in the Bridgwater area is similar. In 1990, there were seven coach/bus operators in and around the town; there are now just three. One of these companies is Southern National Ltd.

  On 9 April 1999, First Group acquired the GAG Group of companies, which includes Southern National Ltd, Taylor's Coaches, Pearce Darch & Willcox, Scarlet Coaches, North Devon Ltd and West Dorset Coaches.

The Legislative Framework

  The Government has undertaken an overhaul of education legislation culminating in the publication of the 1997 School Standards and Framework Act. However, the right to free transport remains linked to school attendance and the qualifying distances are as they were defined within the 1944 Education Act.

  We have no control over either numbers of children or where they live, yet our legal responsibilities, and hence what we spend on home to school transport, are driven by these factors. The freedom for parents to choose which school they send their children to has compounded the problems mentioned above.

  The Government's Green Paper, Excellence for All Children, promotes the inclusion of children with Additional Educational Needs (AEN) in mainstream schooling wherever appropriate. We fully support this initiative, but also wish to highlight that the costs of transporting a child with AEN is, on average, four times that of a child who does not have a specialist transport need.

  It is also likely that the minimum wage legislation and the directive controlling the maximum working week will have a significant impact on operators' costs and driver availability.

3.  THE RISING COST TO LOCAL AUTHORITIES

  The driver shortage, the ceasing of the concession which allowed three children under the age of 14 to share two seats and the implementation of seat belt legislation have had significant cost implications for Local Authorities. These higher costs are evident in the form of higher tender prices and less-than-reasonable demands from operators when contracts are re-negotiated. Table 2 below demonstrates the outcome of operators terminating routes to re-tender at higher rates: the average increase per contract during the period April 1998 to March 1999 was 30.4 per cent and the increased cost for a full financial year will be over £50,000.

Table 2

Previous
Cost/Day
New Cost/Day
Increased
Cost/Day
% Increase

£81.55
£111.05
£29.50
36
£81.55
£110.11
£28.56
35
£64.45
£106.33
£41.88
65
£69.50
£79.00
£9.50
14
£82.75
£92.00
£9.25
11
£65.25
£82.00
£16.75
26
£66.90
£85.00
£18.10
27
£66.35
£85.00
£18.65
28
£73.15
£95.50
£22.35
31
£66.45
£82.50
£16.05
24
£70.30
£94.50
£24.20
34
£65.95
£88.00
£22.05
33
Additional
cost/day
Average % change
£256.84
30.4
Additional cost per year
£50,083.80


  The ending of the three for two concession meant that more vehicles were required to convey the same number of children, with an additional cost burden caused by operators loading their tender prices to take into account the future cost of fitting and maintaining seat belts. Somerset County Council stopped taking advantage of the three for two concession in September 1996, and the attached Graph 1 (Mainstream Transport Costs 1995 to 1999) amply demonstrates the dramatic rise in our costs.

  This larger fleet not only increased costs but also exacerbated the shortage of drivers. Apart from the obvious operational difficulties for operators, there is also a cost implication for Local Authorities: the shortage of drivers means that operators are loading their tender prices to cover the eventuality of higher wage bills.

  The sparsity adjustment in the Education Standard Spending Assessment (SSA) does not fully reflect the additional costs that arise in sparsely populated areas and, in particular, the higher home-to-school transport costs which rural counties face. This has been confirmed in a recent survey of all rural LEAs undertaken by the County Councils Network in association with the Local Government Association.

  Bridging the gap between what the SSA provides and what it actually costs to deliver home-to-school transport has a direct impact on the money available to schools to spend on teachers, books and equipment as they are both funded from the same source.

  The public transport network in Somerset is expanding as a result of additional central funding, although provision in some areas requires further development. Therefore, a reliance on contracted provision in some areas is inevitable.

  Local Education Authorities (LEAs) are not funded to match the expectations or requirements of operators. In general, the annual price review has traditionally been tagged at or below inflation. This has led in the past to contractors giving notice on price and the re-tendered work coming in at greatly increased prices. Along with the seat belt issue, this was a significant factor in 1996-97 and extended into 1998, as contractors sought to improve profit margins on their contracts by submitting highly inflated bids for new or re-tendered routes.

  Somerset is a largely rural county where competition is limited and the factors set out above will continue to have worrying consequences for our school transport service.

Nigel Farrow

Corporate Director

19 April 1999


 
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