Memorandum by Somerset County Council
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
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 countyTaunton
Deane and West Somersetaccounts 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
2. EVIDENCE OF
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"
3. TRENDS IN
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
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 Number||No. of tenders dispatched
||No. of returned tenders||Successful Operators
||S_N & BGL||N/A||(2 contracts)
||S_N & BGL||N/A||(2 contracts)
||S_N & BGL||N/A||(2 contracts)
||Cooks Coaches||S_N & D&W
||D&W||A1, S_N, Wakes||
|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.
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
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
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:
|Modes of Transport||Numbers Conveyed
|Contracted bus etc||9,180
|Local bus service||638
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
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
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.
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
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
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
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
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.
|New Cost/Day||Increased |
|Average % change
|Additional cost per year
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
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.
19 April 1999