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Connex gets fined $2.4M
Aaron Hewett

Connex has finally been fined for cancelled services, late trains and general operational tardiness according to this article in The Age today.

They were fined $2.4 million dollars by the Victorian Government.

This does bring up a dilemma, however. The service provider (Connex) is paid by the State Government to provide an efficient and timely service to us (commuters). They also receive revenue from ticketing and fines.

If their level of service drops below a certain level (measured by train lateness and no-shows), they get fined by the Government.

However, since Connex's main source of revenue is from the government (in the form of state taxes and from the GST), the burden for paying this fine rests with the taxpayer and the commuter (and lucky for me - I'm both).

So what exactly is the government going to do with this $2.4M? Run the extra trains that Connex won't? Train drivers like they should have done while running the defunct M>Train network? Upgrade rail services? Or will they simply label it "surplus" for the timebeing and use it to buy votes at the next state election?

The reality is that Connex is hardly going to be in a position to improve services with less money. So while taxpayers have got an extra $2.4M to play with, the quality of their rail services is going to diminish, and there will be more pressure at the end of the year to raise ticket prices.

We are in a ludicrous situation which relies on competition but there isn't any (because who really has the expertise and the want to run a city's PT services?), and where fining service providers actually has the reverse effect on service delivery.

To my mind, the entire reason the Victorian (Labor) Government persists with a privatised public transport system is so it is removed from direct responsibility (and direct blame) for the problems that eventuate. They, afterall, have had many opportunities to end this costly charade.

General 11th September, 2004 19:19:41   [#] 

Comments

Surprisingly
I mostly agree.

Except for one point. There is competition for public transport. It exists in the form of the road network, and even the footpaths. Needless to say it is also heavily subsidised creating the ludicrous situation where one subsidised form of transport "competes" with another.

The beauty of the fines are that the exist as a bandaid for government incompetency. Normally a company won't implode on itself because doing so loses customers, and of course, their revenue. But the government is so paranoid about public transport "dying" that the operator knows it will be propped up regardless. I'm not sure that they should, nor that the loss of p/t would be as great as we imagine, but I'll save that line of thought for a post of its own.
Russ  11th September, 2004 22:43:40  

Corrections
Just a word of warning - the revenue raised from ticketing and fines does not go directly to the operator, in this case Connex - it goes to the government, who then pay it to the company as part of their payment for the services - but they take out the value of any 'punctuality problems', and thus you end up with the 'fines' of 2.4m, et cetera.
Essentially these 'fines' that they speak of are service benchmarks that act as a financial incentive for the company to run services to a set standard - or risk lowering their return.
Random Public Transport Employee  15th September, 2004 15:36:58  

Thanks and noted RPTE.
The problem with that model is two-fold - and is both Aaron's and mine own points. One, Connex isn't making a return, or at least wasn't before the government poured more money into the system, so giving them less money is likely to reduce performance rather than improve it. And two, having the government set benchmarks, funding, ticket prices etc. defeats the purpose of having a private system (ie. market competition) because the operator is just a puppet of the government.

It really is time we stopped pretending that p/t is a private concern and put the blame for its failures where it actually lies.
Russ  17th September, 2004 14:16:25  

More Corrections
Connex is 'expected' to turn over a sum approximately 85-90% of the total value of the $2.7bn promised to them by the government in the New Contract. If they ran every train on time, with no cancellations, they would recieve the full amount of $2.7bn. As this is not fully possible by any stretch of the imagination, they claim 85-90% of the total value as their net profit, budget for that figure, and anything else they earn from on-time running comes in as an additional profit.
In essence, the Operational Performance Regime (which measures their performance) dictates their return, so the incentive to run more services on time is directly financial. If they are given less money they are motivated to improve the service to start making money again.

Second, the only person capable of scheduling less services is the Director of PT, inside the Dept of Infrastructure. Connex could theoretically up the number of trains, but it would do so at its own financing. The DPT sets a benchmark through the entire network timetable, connex runs those services and gets paid for it. No train runs, no pay. Thats a better description of the 'fines' system.

On the puppet reference - the whole arrangement is run like a subcontractors' employment - Connex has the logistical and industry knowledge and experience to run the system (theoretically), they bid for the contract, and they won it. Then the scope of their contract was expanded and they assumed control of the entire system. But essentially they are paid to do what the government wants, and if they fail to do so they get the boot.

A little bit of inside info - the government can reabsorb the entire PT network with two hours' notice, its written into the contract. If both YT and Connex perform badly there is no obligation for the gov't to pay out their contracts - however if the system was reabsorbed without good reason the state would be the financial loser as it would have to pay a percentage of the remaining contracts.
Random Public Transport Employee  17th September, 2004 17:55:23  

True, however
RPTE, we seem to be talking at cross purposes here. Aaron and I are not talking about the system as it is being run, as much as the underlying politics of doing it in this manner. In particular, the rationale behind the privatisation of public transport was to gain the benefits in cost savings that a profit (and customer) orientated private company has over the public service. And those don't occur when the operators are subcontractors and therefore wholly answerable to the government.


To answer your point however, there are some assumptions underlying the Operational Performance Regime that are incorrect. One, that the government can predict how much the p/t system should cost when making the contracts and two, that the services are poor because of a lack of motivation to do better on the part of the operator.

There aren't enough companies wanting to run the services to actually have the sort of competitive bidding process that would guide the funding levels. As such the operators were massively under-funded under the old contract, and that has caused the current drop in service levels. The 'fines' such as they are merely exacerbate that problem. Things may improve under the new contract but I wouldn't hold my breath. As Aaron said - rightly I think - the government is more interested in avoiding responsibility for the p/t system than producing good outcomes. And the current contract system is broken.
Russ  20th September, 2004 00:17:58  


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