New Bus Service Framework for Budapest high quality for passengers, opportunity for market players

1. New Bus Service Framework for Budapest high quality for passengers, opportunity for market players László Sándor Kerényi Head of Transport Strategy Department BKK Centre for Budapest Transport

2. Contents • Budapest facts and figures • Current status of the bus sector • Challenges for better services • The new model • Lessons learnt

3. Budapest facts and figures Budapest / the Capital (since 1873): • 1.700.000 inhabitants • 600.000 car trips/day • Modal Split: 60% personal/ 40% public • 3,56 million passengers/day on BKV Agglomeration (Pest County, 80 settlements): • 800.000 inhabitants • 400.000 car trips/day (66% of all trips!)

4. Budapest facts and figures Two level municipal system (since 1990): • Municipality of the City of Budapest (the Mayor of Budapest) • 23 municipalities (23 mayors) of 23 districts Transportation tasks of the Municipality of the City of Budapest:[National Law LXV.1990.63.A§ g] • Public transportation • Traffic management on the whole road network of Budapest (4500 km) • Road and bridge maintenance tasks on roads and bridges owned by the City of Budapest, or used by public transport (1000 km) • Transportation developmentprojects • Permitting and legal control

5. Budapest facts and figures Road network: • Full length of the road network: 4500 km • Length of the main road network: 1200 km • 9 Danube road bridges (including M0 bridges) • Over 1000 traffic signaled intersections Public transport network: • Length of the public transport network: 1100 km • Number of stops and stations: 4700 • Rolling stock: app. 3000 vehicles (176 million km run) • Average occupancy of vehicles: 23,8% • Average circulating speed of vehicles: 16,7 km/h • 1,37 billion passengers/year, 5,1 billion passenger km/year

6. Budapest facts and figures New transport management model (since 2010):

7. Budapest facts and figures General tasks of BKK: • Ordering services of public transport (network planning, commission, control, issuing and controlling tickets, regional coordination) • Operationof roads, bridges and the traffic management system (development and coordination of reconstruction and construction works) • Integratedadministration and developmentof urban transportation (elaboration and updating of transport strategy, development and management of projects, professional coordination) • Elaboration and operation of general transportation regulatory systems (parking, congestion charging, heavy weight traffic charging)

8. Current status of the bus sector • Bus servicefacts and figures: • Share: 40% • 556 million passengers p.a. • 177 million vehicle kms • full geographical coverage • 7/24 service • 206 bus lines (daytime) • 38 night bus lines • Peak hours passenger load above 90% on 80% of the lines, average passenger load 24.0% • OPEX HUF 40 billion (EUR 135 mn) per annum • Total number of passengers 1.39 million per annum

9. Current status of the bus sector • First-door alighting to be extended gradually • Operational and planned replacement of BKV’s fixed-rail services • Mid-term general goals: • more fixed-rail services • less bus services • Automated fare collection to be rolled out (fully managed by BKK) • GPS-based AVL system to be mounted on all surface vehicles (even private operators) • Gradual shift to the competitive tendering model

10. Current status of the bus sector • Bus fleet facts and figures: • 1,353 buses • 624 pcs „articulated” (18m-long) • 698 pcs „solo” (12m-long) • 31 pcs „midi” (8m-long) • Average age of fleet: 18.13 years • BKV’s subcontractors: • 2 operators (1 private, • 1 government controlled) • own depots

11. Current status of the bus sector IK 415 160 pcs Volvo 7700 A 150 pcs IK 412 114 pcs IK 260 377 pcs IK 280 270 pcs IK 435 171 pcs

12. Current status of the bus sector Bus fleet vs. services: • Many break-downs and cancellations • 75% high-floor • 83%no A/C • Mostly EURO-0, up to EURO-III • Deteriorated outlook, passenger area

13. Current status of the bus sector • Bus depots of BKV: • 4 bus depots • 1 trolley bus + bus depot • 300-350 buses per depot • all owned by BKV • on-site petrol stations • on-site car wash • Full Wi-Fi coverage (as part of the AVL system „FUTÁR”) • Not to be sold – can be utilized by future private operators

14. Challenges for better services • Main questions related to the new model: • How to deal with current technical conditions of the fleet? • How to involve private funding? • How to improve services for passengers? • How to generate competitive pressure for BKV?

15. The new model Main aims of the new bus model: • Hundreds of low-floor, air-conditioned, EURO-5 or EEV buses to be put into operation until 2014 • No CAPEX • Competitive tendering • Cheaper, more efficient, better • Risk-sharing between BKK and the operators • BKV’s bus operations: competitor and benchmark

16. The new model • Competitive framework: • EU public procurement directives, HU public procurement law • Two phases: • Prequalification: open for application for years – since 21/10/2011 • Competitive tendering: actual call for tender for those operators who have successfully passed the pre-qualification • First tender due: December 2011 • „Larger” and „smaller” fleet contracts • Contract term depending on age of fleet; with new buses planned term: 8 years • Planned contract sizes between 50 and 300 buses

17. The new model • Service level agreements: • Punctuality • Cleanliness • Passenger comfort (heating, A/C) • Strict control regime: • Incentives and penalties – „bonus-malus” (stick / carrot) • Ever increasing service level control • BKK-managed AVL system to track each vehicle • Target: high quality services

18. The new model • Gross cost contracts: • Km-based service fee • Service fee to be reviewed per annum • Fare revenue to be collected by BKK • Contract term: • Based on turnover of CAPEX and 1370/2007/EC • Average planned contract term 7-8 years • Option to extension • Risk-sharing, spreading of costs: • Minimal standards to be set • Application of greatest possible freedom for operators • Target: acceptable service fee

19. The new model Costs: Factors on possible price increase Potentials to decrease costs • Experience of operatorsExperience with cheaper buses, existing processes, workflows • More efficient processesMaintenance, roistering, ever increasing cost optimization • Risk coverageOverhead costs spread across other activities • Higher amortizationBKV’s buses are amortized to zero now • Higher maintenance costsHigher qualified maintenance staff and more expensive • More diesel used by new busesNew technology, A/C increases fuel consumption • RisksDiesel price increase, use of BKV depot, trade unions

20. The new model Roll-out of the new service framework: 2012 2013 2014 2015 Phase 0 „urgent” Public procurement preparation Tenders Service provision 150 pcs 450 pcs 750 pcs 900 pcs • Phase 0: replacement of BKV’s subcontractor contracts (until 1/5/2012) • Tenders: gradual and continuous increase of number of contracts and operators • Target: more than half of the fleet size are new buses on the new tender regime

21. The new model The first tender: under time pressure… Phase 0 (under time pressure) Later phases service framework • Tenders from 1/5/2012 • BKK to procure • Long-term contracts • Smaller and larger fleet sizes (100-300) • Only new buses • High quality expectations • Service contract with operators • Competitive tendering • Redistribution of buses on the network • BKK-BKV consortium to procure • Short-term contract(s) (1-2 years) • Small fleet size (25-50) • Acceptance of high-floor/low-entry buses • „Compromises” on technical expectations • Subcontracted to BKV • Direct contract award • Service to start on 1/5/2012 • Buses to be distributed across the Budapest bus network (mixed with BKV buses)

22. The new model • The first tender: urgent need to actquickly • BKV’s Public Service Contract and BKV subcontracts expire on 30/4/2012 • Before 1/5/2012 BKK had no authority to conclude procurement and award contracts • BKV has no extra 110 buses for replacement • New contract needed to provide capacity • Time pressure leads to phase 0 „contradictions” with the new service framework

23. The new model 2012 2011 November December January February March April 44 45 46 47 48 49 50 51 52 13 14 15 16 17 1 2 3 4 5 6 7 8 9 10 11 12 Activities Week • BKK internal decisions • Prequalification • BKK to draft tender documents • Submission of applications • Evaluation of applications • Negotiations with applicants • RFP • Decision by BKK/BKV • Room for appeal • Contract Award • Preparation for Service Provision

24. The new model Service contracts Part 1 to 6

25. The new model • Service contracts Part 7 and 8: • Part 7: 25 new solo buses + 200% optional • Part 8: 25 new articulated buses + 200% optional • Specifications: • Low floor, with ramp • Minimum EEV engine • Additional points for the alternative propulsion (CNG, hybrid, electric etc.) • Air-conditioning • Built-in CCTV security system • Built-in passenger counter system

26. Lessons learnt • Main lessons after the first tenders: • No real bonus/malus: only penalties can apply due to the Hungarian procurement procedures → new regulation? • BKV is not allowed to bid on these procurements → New prequalification tender without BKV • Only Hungarian bidders → minimum fleet size to bid for new market is around 200 • No Hungarian buses → ??? • No change: • Integrated bus fleet control remains in the responsibility of BKK (FUTÁR system will be integrated on all vehicles) • Continuous quality control to be performed

27. Thank you for your kind attention! László SándorKerényi Head of Transport Strategy Department laszlo.kerenyi@bkk.hu