A telling line from provisional liquidators of coach operator Fishers Tours cites fixed contract income coupled to rising costs as a contributor to the Dundee business’s closure.
Debate over contract pricing is nothing new for the coach and bus industry. One school of thought is that when an operator has submitted a price, it should stick with it if successful regardless of market fluctuations over the award’s life.
Another posits that where cost uplifts are out of sync with anything foreseeable, or inflation, the tendering body should at least consider working with the operator to mitigate that.
Such unpredictability has been legion in recent years; one operator highlights that while bulk diesel is now not much above £1 per litre, there is no way of forecasting where it might be in six months, let alone three or five years. That is where the mythical finger in the air comes in.
The cost of employing staff has seen an unexpected rise with changes to National Insurance. Some observers suggest that further revenue raising by the government may be necessary later this year.
How can all this be predicted, never mind built into forward-looking contract pricing? The state of local authority finances is well-known, and the likelihood of those bodies willingly offering an uplift beyond an inflation-related clause is remote. The option of last resort, handing contracts back, remains, but then what?
To this uncertainty over contract prices is added the outcome of bus franchising. Policy in that respect is crystalising quickly in parts of the UK, and the influence that it could have on home-to-school contracts in parts of Wales was recently highlighted to Senedd members.
Contracted or modestly commercial local bus services can be intertwined with home-to-school provision to create a good day’s utilisation of vehicle and driver and give a financially astute delivery mechanism for both.
However, it looks that under Welsh Government franchising plans, procurement of those lines of work will be split. Local services will be overseen by Transport for Wales under a country-wide reregulation approach. Home-to-school will stay with local authorities.
If delivered, that would potentially mean that each pool of work operates in its own silo. The implication on costs is clear. But against that should be seen how wrapping local bus and home-to-school together into a single franchise contract award can harm SME operators.
Such an outcome has already been witnessed in Greater Manchester. Despite words to the contrary from those in power, there is a risk of it happening again elsewhere. The approach to how home-to-school sits alongside franchising is difficult, but it is equally tricky to see how a strategy that is satisfactory to all could be arrived at, particularly in more rural areas.
Equally awkward is defining an equitable way around unexpected cost rises on contracts. The point that contingency should be priced in at the beginning has merit, and it is no doubt utilised. Some stakeholders have called for longer-term awards to leverage investment in vehicles and technology, let us not forget.
But when the likely ongoing financial turbulence is considered, being able to accurately forecast how much it will cost to deliver a service in the medium-term is as far away as ever. The proverbial finger in the air will no doubt have a part to play for some time yet.
