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Agreements on bus packages reached between LTA and bus companies

In a press release on 11 August, the Land and Transport Authority (LTA) announces that it has reached agreements with SBS Transit and SMRT Buses for 11 bus packages under the bus contracting model, which will come into effect on 1 September 2016.

Under Singapore’s bus contracting model, operators will be paid a service fee to operate the services, while LTA will determine the bus services to be provided and set service standards.

The estimated total contract fee is $5,322 million for SBS Transit, which will operate 8 packages out of eleven with 196 services. While the estimated contract fee with SMRT Buses is $1,865 million, in which it will operate three packages with 77 services.

There will be no change in the bus operators and infrastructure of the 11 packages. Therefore, the handover of the assets are not needed, and existing bus employees will not be affected.

The durations of the contracts range between two years to ten years. When these negotiated contracts expire, they will also be put out for competitive tendering.

All bus services will have scheduled headways of no more than 15 minutes for both directions during the morning and evening peak periods, with at least half of them having scheduled headways of no more than 10 minutes. Feeder services will run at intervals of six to eight minutes.

Mr Chew Men Leong, LTA’s Chief Executive, said, “With the completion of the transition, not only will the bus industry be put on a financially more sustainable footing, but commuters can expect higher bus service levels throughout Singapore.” Mr Chew has earlier announced his resignation from LTA is said to be leaving on 11 November this year.

Under the bus contracting model, LTA will own all operating assets including buses and lease them to the operators. In preparation for the transition, LTA has been buying additional buses since 2012 under the Bus Service Enhancement Programme and replacement buses since 2015.

There remain about 4,000 buses that are owned by SBS Transit and SMRT Buses at the moment. During the tenures of the negotiated contracts, LTA will lease these buses from the operators by paying an availability fee that is equivalent to the depreciation value of the buses. The financial cost of this is the same as buying over the buses now at net book value.