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In 1989 the New Zealand government introduced legislation to reform the process whereby public funds were spent on the procurement of public passenger transport services, and to take effect from 1 July 1991. Under this legislation Transit New Zealand was responsible for approving Competitive Pricing Procedures (CPPs) which must be followed before passenger transport services are eligible for public funding.

To identify if the required efficiencies were being achieved, an extensive review of international public transport tendering and contracting practices, especially in the United Kingdom and the United States of America, and discussions with funding authorities and operators in New Zealand, were undertaken. Key issues have been identified that have the potential to impact on competition and contract pricing. They include RFT size, Group and Combined Tenders, Gross v Net Tenders and Patronage Information, Security of Contract Tenure, Contract Negotiation Procedures, Vehicle Availability, Non-Performance Penalties and a range of other issues.

The key issues that have the greatest impact on competition and contract pricing are accorded high priority for further investigation. Broad options to improve procedures are also identified.

Conclusions are provided on seven specific questions relating to:

• factors that have limited competition
• why competition has varied throughout New Zealand
• whether competition is likely to increase
• whether current levels of competition are a major problem
• the implications of low levels of competition
• how a greater number of commercial services might be encouraged
• changes to the present procedures which would help reduce public sector costs and provide better value for public funds.

Keywords: Buses, competition, contracts, deregulation, New Zealand, passenger transport, road transport, tendering