Tenders and service contracts for local public transport

This paper analyses the relationship between the service contract (and tender) design and the outcome of the tender in the local public tran sport. Data are collected through a survey involving about 50 territorial entities. It emerges that optimal contract (and tender) design crucially depends on the objective function of the regulator. Participation is encouraged by a semi-rigid model, by gross cost contracts, by weak incentives and by opportunity of sub-contracting. Vice versa, rebates are favoured by long duration of the contract, by strong incentives and (again) by opportunity for sub-contracting. Finally, having a new winner is favoured by strong incentives, by asset availability.