On (again) – and off (again) – the buses

Prior to the 4th of September Canterbury Earthquake, the bus company Christchurch Bus Services (CBS) was, apparently, ‘all go‘ for the extra bus routes that it won through tender; now CBS is ‘all Go Bus‘.  One minute it was all ‘on’; the next minute it’s all ‘off’.

What’s really going on?

It’s now been reported that Hamilton-based Go Bus has purchased CBS, one of the private bus companies recently awarded additional routes in metropolitan Christchurch.

CBS was highlighted in a police ‘sting’ that resulted in 62 buses being ticketed or taken off Christchurch streets and has also been involved in the chaos that has become Christchurch public transportation.

You don’t have to have a suspicious mind to experience raised eyebrows at this sale and purchase.Apparently, the purchase process has been protracted and in process for some weeks at least

Ecan had become concerned recently about the service offered by CBS during protracted sale negotiations.

It gave the company a deadline of 5pm today [19 November] to complete the sale, or Ecan would withdraw its contracts.

A company just wins additional bus routes and, all of a sudden, it’s in “protracted sale negotiations”? How protracted? When did these ‘negotiations’ begin?

Then there’s this curious admission from Bryan Jenkins, departing CEO of ECAN:

In a Perspective piece in The Press on Wednesday, outgoing ECan chief executive Bryan Jenkins said CBS tender prices for Red Bus routes “did cause us concern”.

“CBS assured us its prices were sustainable and so there was no reason not to award the contracts.

“To not do so could have led to significant legal repercussions.”

ECan has now included a clause in its tender documents to enable it to reject tender prices if they are more than 10 per cent below an independent estimate of the cost of providing the service.

To summarise; CBS is in sale negotiations – at the very least – almost immediately after gaining control of extra routes through tender. The tender it put forward “did cause [ECAN] concern” over whether the “prices were sustainable”.

One explanation is that CBS honestly believed its tender prices were sustainable, had no intention of selling until ‘reality dawned’ as soon as they actually started to operate the extra routes (1st of November). They then sought a buyer. This explanation depends on the sale process not even being considered prior to the tender being awarded.

There’s another possible explanation.

Hypothetically, let’s suppose that prior to the latest tender round CBS was aware that it was not a sustainable business and began the process of looking for a buyer. The owners and shareholders of CBS would, presumably, want the best price possible. Now, how might a bus company make itself more desirable to a prospective buyer and, therefore, attract a better price?

How about gaining more bus routes? Fine, but how to do that when current routes were being serviced by current operators to a high standard. According to ECAN CEO Bryan Jenkins, Christchurch’s bus services are the envy of all. As he said in his ‘Perspective’ piece in print version of The Press (24 November):

Since the early 1990s, bus use has increased from seven million trips a year to more than 17.5 million. More than 73 per cent of users rate the bus system as very good or excellent, with 87 per cent of residents rating Metro as value for money.

A 2009 survey shows that greater Christchurch has the lowest cost per kilometre and the highest standard of public passenger services in Australasia.

One way to win a tender, of course, is to put in an unsustainably low price for the routes – if the tender process allows for that. After all, if you know that a bigger fish might buy you soon and you also know that it is willing to take a short-term hit to enter a new market, it might just work. Your assets would then include extra routes – which the ‘big fish’ would appreciate to soften the short-term loss. Those extra routes would also provide your owners and shareholders with a better sale price.

It would be a ‘win-win’ for all. Except, of course, for your passengers and ECAN. But, then, this is business, isn’t it? Not charity …

… or public service.

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