Incompleteness and clarity in bus contracts: Identifying the nature of the ex ante and ex post perceptual divide

Document Type

Journal Article

Publication Date

2010

Subject Area

economics - capital costs, economics - operating costs, mode - bus, mode - bus rapid transit, operations - performance, organisation - contracting, organisation - performance

Keywords

Contract, Transaction costs, Bus operations, Contract ambiguity and clarity, Completeness, Survey of bus operators, Trust, Partnership

Abstract

In the transport sector, many types of contracts exist. Some are very precise, and strive for completeness; others are very ‘light-weight’ and are incomplete. Bus and coach contracts, won through competitive tendering or negotiation, are typically incomplete in the sense of an inability to verify all the relevant obligations, as articulated through a set of deliverables. This paper draws on recent experiences in contract negotiation, and subsequent commitment in the bus sector, to identify what elements of the contracting regime have exposed ambiguity and significant gaps in what the principal expected, and what the agent believed they were obliged to deliver. We develop a series of regression models to investigate the extent of discrepancy between the principal and the agents perceived ‘understanding’ of contract obligations. The empirical evidence, from a sample of bus operators, is used to identify the extent of perceived incompleteness and clarity across a sample of bus contracts. A noteworthy finding is the important role that a trusting partnership plays in reducing the barriers to establishing greater clarity of contract specification and obligations, and in recognition of the degree of contract completeness.

Rights

Permission to publish abstract given by Elsevier, copyright remains with them.

Comments

Research in Transportation Economics Home Page: http://www.sciencedirect.com/science/journal/07398859

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