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POLITECNICO DI MILANO
SCHOOL OF INDUSTRIAL ENGINEERING
DIPARTIMENTO DI INGEGNERIA GESTIONALE
Quality in urban collective transport systems: the
case of São Paulo, Brazil
Guilherme Nudel Radomysler
Matricola: 812915
Tesi di Laurea Magistrale
Supervision: Prof. Deborah Agostino
Milano
2015
ABSTRACT
Urban mobility in a metropolitan region, defined by the easiness with which
people can move around, is a fundamental characteristic of the quality of life of those
who live in it and of its degree of social and economic development. The urban mobility
system is deeply related to the urban development and the use of the land.
In Brazil, where 84% of the population lives in urban areas, the mobility
question has an increasing importance. The mobility model implemented in São Paulo
throughout most part of the 20th century has been focused on the use of the automobile
as main mode of transportation. The investment in large avenues and road projects such
as tunnels and bridges and the prioritization of private transport instead of public
transport are vital features of this model. However, it is showing signs of exhaustion,
as demonstrated by the daily traffic jams and the every lower indices of mobility of the
population of São Paulo.
Collective modes of transportation are an alternative of mobility system,
especially the bus system, because it has low implementation costs and it enables
operational changes that will have short-term impacts, when compared to subways or
urban train systems.
In June 2015, the City Hall of São Paulo published the structure of the tendering
model for the concession of the bus public transport services that will regulate the
operation of buses in the city for twenty years, extendable for another twenty years.
This tender, with a value of R$ 140 billion, has several innovations and mechanisms in
order to guarantee that the service is offered with quality and efficiency.
This work, based in the available literature review, analyzes the ways in which
the invitation to tender measures the quality of the service supplied by the operators
and the tools it uses to maintain minimum standards of service and to influence
behaviors. Several shortcoming were found in the definition of quality of the proposal,
especially concerned about the perspective of stakeholders other than the users of the
system.
I conclude with a series of suggestions of strategies and mechanisms that could
be included in the contract with the operators and in the tendering process of the
concession of the service exploration.
Keywords: Performance measures, collective transport, bus
LIST OF FIGURES
Figure 3-1 - Strategic management process ..................................................... 25
Figure 3-2 - Four fundamental processes......................................................... 31
Figure 3-3 - Development process of a PMS ................................................... 34
Figure 4-1 - Measure's record sheet ................................................................. 50
LIST OF TABLES
Table 3-1 - Template from Neely et al (2002) ................................................. 29
Table 4-1 - Assessment categories and measures from the ITT ...................... 51
Table 4-2 - Measures and respective weights according to the ITT ................ 57
Table 4-3 - Explanation of the remuneration formula ..................................... 59
Table 4-4 - Terms of the Basic Remuneration ................................................. 60
Table 4-5 - Remuneration changes according to the MKBF ........................... 61
Table 4-6 - Quality index formula's terms ....................................................... 61
Table 4-7 - Explanation of the system’s productivity formula ........................ 63
Table 4-8 - Explanation of the system’s productivity formula ........................ 65
SUMMARY
1 INTRODUCTION ....................................................................................... 7
1.1 Context ................................................................................................. 7
1.2 Motivation ............................................................................................ 9
1.3 Objectives ........................................................................................... 10
1.4 Structure ............................................................................................. 10
2 METHODOLOGY .................................................................................... 12
2.1 Literature review ................................................................................ 12
2.2 Case studies ........................................................................................ 13
2.3 The case of São Paulo ........................................................................ 13
2.4 Suggestions......................................................................................... 13
3 LITERATURE REVIEW .......................................................................... 14
3.1 Performance Measurement ................................................................. 14
3.2 Performance Measurement Systems .................................................. 15
3.2.1 Brief history of PMS .................................................................... 16
3.2.2 Change factors .............................................................................. 16
3.2.3 Deficiencies of the traditional PMSs ............................................ 17
3.2.4 New requirements of PMS ........................................................... 19
3.2.5 Uses of PMS ................................................................................. 19
3.3 Performance Measures ....................................................................... 25
3.3.1 Classification ................................................................................ 25
3.3.2 Requirements ................................................................................ 27
3.3.3 Record sheet ................................................................................. 29
3.4 Design of a PMS ................................................................................ 30
4 THE SÃO PAULO CASE STUDY ........................................................... 36
4.1 Legislation and guidelines .................................................................. 36
4.2 Development of São Paulo’s urban transport ..................................... 39
4.3 The Invitation to Tender in São Paulo, 2015 ..................................... 44
4.3.1 Annex 4.4 – Service Evaluation Procedures ................................ 46
4.3.2 Annex 4.8 – Remuneration Methodology .................................... 58
5 CONCLUSION ......................................................................................... 67
5.1 Contract .............................................................................................. 68
5.2 Tendering process .............................................................................. 71
5.3 Next steps ........................................................................................... 72
6 BIBLIOGRAPHY ..................................................................................... 74
7
1 INTRODUCTION
1.1 Context
Urban mobility can be defined as a person’s difficulty of making a trip inside a
city. It is essential for urban development, allowing that people move around in order
to realize commercial, industrial, educational, recreational activities, among others.
Therefore, urban mobility is an important factor of life quality and of social and
economic development of a city. (FERRAZ e TORRES, 2004).
Urban mobility also possess an intense interdependence relation with the socio-
spatial organization of the cities. In one hand, the existing transport and traffic systems
directly affect the urban development. In the other hand, areas already urbanely
developed need an efficient mobility system that accompanies its expansion
(VASCONCELLOS, 2012).
The definition presented below incorporates the relation between mobility and
urban development, including factors related to environmental and economic
sustainability and to social equity, relevant to any contemporary city.
“Sustainable urban mobility is a system that incorporates
economic viability, environmental stability and social equity by
meeting the needs of transport and land use of both current and future
generations in an efficient manner” (KAYAL, SINGH e KUMAR,
2014)
In the city of São Paulo, article 225th of the Strategic Director Plan (PDE, in
Portuguese), defines the mobility system as:
“(…) the organized and coordinated ensemble of transport
modes, services and equipment, infrastructures and operational
facilities necessaries to the full mobility of people and freight through
the municipal territory, aiming at ensuring the service quality, the
safety and security of all users, especially those in social vulnerable
condition, in addition to contributing to the mitigation of climate
change”.
The collective urban transport is an integral part of the urban mobility system,
representing ,in the city of São Paulo, 37,1% of a total of 26 million trips taken daily,
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which is 55% of the trips made by motorized modes1. In the collective transport share,
the bus systems is preponderant, being responsible for 65% of the trips made2.
However, there is a great disparity between the quality of private transport and
collective transport. The average travelling time of users of the collective system is 2,16
times longer than that of private transport users3.
In addition to being fundamental for de mobility of a large part of the
population, the collective urban transport also has several advantages to the society as
a whole in comparison to private transport. Collective transport propitiates a more
rational and efficient use of the road infrastructure. For example, a car uses 25 times
more space than a bus, per transported passenger. This difference can lead to
improvement in the congestion and traffic jams of the cities and in emissions related
pollution. Collective transport also is a safer and more secure form of travelling,
reducing the number of accidents and injuries or victims. Last, collective transport also
presents a lower cost per passenger, aiding in the democratization of mobility and the
urban spaces, which becomes more accessible to all.
The PDE of São Paulo recognizes the importance of collective transport to its
urban development:
“Art. Sixth – The urban development policy and the strategic
director plan are oriented by the following guidelines:
XI – priority in the road system for collective transport and
non-motorized modes”.
São Paulo is the biggest city in the Americas, with approximately 12 million
inhabitants. It is part of one of the ten largest metropolitan areas in the world, consisting
of 39 cities and over 20 million people. The proportions of the collective road system
are also of this magnitude. The municipal fleet has over 1200 lines, through which
circulates almost 15.000 vehicles.
1 From http://www.metro.sp.gov.br/metro/numeros-pesquisa/pesquisa-origem-destino-
2007.aspx (last acccessed 01/11/2015).
2 From http://www.valor.com.br/brasil/4250736/interior-de-sp-adota-carro-e-morador-da-
capital-tende-usar-transporte-publico (last acccessed 01/11/2015).
3 From http://www.metro.sp.gov.br/metro/numeros-pesquisa/pesquisa-origem-destino-
2007.aspx (last acccessed 01/11/2015).
9
Such a system has numerous costs, particularly related to the service operation
and to the infrastructure maintenance and development. Usually, the collective urban
road system is financed through a mix of fare revenues – paid by the users – and
subsidies – supplied by the public authority through tax collection. Only in the city of
São Paulo, the costs of the bus system will total R$ 7 billion (approximately € 1,7
billion), including R$ 1,9 billion in subsidies,, which represent 4% of the municipal
budget.
The adequate functioning of a system that consumes such a large amount of
public resources and that has a wide range of impacts in the socio economic
development of the city is in the interest of all. The quality and performance of this
service is a complex concept that should consider several factors and stakeholders.
Through this project, I will discuss the quality of the collective road transport
system, trying to analyse its impact in different stakeholders and in the city as a whole.
Then, I will analyse the Invitation to Tender and the proposed contracts that regulates
the bus service delivery in the city of São Paulo, focusing on its quality definition and
on the mechanisms that exist to ensure it. Last, I will propose a series of suggestions
that could lead to better performance of the operators and a better quality of the system.
1.2 Motivation
São Paulo has over eight million automobiles that circulate daily on its streets
and avenues, causing hundreds of kilometres of congestion in the peak hours. The
average speed of trips, both in cars and buses, has been diminishing, indicating the
exhaustion of an urbanisation model that prioritizes the individual motorized modes of
transport.
The municipal public authority has already realized that. The tenure of Mayor
Fernando Haddad (2013), implemented several initiatives related to the mobility
question, always prioritizing the collective transport or non-motorized modes. As an
example, there has been the implementation of over 150 km of exclusive bicycle lanes,
450 kilometres of exclusive bus lanes in the last two years 4 and the speed limit
reduction on the largest avenues of the city, including the Marginal Pinheiros and Tietê.
4 Retirado de http://www.cidadessustentaveis.org.br/boas-praticas/implantacao-de-ciclovias-
faixas-e-corredores-de-onibus-nova-visao-para-mobilidade-em (acessado em 01/11/2015).
10
On July 2015, the first version of the invitation to tender (ITT) for the
concession of public transport on tires was published. It will regulate the tendering
process and the contracts of bus operation for all municipal lines for twenty years,
extendable for another twenty. The municipality estimates the value of the concession
to be around R$ 140 billion (€ 34 billion), not considering the possibility of extending
the contracts.
The framework that these contracts will have has the potential to affect deeply
the development of the “paulistano” 5 bus system and, consequently, the socio-
economic development of the city. The tendering process and the mechanism included
in the contracts represent an opportunity to influence significantly the urban mobility
context.
Last, Brazil is going through a delicate economic moment, with a recession
forecasted for this year and the next. In this crisis period, the need to better utilize public
resources increases greatly. In addition, more people tend to use the collective transport
system, with lower costs to the user.
1.3 Objectives
This work has the following objectives:
Analyse and discuss the quality definition adopted by the São Paulo’s
Transport Secretary (STM, in Portuguese), through the Invitation to
Tender of 2015;
Analyse the mechanisms that the SMT has to influence and motivate
behaviours, in order to achieve a better performance for the system;
Discuss and present alternatives for the application of these measures,
in order to maintain a minimum service level from the Service Providers
and to motivate them to improve continually their performance.
1.4 Structure
As to guide and orient the reader of this project, I present its structure in this
section.
5 “paulistano” is a term used to denote what is or comes from the city of São Paulo
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Chapter 2 – Methodology - Here I present the methodology of this project,
which is based in four parts: literature review; case studies; contextualization of São
Paulo’s system and its definition of quality; and, suggestions and critics.
Chapter 3 – Literature Review - This chapter presents the references consulted
in the literature in order to supply a technical and theoretical base for the analysis of a
Performance Measurement System (PMS) of a bus transport system. First, I will
introduce some basic notions on management and measuring of performance,
discussing the recent evolution in the PMS’s theory, its uses and benefits. Second, I
will present a discussion on performance indicators, their characteristics and
requirements. At last, some PMS development models will be presented, as to aid in
the methodology of this project.
Chapter 4 – The São Paulo Case Study - In the first part of this chapter, I present
the São Paulo collective transport context. First, I make a broad explanation of the
legislation in national, regional and municipal level that regulates the public transport
in São Paulo. Second, I present the history of the public transport system in the city
form the beginning of the 20th century until present days, finishing with the current
model of service delivery. Lastly, I introduce the main stakeholders present in the SP
scenario, relating them to the theoretical model presented above.
In the second part of this chapter, I present and discuss the Invitation to Tender
created by the SMT on behalf of SP’s Mayor Office, especially the parts regarding the
indicators that will be used and the remuneration of the service providers.
Chapter 5 – Conclusion - In this chapter, I discuss ways in which to ensure
minimum levels of service while at the same time motivate desired behaviors and drive
innovation from the service operators. I mention experiences form other cities and
systems that helped the agencies responsible to manage the service providers better.
12
2 METHODOLOGY
For the purposes of this project, I defined four main steps, considering the
objectives proposed in section 1.3.
In order to achieve the proposed objectives, the present work has been divided
into four research processes: (i) a literature review on Performance Measurement
Systems (PMS) in general and performance indicators; (ii) regional case studies about
collective urban transportation, frameworks for defining, measuring and influencing
the quality of the service in these systems; (iii) a critical analysis of the invitation to
tender of the city of São Paulo, its proposed PMS and consequent definition of quality
and its remuneration formula; and (iv) suggestions based on the literature review, case
studies and on the original model proposed by São Paulo’s Municipal Transports
Secretary (SMT, in Portuguese), of a PMS that represents a better definition of quality
for the system, including ways in which to motivate and influence behaviours.
2.1 Literature review
The first part of this work consists in a profound revision of the recent academic
literature on Performance Measurement Systems, presented in Chapter 3, with the goal
of supplying a strong theoretical foundation for this project’s development.
This review starts with some definitions and basic concepts on the service
quality debate. It follows to a contextualization of the recent scientific research about
the theme and the main contextual changes that have influenced the PMS models
relevant for this subject development.
After that, I will make an analysis regarding the main requirements of a PMS,
defining which characteristics it should possess in order to work effectively and
efficiently in an increasingly complex and dynamic business environment.
Subsequently, I continue to an analysis of the fundamental unit of a PMS, the
performance measure. I suggest a few different frameworks and classifications for the
varied indicators. I also present the key requirements of efficient and effective
measures. Last, I discuss the graphic presentation of the measure’s metrics, through a
record sheet.
The last part of the PMS’s literature review is related do the system’s
development, in which I discuss some processual frameworks
13
2.2 Case studies
A few important cases have been studied during the development of this project.
This study was based on a descriptive exploratory research methodology, with the goal
of obtaining alternative models of contracting and delivering transport services. Some
cities have been analysed in depth and have especially contributed to this project, such
as London (England), Curitiba (Brazil), Bogotá (Colombia) and Milan (Italy).
2.3 The case of São Paulo
The Invitation to Tender (ITT) of the bus service operations concession in São
Paulo is the focus of this work. Based on the literature review and on the case studies,
I make a critical analysis of the ITT published by the municipality of São Paulo. I follow
the same structure as defined in the ITT, focusing on its definition of quality and
measures and on its remuneration formula. During the literature review, I found that
these two characteristics are central to a PMS that can impact and influence behaviours.
2.4 Suggestions
In this last part of the work, I make a series of suggestions that could be used in
the city of São Paulo. All suggestions are based on the current ITT and the city’s
context, as not to create ideas that are impossible to execute.
I separate the suggestions into two parts. First, the ones related to the tendering
process and model. Second, the ones that relate to the contract offered, especially the
measures used, the quality definition and the remuneration formula.
14
3 LITERATURE REVIEW
This chapter presents the references consulted in the literature in order to supply
a technical and theoretical base for the analysis of a Performance Measurement System
(PMS) of a bus transport system. First, I will introduce some basic notions on
management and measuring of performance, discussing the recent evolution in the
PMS’s theory, its uses and benefits. Second, I will present a discussion on performance
indicators, their characteristics and requirements. Last, I will present some PMS
development models as to aid in the methodology of this project.
3.1 Performance Measurement
Performance measurement is, literally, “the process of quantifying action,
where measurement is the process of quantification and measurement leads to
performance” (NEELY, GREGORY e PLATTS, 2005). The authors go on to making
some other important distinctions:
Performance measurement - the process of quantifying the efficiency and
effectiveness of action.
Performance measure (PM or indicator) - a parameter used to quantify
the efficiency and/or effectiveness of an action.
Performance measurement system (PMS) – a set of measures used to
quantify both the efficiency and effectiveness of actions.
Performance metric – the definition of the scope, content and component
parts of a broadly based performance measure.
Here it is also essential to clarify the distinction between efficiency and
effectiveness. Efficiency is a measure of how economically the firm’s uses its resources
when providing a given level of customer satisfaction, while effectiveness refers to the
extent in which customer requirements are met (NEELY, GREGORY e PLATTS,
2005).
The same Neely, now together with Adams and Kennerly (NEELY, ADAM e
KENNERLY, 2002), made a small but deeply significant adjustment to this definition.
They think about performance in terms of stakeholders’ satisfaction and requirements,
instead of the clients’. With this change, they recognize organizational performance as
“a complex and multifaceted phenomena, which goes beyond a simplistic conception”
15
(CARNEIRO, 2005). They also recognize the impact that stakeholders, not only
customers and shareholders, have in the success of a company.
Bonsall and Marsden (MARSDEN e BONSALL, 2006) define other useful
terminology when discussing PMS:
Objective – a succinct statement of the key goal(s) being pursued over the
medium to long-term. May be expressed in terms of an input, an output, or
an outcome.
Input – the resources that contribute to the production and delivery of an
output.
Output – the immediate result of an action.
Outcome – the ultimate impacts of an action.
Process – the means by which an outcome or output is to be achieved.
Constraint – a limit on inputs or processes or a level of performance that
an organization feels it must achieve.
Target – the level of a performance that the organization aims to achieve
for a particular activity within a given lifetime. Usually relates back to an
objective.
3.2 Performance Measurement Systems
Agostino et al. (AGOSTINO, STEENHUISEN, et al., 2014) identify three
elements that shape a PMS: design, use and development. The first element, design
represents the technical characteristics of the PMS, such as KPI, targets associated with
a system of bonus and penalties, and a system of reporting. Use, the second element,
involves data validation, that is, how and by whom the data validity is checked. It also
considers all the consequences triggered by the use of PMS, both intended and
accidental. The third element, development, encompasses the way a PMS design and
use evolve over time.
Design – KPIs, targets and system of reports
Use – Type of use, data validations, data interpretation and effects
Development – Changes in PMS design and changes in PMS use
16
3.2.1 Brief history of PMS
Historically, the measurement system for business has been financial
(KAPLAN e NORTON, 1996). Even before the industrial revolution, artisans already
used some form of financial performance measures (BORNIA, TEZZA e VEY, 2010).
During the Industrial Revolution, a few other measures came into use. Railroad
managers developed an operational index, relating operational expenses and revenues.
Still in the XIX century Taylor initiated what is now known as scientific management,
introducing the scientific method into the management world, and measuring with
accuracy the material, man hours and machine hour used for production.
By the early 20th century, some financial innovations, such as the creation of the
indicator Return on Investment (ROI), together with other traditional financial
indicators became the preeminent figures guiding managers of large companies
(BORNIA, TEZZA e VEY, 2010).
During the 1960’s, with the rise of the quality movement, non-financial
indicators were being used more frequently. They focused in different aspects of
quality, such as speed, reliability and flexibility. This initial rupture with financial
indicators was intensified in the 1980’s, but traditional measures continued to be
extremely significant for managers.
From the 1980s, a series of economic, social and technologic changes affected
significantly the ways in which organizations used their PMS. We will discuss the
mains factors responsible for those alterations.
3.2.2 Change factors
Much has been written about Performance Measurement Systems (PMS) in the
last decades. This increase in PMS literature is due to a situational shift in the way
managers think and companies are organized. A few authors tried to list the most
important changes that companies face in this complex and dynamic business
landscape.
Kaplan and Norton (1996) discuss a new set of operational assumptions that
started to take place in the last decades of the twentieth century.
17
Cross functions – high level of integration between different business
processes, crossing traditional functional barriers and business units;
Links to customers and suppliers – high level of integration related to
the supply chain, from suppliers to the final customer;
Customer segmentation – change from a competitive perspective
oriented towards the lowest cost to a perspective focused on customer
satisfaction;
Global scale – organizations act in a global scale, tending to clients
throughout the world; t
Innovation – there is a reduction in products’ and technologies’ life
cycle, increasing the organizations’ need to innovate and reinvent
themselves; and,
Knowledge workers – the automation of productive processes has
reduced the need of operational work force, while the market dynamicity
and competitiveness have increased the importance of specialized
workers.
Neely (Measuring business performance, 1998, p. 50) mentions seven
contingencies as factors that contributed to the necessity of a revision of the PMS
concept:
Changing work nature;
Increasing competition;
Specific improvement initiatives;
International and national quality prizes and awards;
Organizational role changes;
External demand changes; and,
The power of IT.
3.2.3 Deficiencies of the traditional PMSs
In the following decades, there has been a considerable change in the business
landscape, as already discussed. In these new setting, a series of shortcomings of
traditional PMS became apparent. Kiyan (KIYAN, 2001, p. 30) makes a revision of the
literature on these shortcomings:
18
Excessive focus on efficiency – In a stable and buying environment, the
cost dimension was an accurate demonstrative of success. In this new
dynamic and supplying scenario, answering to different customer
requirements, such as delivery time, reliability, personalization and being
environmentally friendly can become critical for achieving success.
Efficacy, not only efficiency, is a success factor.
Fragmented vision – The traditional financial measures are not relevant for
many day-to-day operations. This creates a misalignment in managerial
goals, focused in financial measures, and the operations in different
departments, which do not fully understand how their actions influences the
financial indicators.
Lack of adherence with strategic objectives – Modern companies base
their strategies upon capabilities and assets that cannot be measured
adequately by financial measures, such as new products pipeline, process
capabilities, employee skills, motivation and flexibility, customer loyalty
and data-bases.
Emphasis on results – Traditional financial measures are superficial
measures, pointing out the organization results but failing to acknowledge
its reasons and root causes.
Financial result oriented – Focus only on financial results, in accordance
to the interest of capital markets, regulators, high executives and
government, but ignoring many other stakeholders, such as unions, local
communities and environmental and human rights NGOs.
Short term oriented – Financial measures motivate managers to focus on
short-term performance, sacrificing investments in long-term growth
opportunities.
Lack of timeliness – Financial measures usually take some time to be
compiled and are calculated with pre-determined frequency. They are of
little use to day-to-day operations, which often requires immediate actions.
High aggregation level – Traditional measures supply information in such
a generic way that they do not allow further analysis to be made. It is
difficult to understand the relation between activities and measures.
19
3.2.4 New requirements of PMS
As organizations try to adapt themselves to this new reality in order to maintain
their competitiveness and long-term success, a series of new tools and improvement
initiatives are being developed. Total quality management, just-in-time production and
distribution, time-based competition, lean production/enterprise, customer-faced
organizations, activity-based costing, employee empowerment and reengineering are
just a few of these innovative techniques (KAPLAN e NORTON, 1996).
However, in order to accomplish and recognize real change in a company, a
measurement system is essential. It is the foundation over which we can recognize
needs, assess the impact and evaluate the performance of the overall company and of
individual programs and initiatives.
Martins (MARTINS, 1999) has singled out the following characteristics as the
most commonly mentioned requirements of new PMSs in order to overcome these
shortcomings:
Be congruent with competitive strategy
Have financial and non-financial measures
Guide and support continuous improvement
Identify trends and progress
Facilitate the understanding of cause-effect relations
Be easily understandable and intelligible
Encompass the entire process, from supplier to customer
Real time information available for the entire organization
Be dynamic
Influence employees attitudes and behaviour
3.2.5 Uses of PMS
Arnaboldi (2013) and Ferrarri and Galletti (FERRARI e GALLETTI, 2010)
recognize a PMS as part of the Management Control System (MCS), an assembly of
subsystems adopted by an organization for pursuing its goals, maintaining viable
patterns of behaviour. This system is comprised of four subsystems:
20
Performance Measurement System (PMS) – it gathers the necessary
information and calculates the appropriate indicators in order to measure the
performance of the different units analysed.
Budgeting System – using procedures established a priori, it allocates
among the responsible actors a set of goals and resources needed for their
completion.
Reporting System – supplies the responsible actors with the necessary and
sufficient information in order to make decisions and corrective actions.
Infrastructure – integrates the MCS with the Information System (IS) of
the company, serving as a technical foundation for the others subsystems.
This subsystems are related in a way that both the Budgeting and Reporting
system depend on the information gathered and processed by the PMS, that in turn
depends on the IS for ensuring the accuracy and quality of the data. Thus, when
designing a PMS, it is crucial to think of it as a management tool essential for the MCS
functions as a whole.
According to Ferrari and Galletti (2010, p. 65), it is possible to classify the main
roles of a MCS in two macro areas: Decision making support and Accountability.
Decision making support – supply adequate information to those that are
required to make decisions in order to maximize the organization’s value.
Accountability
o External – communicate their results and actions to the stakeholders
of the company, ranging from mandatory financial reports to
environmental and corporate governance reports voluntarily
submitted to the stakeholders.
o Internal – motivating and reinforcing behaviours of the components
of an organization.
Galbraith (GALBRAITH, DOWNEY e KATES, 2011) sees the PMS as part of
the reward system of a company, focusing on its role in Internal Accountability. It is
responsible for motivating and reinforcing behaviours that add value to the
organization. In order to do that it must translate the mission of the company and its
vision of success into a clear definition for its employees, both in terms of business
results as well as individual performance. Since knowing what to do not always results
21
in action, the reward system must also analyse the way in which people are evaluated
and rewarded. It is composed of four subsystems:
Metrics – the system of performance indicators and targets of the company,
the Business Units (BU), the teams and of the individuals.
Desired values and behaviours – actions and values that are most likely to
produce the desired results and to reflect on the organization’s values.
Compensation – monetary strategies implemented in order to recognize
someone’s contribution and to sustain and increase his performance
measures.
Rewards and recognition – non-monetary components that complement a
reward system in order to value people.
Neely et al (1995) also recognizes the role a PMS can have in influencing
behaviour. They argue that management control systems can be used as a means of
surveillance, motivation, monitoring performance, stimulating learning, sending
signals or introducing constraints.
Kaydos (KAYDOS, 1999) presents the following uses of a PMS:
communicating strategy and clarifying values; identifying problems and opportunities;
diagnosing problems; understanding the process; assigning responsibilities; improving
controlling and planning; identifying when and where action is needed; guiding and
changing behaviours; making visible the work done; helping people involvement; base
of a reward system; and facilitating the process of delegating responsibilities.
A structured and robust PMS can also serve as base for a benchmarking process,
which is an “approach to collecting and sharing data, information, ideas and methods
with the objective to come to comparisons that will be of mutual benefit amongst all
groups involved” (GEERLINGS, KLEMENTSCHUTZ e MULLEY, 2005). According
to the same authors, the benchmarking process is comprised of three levels, the first
one being self-assessment. The second level, comparison, involves comparing
yourself with an anonymous database, identifying improvement areas and best
standards. The third level, collaborating, is ideally a two way process. It consists in
working with relevant players by exchanging confidential information in order to define
best practices and how to achieve them.
22
Kaydos (KAYDOS, 1999) reckons that measuring performance has benefits for
managers:
Improved control – Meaningful measures and timely feedback give
managers a better control over their area of responsibility. Deviations in
performance are detected earlier, enabling managers to promptly intervene,
minimizing the damage, or profiting from an opportunity.
Clear responsibilities and objectives – A good PMS specify what is the
desired performance for each person, manager, team or operating unit in
unmistakable terms. It ensures that every decision throughout the company
is aligned and that every individual is evaluated fairly.
Strategic alignment of objectives – When a company’s measures reflect
its strategy, it assures that everyone is working towards the same objectives.
The PM are also effective in assessing whether a particular strategy is being
effective or not.
Understanding business processes – Measures are essential to
understanding the main factor affecting a process and how it will respond if
any change occurs on them. It is not uncommon to exist a gap between the
way managers think a process works and the way it actually works.
Knowing what a process can do – By understanding a process it will be
possible to assess its capability, that is, its ideal performance. This is
important for the managers to discriminate weather they need to increase
the capability of a process or improve its operations in order to achieve its
full potential.
Improved quality and productivity – Improving a process is a matter of
closing the gap between desired and actual performance. In order to do that,
it is essential that you have adequate measures to analyse the process and
assess the change in performance. Without that, you will not be sure of how
effective and relevant your improvements are.
In many cases, just the simple implementation of a PMS already
achieves a certain improvement in performance because: the measures
define what is important, they define quality and process standards and,
when visible, they have a motivational power – no one wants to look bad.
23
More efficient allocation of resources – Adequate measures allow
managers to better evaluate the importance and return of problems and
opportunities. This way, they are able to optimize the use of a company’s
scarce resources.
Better planning and forecasting – Performance measures supply insights
on critical factors, both internal and external, that affect a company’s
operations, increasing the reliability of forecasts.
The freedom to delegate – Knowing that your employees are being
evaluated and their performance is being measured helps managers not to
micro manage and focus on its own tasks.
Defending your position – Structured and reliable data make a strong
argument in the defence of ideas, especially against opinions and feelings.
Changing a company’s culture – By valuing and motivating some
behaviours, a PMS can have be an efficient tool in changing or aligning a
company’s culture.
And for employees:
Clear responsibilities and objectives – Knowing what they are supposed
to accomplish and receiving feedback on their performance ensures that all
employees are self-aware of their work and can be motivated to improve.
Seeing accomplishments and receiving recognition – Achievement and
recognition for contributions are two primary motivators of employees.
Being evaluated objectively – With measurements, manager are able to
evaluate their employees without making personal judgments, making it
fairer and increasing its efficiency in motivating personnel.
More empowerment – Employees can assume more responsibilities and
have a higher degree of freedom, because, as mentioned before, managers
trust in the imposed control systems and do not need to micro manage its
his processes.
A PMS can also be used as a strategic management system, profiting from the
measurement focus of the scorecard to accomplish critical management processes
(Kaplan and Norton 1996, p. 10). This is the case of the Balanced Scorecard (BSC),
24
one of the PMS frameworks most discussed in the literature. It presents four strategic
management processes:
Clarify and translate vision and strategy – To develop a BSC, the
management team must work together into translating the strategy of the
company into specific strategic objectives. During this process, it is usual to
see some differences between the different managers’ view of the
company’s goals. The scorecard tries to unify these discrepancies, creating
a shared model of the entire business and a set of specific goals and
objectives.
Communicate and link strategic objectives and measures – The BSc
helps to communicate to all employees the critical objectives that must be
accomplished if an organization’s strategy is to succeed and how best to
achieve them. This can lead to subunits creating local measures to ensure
that strategic goals are being achieved.
Plans, set targets, and align strategic initiatives – This process will enable
a company to: quantify the long-term outcomes it wishes to achieve; identify
mechanisms and provide resources for achieving those outcomes, and;
establish short-term milestones for the measures on the scorecard.
Enhance strategic feedback and learning – According to the authors, this
is the most innovative and most important aspect of the entire BSC. It means
that the BSC enables managers “to monitor and adjust the implementation
of their strategy, and, if necessary, to make fundamental changes in the
strategy itself”. It achieves that by a double loop learning process that occurs
when managers, facing new evidence, observations and experiences,
question their underlying hypothesis and reflect on the accuracy of the
theory upon which their strategy is based.
25
Figure 3-1 - Strategic management process
Source – Kaplan and Norton (1996)
3.3 Performance Measures
Performance measures, or indicators, are the fundamental part of the PMS. In
this section, we are going to determine some important classifications of PM, the
requirements for its ideal utilization and a record sheet that will aid in its
characterization.
3.3.1 Classification
Several authors have classified performance measures into different
perspectives (BORNIA, TEZZA e VEY, 2010). Neely et al. (NEELY, ADAM e
KENNERLY, 2002), in an approach that includes and prioritizes a multi-stakeholder
view of an organization, classify indicators as related to stakeholder satisfaction;
stakeholder contribution; strategies; processes, and; capabilities. In the BSC framework
26
(KAPLAN e NORTON, 1996), focused mainly on customers and shareholders, they
single out four perspectives: financial; customer; internal processes and learning; and
growth.
In their work, Kaplan and Norton (1996, p. 34) discuss briefly weather their
four perspectives are sufficient for any business. They claim that they are necessary for
every organization, but, depending on circumstances and context, more additional
perspectives could be added, especially when stakeholders interest are vital for the
success of the organization’s strategy.
Figge et al. (2002), introduces the concept of a Sustainability Balanced
Scorecard (SBSC), adding a fifth perspective to the traditional framework, called non-
market perspective. This perspective includes environmental and social measures that
represent strategic core aspects for the organization but cannot be incorporated in the
other four market perspectives.
Carneiro (2005) tries to incorporate the multi-stakeholder view of the
organization in his classification. He lists eight perspectives of measures. The first four
are exactly the same as those enumerated in the BSC framework, which prioritize the
customers and shareholders as main stakeholders. The last four perspectives, which are
social, environmental, behavioural/situational and general/aggregated, try to
incorporate the view of other important stakeholders.
Financial perspective
Customer perspective
Internal processes perspective
Learning and growth perspective
Social perspective
Environmental perspective
Behavioural/situational perspective
General/aggregated perspective
Neely et al. (1995) talks about two types of indicators in any organization: those
that relate to results (competitiveness, financial performance), and those that are
determinant of results (quality, flexibility, resource utilization). Kaplan and Norton
(1996) also recognize this classification. They called the result indicators of outcome
27
measures (or lagging indicators), and the determinant measures, as performance drivers
(or leading indicators).
A scorecard with only outcome measures fails to communicate on how these
measures are to be achieved and fail to provide an early indication about whether the
strategy is being implemented successfully. Contrariwise, the existence of only
performance drivers may lead to an operational increase that will not affect the
objectives stated in the company’s strategy. “A good Balanced Scorecard should have
an appropriate mix of outcomes (lagging indicators) and performance drivers (leading
indicators) that have been customized to the business unit’s strategy” (KAPLAN e
NORTON, 1996).
3.3.2 Requirements
As mentioned in the beginning of this chapter, a performance measure is a
parameter used to quantify the efficiency and/or effectiveness of an action. This
parameter, however, requires further refining in order to become part of a well-
functioning PMS. The performance metrics are the definition of the scope, content and
component parts of a broadly based performance measure. Before defining what
elements have to be specified, we will discuss what constitutes a good measure with
good metrics.
According to Galbraith (2011), the design of representative PM lies on six
principles:
Amplitude –There should be a balance between financial and non-financial
indicators, encompassing all success factors of a company.
Critical sense – An excess of measures can block the system, making more
difficult to managers to find relevant information. Only a restrict number of
measures should be reported, according to their fulfilment of the
requirements.
Timeliness - PMs should analyse a company’s future with both a predictive
and retrospective perspective. There should be a balance between lagging
and leading indicators.
Consequences – Measures and their respective targets are used to influence
behaviour, but sometimes they can have unexpected consequences.
28
Alignment – Measures and metrics should be aligned and coherent
throughout the organization, both vertically, from a strategic perspective to
an operational one, and horizontally, among parallel departments and units.
Targets – A target that is both challenging and attainable is essential for an
effective PM.
Neely et al (2002, p. 38) mention ten tests, in form of questions, which will
ensure the quality and assess the importance of a measure:
Test 1: The truth test – Are we really measuring what we set out to
measure? To answer this question we should compare the measure, its
purpose and the way it is calculated.
Test 2: The focus test – Are we only measuring what we set out to measure?
This question tries to ensure that we can easily tie a change in the measure
with its underlying cause. If we have a broad measure, it is more difficult to
assess what is making it oscillate.
Test 3: The relevance test – Are we definitely measuring the right thing?
Here, we try to assess whether this measure is an adequate and relevant
proxy to the objective it relates to.
Test 4: The consistency test – Is the measurement process clearly
specified? This will ensure that the measure is always comparable: no matter
who takes the data, it will always be done in the same way.
Test 5: The access test – Is it easy to locate and capture the data needed to
make the measurement? This is concerned with the practicality of a
measure. It is mostly a proxy for the cost of measurement, although it can
have implications such as data structure and reliability.
Test 6: The clarity test – Is there any ambiguity possible in interpreting the
results? If measures are not well defined and the data is ambivalent, they
will lose its value as an accurate source of information for decision-making.
Test 7: The so-what test – Who acts on the data and how? There is no point
in actually measuring something if it is not going to be acted upon.
Test 8: The timeliness test – Can the data be analysed and accessed rapidly
enough, so that timely action can be taken? This question tries to analyse
whether measures are provided in a timely fashion allowing people to act
on it in a meaningful way.
29
Test 9: The cost test – Is the particular measure worth the cost that will be
incurred in capturing the data? This test tries to assess the cost/benefit of
individual measures.
Test 10: The gaming test – Is this measure, in its proposed form, likely to
encourage any behaviours that are undesirable to the organization? This test
tries to understand what undesired and unexpected consequences a measure
can have in the behaviour of employees.
3.3.3 Record sheet
A template of a performance measure is the way in which we organize all its
information and characteristics. It standardizes the metrics’ definition in an intuitive
and visually appealing way, helping the operation of the PMS as a whole and its
frequent update. Templates also aid in the design of measures “as it identifies the
awkward questions to address when confirming the specification of the measure
design” (NEELY, ADAM e KENNERLY, 2002).
Table 3-1 - Template from Neely et al (2002)
Title Time to quote – days
Purpose To stimulate improvements in our responsiveness to our
customers
Relates to Business objectives – “improve sales team performance”
and “time to quote”
Formula Date of verbal confirmation of receipt of quote by
customer – date of first contact by customer
Target Seven calendar days by the end of the year
Frequency Monthly
Source of data Customer contact
Who measures? Sales manager
Who acts on the data? Sales director
What do they do? Monitor time to quote and investigate any expected
results
Notes and comments
Current systems means that the only person who has
management authority over everyone involved in the
quote generation process is the site general manager.
There is a need to examine this business process in more
detail.
Is the quote generation process under the sales manager
control?
Source – Adapted from Neely t al. (2002)
30
3.4 Design of a PMS
According to Neely et al. (2002), “there are four fundamental processes that
underpin the development and deployment of a PMS”: design; plan and build;
implement and operate; and refresh.
The design process is the foundation of the PMS, if it is not done well, the entire
project will be jeopardized. It consists on understanding what should be measured and
defining how it should be measured.
The second process, plan and build, will focus on planning the introduction of
the new measures into the organization and acquiring the technology necessary for the
measurement system. Another important part of this process is communicating all
involved personnel of the importance and relevance of the PMS, motivating and
acquiring support for the project.
The third process, implement and operate, includes the actual implementation
and deployment of the previous phase and the operation of the system on a day-to-day
basis. This process requires project management capabilities, as it is the concretization
of a well thought design and plan. However, measuring the performance doesn`t add
value to the organization by itself, managers and employees must analyse and act on
the data received.
The fourth and last process, refresh, reinforces the dynamic feature of the PMS.
While some measures are indispensable and must always be accounted for, some other
indicators can be related to a specific threat or opportunity and, after it passes, are no
longer needed. In addition, there is the constant need to adjust some measures,
especially regarding target setting.
31
Figure 3-2 - Four fundamental processes
Source – Neely et-al., 2002
In order to develop a PMS, several different frameworks can be found in the
literature. They can be classified in two groups that sometimes overlap each other:
structural frameworks and procedural frameworks (Nappi, 2014). The first group
presents the relation between individual measures and their ensemble and are more
interested in presenting the dimensions or perspectives for managing the PMS. The
second group focuses on the systematic process required to design, use and develop a
PMS.
The Balanced Scorecard is one of the few works that fall into both categories
mentioned above. It is a structural framework in the way it dictates the four perspectives
of the BSC: financial, customer, internal process and learning and growth.
Nevertheless, it is also a procedural framework in the way it establishes a four-step
guideline for creating a PMS.
Define the measurement architecture – In this step, we must select the
appropriate organizational unit. Ideally, the organizational unit has activities
throughout an entire value chain. It also has, or should have a strategy in
order to accomplish its mission. For those characteristics, the authors called
it a Strategic Business Unit (SBU).
It is also important to consider the relationship of the SBU to other
SBUs and the divisional corporate organization. This can enable the
•Apply systems and practices
•Manage with measures
•Refine application•Review relevance
•Develop systems and practices
•Communicate intentions
•Select measures•Define metrics
DesignPlan & Build
Implement & Operate
Refresh
32
manager to see threats and opportunities that would not be visible if the SBU
was treated as an independent organization.
Build consensus around strategic objectives – The authors recommend a
series of interviews and workshops in order to best define and align among
top managers the strategy of the company. This interactive process will also
help to build support for the strategy and for the BSC process.
By the end of this process, the team will have identified, for each
perspective, three to four strategic objectives, with a detailed descriptive
statement and a list of potential measures for each objective.
Select and design measures – In this step, the development team should
refine and agree on a final language for the objectives. It should also
precisely define the measures for each objective, including how they are
going to be quantified and displayed and how the information is going to be
gathered.
Finally, the team should identify the key linkages among the
measures within the perspective, as well as amongst the other perspectives
of the BSC. Ideally, this will result in a graphic model connecting the
measures, the perspectives and the objectives of the organization.
Build the implementation plan – The team should plan and formalize
targets for the measures and also encourage and facilitate the creation of
second-level measures, aiding the decentralized units to achieve their
primary objectives.
By the end of this step, top management should have agreed on an
implementation program and how to communicate it to employees, how to
integrate the scorecard into a management philosophy and on the
development of the necessary IS to support the scorecard.
Neely et al. (2002) claims that the BSC downplays the importance of
stakeholders other than customers and shareholders. By focusing on its four
perspectives, the objectives and strategies are usually focused on customers and
shareholders. The authors pose vital questions on five different perspectives in order to
aid the development of a PMS:
Stakeholder satisfaction – who are our key stakeholders and what do they
want and need?
33
Stakeholder contribution – what do we want and need from our
stakeholders on a reciprocal basis?
Strategies – what strategies do we need to put in place to satisfy the wants
and needs of our stakeholders while satisfying our own requirements too?
Processes – what processes do we need to put in place to allow us to execute
our strategies?
Capabilities – what capabilities do we need to put in place to allow us to
operate our processes?
These questions will lead to the development of a success map for each
stakeholder, revealing the hierarchy and relations between them. The next step is to
narrow the complexity of this graphic map. The following question should be answered:
what is it that you as an executive team need to know in order to decide whether the
business is moving in the direction you want it to?
In the Transit Cooperative Research Project’s Report 88 (TCRP 88, 2003)6 the
authors provide a procedural framework in their guidebook for developing a transit
system. It starts its eight-step process by reinforcing that “implementing and updating
a performance-measurement program is an iterative process” and, therefore, the PMS
should be dynamic, evolving according to the needs of the organization and context it
finds itself in.
6 The Transit Cooperative Research Program was created by the USA Department of Transit in
1992, with the objective of developing innovative short to medium term solutions to meet the demand
on the transportation systems.
34
Source – Adapted from TCRP 88 (2003)
The first step of the process is defining goals and objectives. In this step it is
important to include external stakeholders input, which can be extremely relevant to an
organization. It is also important not to worry on how this is going to be measured - this
will be addressed in Step 4.
The second step consists of generating management support. More important
than collecting the data and analysing it is acting on it. Without the management
support, the implementation of the PMS is already jeopardized and it most likely will
not generate any actions or new programs. It is also important to involve top managers
in the development process of the PMS, as they can contribute with valuable insights
and as a way to get them on board of the project.
The third step consists of identifying users, stakeholders and constraints of
the PMS. Who will be using the measures and the resources available to be consumed
by the program are factors that impact heavily on the type of PMS to be developed.
The fourth step is the most important to our work, so we will give it special
attention. It consists of selecting performance measures and developing consensus
around them.
Figure 3-3 - Development process of a PMS
35
Before selecting specific performance measures, it is recommended that
organizations define overarching categories, directly linked with the goals and
objectives defined in Step 1. Then, a review of the literature and industry practices
on which performance measures can be used to address each specific objective should
be made. In this part, Condry et al. (2006) emphasize the importance of the PMS in
benchmarking. They claim it is extremely important to use indicators mentioned in
international standards and guidelines or in benchmarking groups, making them
comparable with other organizations.
With a few options for each objective and the constraints specified in Step 3 in
mind, the organization is able to make an informed decision on which measures best
fulfil their needs according to their available resources. In this step, it is also important
for the organization to establish targets or standards for their measures and to
develop consensus among the key stakeholders involved.
The fifth step consists of testing and implementing the program. It is
advisable to create a pilot project of the PMS to test the organization’s capabilities and,
if need be, develop alternative measures. When implementing the program, it is
important to assign the responsibilities to the appropriate personnel. There are usually
three main responsibilities: data collection, data analysis and data reporting.
The sixth step consists of monitoring and reporting performance. This means
establishing how often the measures will be made and how will they be presented to
the responsible agents. Not necessarily all measures will have the same frequency of
measurement, but this must be made clear to those that will act on them.
The seventh step consists of integrating results into agency decision-making.
This is possibly the most important step on the performance measurement process. This
is where and when the measures gathered through the PMS will result in actual actions
that will have an impact on the organization’s goals and objectives.
The eighth and last step, review and update the program, exists to make sure that
the PMS keeps being a valuable tool for the organization. In a dynamic and complex
environment, the organization and, consequently, its goals, objectives and PMS, must
evolve and adapt over time.
36
4 THE SÃO PAULO CASE STUDY
In this section, this study intends to present a brief history of the urban transport
system development in the metropolitan region of São Paulo, which encompasses 39
municipalities, including the capital. It will culminate in the invitation to tender of the
entire bus system of the city of São Paulo, presented in its final version on October
2015.
First, I will present the legal and juridical environment that regulates the
Brazilian collective transport and, specifically, in the city of São Paulo. Second, I will
explain the evolution of the urban mobility in the city of São Paulo, presenting its main
actors and stakeholders. Last, I will make a critical analysis of the invitation to tender
presented by the city of São Paulo, focusing in its definition of quality and the
remuneration methodology, in particular, the tools used for motivating behaviours and
incentivizing quality.
4.1 Legislation and guidelines
To better understand the development of the collective urban transport in the
city of São Paulo, it is necessary first to comprehend the legal structure that regulates
the offering of this service, to which all citizens have a right. This is ensured in the
Federal Constitution of 1988 (CF 88), art. 30th item V:
“It is the municipalities’ responsibilities: (…) V. organize
and supply, directly or under a concession or permission regime, the
public services of local interest, including public transportation,
which has essential character”7
In this item, it is possible to observe that the State delegates to the municipalities
the responsibility and the duty to organize and supply the collective transport service,
while keeping to themselves the right to legislate about transit and transportation (art.
22nd, item XI).
There is also, as a national policy, the National Mobility Law8 of 2013, which
7In the original: “Compete aos Municípios: organizar e prestar, diretamente ou sob regime de
concessão ou permissão, os serviços públicos de interesse local, incluindo o de transporte coletivo, que
tem caráter essencial”, translated by the author
8In the original: Lei da Mobilidade Nacional ̧translated by the author.
37
“Establishes the National Urban Mobility Policy, attending to the constitution’s
determination the State establishes the guidelines for urban development, in addition of
regarding urban policy questions defined by the City Statute”9.
This law has the following guidelines, on which it is based:10:
Integration with the urban development policy and
respective habitation, basic sanitation, and land use
and management federal policies
Priority of non-motorized modes of transportation
over those motorizes and of collective transport over
private transport;
Integration between modes and services of urban
transport;
Mitigation of environmental, social and economic
costs of the passengers and load transport in the
cities;
Incentive to scientific-technological development
and to the use of renewable less pollutant energies;
and,
Prioritization of collective public transport projects
structured in the territory and inductors of integrated
urban development.
The Organic Law of the City of São Paulo11 reiterates the CF 88 affirming that:
“It is the municipality responsibility to plan, organize,
implement and execute, directly or under a concession, permission or
9From the original:“institui a Política Nacional de Mobilidade Urbana, em atendimento à
determinação constitucional que a União institua as diretrizes para o desenvolvimento urbano, inclusive
transportes, além de tratar de questões da política urbana estabelecida pelo Estatuto da Cidade” translated
by the author. Available at
http://www.cidades.gov.br/images/stories/ArquivosSEMOB/cartilha_lei_12587.pdf (last accessed on
01/11/2015).
10 Idem
11From the original: “compete à Prefeitura planejar, organizar, implantar e executar, diretamente
ou sob regime de concessão, permissão, ou outras formas de contratação, bem como regulamentar,
controlar e fiscalizar o transporte público, no âmbito do Município” art. 172º Lei Orgânica do Município
de São Paulo
38
other contracting regime, as well as to regulate, control and monitor
the public transport in the municipal sphere”.
The Strategic Director Plan12 (PDE, in Portuguese) in force in the city of São
Paulo and promulgated by the Municipal Law nº 16.150 from July 31st, 2014, has as a
guideline13 “priority in the road system for the collective transport and non-motorized
modes of transport”. The PDE also reinforces the impacts that the collective transport
systems have in the land use and in the urban development when it establishes is
strategy on Axis of the Urban Transformation Structure14, defined using the high and
medium capacity mobility infrastructure as reference. In addition, the PDE defines the
following strategic actions to the collective public transport (art.245th), highlighting,
for this project, item VII15:
The strategic actions for the public collective transport
system are:
VII Adopt new operating process and strategies for the
public collective transport system
The guidelines and goals proposed by the PDE were rendered concrete through
the Decree n° 56.232, of July 2nd, 2015, which “regulates the service organization of
the public collective urban transport of passengers in the city of São Paulo and
authorizes the public authority to delegate its execution”16 This decree foresees and
substantiate the 2015 invitation to tender, central document for this project that will be
further discussed in section XX.
12 From the orignial: Plano Diretor Estratégico (PDE)
13From the orignial “prioridade no sistema viário para o transporte coletivo e modos não
motorizados” (art. 6º, inciso XI).
14 From the original: Eixos de Estruturação da Transformação Urbana
15 From the original: As ações estratégicas do Sistema de Transporte Público Coletivo são: (VII)
Adotar novas formas de operação e estratégias operacionais para o Sistema de Transporte Público
Coletivo Municipal;
16From the original: “regulamenta a organização dos serviços do Sistema de Transporte Coletivo
Urbano de Passageiros na Cidade de São Paulo e autoriza o Poder Público a delegar sua execução”.
39
4.2 Development of São Paulo’s urban transport
The first significant interventions in the “paulistano”17 urban transport occurred
in the beginning of the 20th century, with the widening of the important roads of the
city, forming the first road axis in the streets Libero Badaró, Boa vista, Praça da Sé and
Largo São Francisco (ROLNIK e KLINTOWITZ, 2011). This road belts model will
guide a large part of São Paulo’s mobility investment throughout the 20th century.
During this time, however, the majority of displacements were made through
non-motorized ways or trams, operated by the Canadian company The São Paulo
Tramway Light and Power, best known as Light (HIGA, 2012). In 1933, São Paulo,
had 258 km of tram lines, more than triple of the current subway system (ROLNIK e
KLINTOWITZ, 2011).
Light, however, was observing a decrease in its profitability, as well as a threat
of losing its monopoly. The freezing of the tram fares established in contract and the
competition brought by the beginning diesel moved vehicles had a negative impact on
the Canadian company operations, motivating it to propose the Plan for Remodelling
of the Public Transport System (NOBRE, 2010). This plan had a commitment of the
company to realize a series of investment in urban collective transport, including a
system of underground trams, in exchange of a renewal of its monopoly of the bus and
trams systems.
In addition, in the mid-1920s, the engineer Prestes Maia suggested the Avenue
Plan, a continuation of the concentric radial model that begun in the start of the century.
The Avenue Plan was greatly influenced by the north-American urbanism, including
the incentives to the individual motorized transport and to the increase in traffic flow
and velocity (NOBRE, 2010).
In the 1930s, Brazil was passing through a period of great industrialization,
propelled by the coffee crises and the subsequent import substitution (FURTADO,
2005). São Paulo was the main centre of this economic development, adding to its
demographic and geographic expansion. Besides, several automotive transnational
industries installed themselves in the region. This ensemble of factors, associated to the
17 “Paulistano” is the word used to define that that comes from the city of São Paulo.
40
political and economic influence of the auto-sector, made that the Avenue Plan was
chosen instead of Light’s project (HIGA, 2012).
With the choice for Prestes Maia’s Avenue Plan and for the concentric radial
model focused on individual motorized transport, Light lost interest in the tram
operation in São Paulo. In 1948, the municipality started to operate this service, that
was discontinued completely in 1968 (NOBRE, 2010). The Municipal Company of
Collective Transports18 (CMTC, in Portuguese) was created in 1946, with the objective
of assuming the operation of Light’s assets and of the collective transport network of
the city of São Paulo for thirty years (TARTAROTI, 2012).
Two major factors are responsible for the intensification of the urban
development pivoted towards the automobile in São Paulo during the 1940s and 1950s:
the policy of approximation with the USA during the II World War and the installation
of the automotive industry in São Paulo metropolitan region (NOBRE, 2010).
The great exponent of this influence is Robert Moses, a north-American
engineer hired by the municipality of SP to reproduce the model used in the city of New
York. Moses’ project was a continuation and extensions of Maia’s Avenue Plan,
planning a series of expressways that crossed the city, focusing in the individual
motorized means of transport. Moses also note the central position that SP has in
relation to the region’s highways, suggesting the use of the Marginal Pinheiros and
Tietê19, as expressways to divert the highways’ transit (ROLNIK e KLINTOWITZ,
2011).
In the 1940s, São Paulo had nearly 2 million inhabitants and a vehicle fleet of
50.000 (HIGA, 2012). In the 1960s, the population had doubled to 4 million inhabitants,
while the vehicle fleet has been multiplied by ten, reaching 500.000 automobiles. This
vertiginous growth was associated to a heavy investment in road infrastructure,
comprising 27% of the municipal budget between 1965 and 1970 (ROLNIK e
KLINTOWITZ, 2011).
In 1968 the Municipal Secretary of Transports (SMT, in Portuguese), has been
created, responsible for the urban mobility in the city of São Paulo. In 1975, the subway
18 In the orginal: Companhia Municipal de Transportes Coletivos
19 These roads use the riverbanks that surround the city center, as base for its development.
41
was inaugurated. During this period, private companies were responsible for 75% of
the bus operation, while the CMTC was responsible for the other 25% of these services
(ROLNIK e KLINTOWITZ, 2011).
In the 1970s and 1980s, there has been a continuous expansion of the private
use of the automobile, following the previous decades’ policy. The municipality
continued to make significant investments in the road infrastructure, leaving the
collective transport in second plan (HIGA, 2012).
The end of the 1980s and beginning of 1990s was marked by a series of
indications of the exhaustion of the current mobility model for São Paulo, with the
degradation of public collective transport (VASCONCELLOS, 2004). The low quality
and high costs of the collective transport system led to a substantial increase in the
operation of clandestine modes of collective transport, known as “perueiros” or
“lotação” (HIGA, 2012)
In 1991, in the tenure of Mayor Luiza Erundina (1989-1993), “an intervention
in the municipal transport system – the so called municipalisation – was implemented
with the aim to improve the quality, frequency and supply of the public transport on the
outskirts of the city” (ROLNIK e KLINTOWITZ, 2011) There was also a change in the
way the operators were payed. The fare was defined by the public power, which
remunerated the operators according to the kilometres operated and some performance
measures. Part of this remuneration was not covered by the revenue from fares, creating
the need for subsidies, financed by the municipal government through taxation.
In 1993, in the tenure of the Mayor Paulo Maluf, the municipality privatized the
municipal bus operations, transforming the CMTC in the system manager, instead of
the operator of the system. In 1995, the CMTC changed its name to São Paulo
Transports (SPTrans), which works until the present day with the goal of managing the
municipal collective transport system (TARTAROTI, 2012).
In Marta Suplicy’s first year as mayor (2001-2004), the Law n° 13.241/2001
was promulgated. It “can be considered a rupture in the collective transport policy in
the city of São Paulo, because it modifies the normative contents of space for the local
42
circulation”20 (HIGA, 2012). The Interconnected System21 , as the collective urban
transport system was called, was organized in the following way:
Structural Subsystem: set of lines of the collective public transport system
that tend to high demands and integrate the different regions of the city;
Local Subsystem: set of lines of the collective public transport system that
tend to the demands internal to a region and feed structural subsystem,
giving it capillarity.
There is also the prevision of complementary services, including “special
character public transport services, with differentiated fares, which will be delivered by
operators or third parties, according to the established by the SMT”22.
This new model also foresaw the existence of a single fare that served for the
use of the entire collective transport system, facilitating the integration with other
modes of transport and the transfer between lines. Only in 2005, with the electronic
ticketing system called Bilhete Único (Single Fare), the integration between the bus
system and the rail system (train and subway) was activated (HIGA, 2012).
Also in this period, there was a considerable increase in the length of exclusive
bus lanes throughout the city. More than 70km of these lanes have been developed,
triplicating the existing amount23.
The new system’s operational model, based on contracts signed in 2003, was
based in a series of concessions and permissions to private companies, responsible for
the fleets’ operation and the fulfilment of the service order demanded by the Municipal
Secretary of Transports, through SPTrans. These operators were remunerated based on
the number of transported passengers.
20 In the original: “pode ser considerada uma ruptura na política de transporte coletivo no
município de São Paulo, pois modifica os conteúdos normativos do espaço para a circulação local”.
Translated by the author.
21 In the original: Sistema Interligado
22 In the original: “serviços de Transporte Público de caráter especial, com tarifa diferenciada,
que serão prestados por operadores ou terceiros, de acordo com as disposições regulamentares editadas
pela SMT” Lei Municipal n° 13.241/2001 da cidade de São Paulo.
23 Retirado de http://www.anparq.org.br/dvd-enanparq-3/htm/Artigos/ST/ST_IM-001-
1_ZIONI.pdf (acessado em 01/11/2015).
43
Only in 2006, the Law 14.173/2006 was introduced, which regulates the
performance measures related to different public services, including the collective
transport. The measures defined by this law are (art. 18th):
I. Average waiting time in the transfer terminals used
for boarding passengers in the urban transport;
II. Average waiting time in the intermediate stops
between the transfer terminals of arrival and
departure;
III. Average displacement time of workers from their
houses to their work places;
IV. Bus average speed in regular hours and peak hours;
V. Average punctuality level by company;
VI. Cleanness level in the transfer terminals circulation
areas;
VII. Cleanness level in the transfer terminals bathrooms;
VIII. Cleanness, conservation and maintenance levels of
the fleet;
In the late 2000s, however, the administration of José Serra and Gilberto Kassab
were marked by a reaffirmation of the historic model of urban mobility, based on the
investment of “urban highways” and road belts. This can be seen in the expansion and
modernization of the Marginal Tietê (ROLNIK e KLINTOWITZ, 2011).
Currently, Mayor Fernando Haddad’s administration has introduced several
interventions in São Paulo’s urban mobility model, as mentioned in this project’s
introduction. Examples are the reduction of the speed limit of the automobiles in the
major streets and avenues of the city, including Marginal Pinheiros and Tietê, and the
development of 150km of exclusive bicycle lanes and 460km of exclusive bus lanes.
These actions demonstrate a real prioritization of collective and non-motorized means
instead of individual motorized modes of transportation.
The invitation to tender (ITT) on the concession of the bus transport service of
2015, introduced by the Haddad administration, has a potential to impact significantly
the urban mobility of the city of São Paulo, since it concerns the renewal of the
operation model of all municipal bus lines, for twenty years, extendable for another
44
twenty. In the section 4.3, I will make a detailed analysis of the ITT propose by the
SMT.
4.3 The Invitation to Tender in São Paulo, 2015
In June 2015, the municipality of SP, through the ITT introduced by the SMT,
presented the framework for the delegation of the exploration and offering of the
collective public transport service in São Paulo. A correction was issued in October,
with some minor changes.
The tendering process uses one single criteria, the “smallest fare offered”. This
term used in the ITT can cause some confusion. A more precise description of this term
would be the remuneration received by the operators per passenger transported, which
does not depend on the fare actually paid by the passengers. The bus fare paid by the
users and the existing discount and gratuities do not alter the operators’ remuneration ,
which depends primarily on the value offered by him, called “fare offered”, and the
remuneration formula, which will be analysed in the section 4.3.
Two main factor demonstrate the relevance of this tendering process and the
potential impact it can have in the city of São Paulo. First, the ITT foresees the tendering
of the city’s entire bus network, applying a new model to the entire system, which
transports over 8 million passengers every day24. Second, the contract will be active for
twenty years, freezing the main aspects of the concession model for this entire period,
renewable for another twenty years.
This proportion of the ITT and of São Paulo’s bus system can be translated by
the estimate present value of the contracts being tendered, that add up to R$ 140 billion
(approximately € 34 billion25) in twenty years. This sum does not include the value of
the potential renewal of the contracts, which could double their duration.
This value considers only the financial value of the concessions to the operators.
Several other factors, sometimes difficult of being financially measured, will also be
impacted by the ITT. Transport conditions affect daily millions of citizens, especially
24 Retirado de
http://infocidade.prefeitura.sp.gov.br/htmls/12_passageiros_transportados_em_Onibus_urba_2003_107
66.html (último acesso em 01/11/2015)
25 Converted in November 9th, 2015
45
when considering their life quality. The average time spent by “paulistanos” daily in
their mobility is 2 hours and 42 minutes26.
An innovation present in this ITT is the way in which is made the division of
the concession batches. In the current system, São Paulo is divided in nine regions, each
one corresponding to a batch of lines. In each region, there are lines from the structural
subsystem and from the local subsystem, all belonging to the same batch and operated
by the same company. In the new model, the batches are first divided by their function
and then, in the same function, by geographical region.
There are three main line functions, according to the ITT:
Structural group, which will include lines with major demand,
connecting the city’s regions to the centre (radial lines) and connecting
different regions through exclusive bus lanes or roads with large flow of
vehicles (perimetral lines);
Local group of regional articulation, which will include lines that
connect the centres of different regions in the city or these regions with
the city centre without passing through exclusive bus lanes or high flow
roads; and,
Local distribution group, with lines inside specific regions, usually
connecting neighbourhoods with local terminals or train and subway
lines, giving capillarity to the system. This group also includes rural
lines.
This concession model is directly related to the operational model that is being
implemented in the city of São Paulo, the trunk feeder model. In this model, there are
local lines, responsible for giving capillarity to the system, supplying the users with
transport from their origin/destinations to the arterial lines. Those are high frequency,
high capacity lines, responsible for increasing the system’s flow and volume. The local
articulation lines have an intermediary function, as described above.
Two characteristics are essential in the definition of any service, its quality and
its cost. The ITT regulates these two factors in the Annex 4.4 – Service Evaluation
26 Retirado da pesquisa OD (2007) realizada pelo Metro
46
Procedures and 4.8 – Remuneration Methodology. In the following sections, we will
discuss these two points more with detail.
4.3.1 Annex 4.4 – Service Evaluation Procedures
The Annex 4.4 – Service Evaluation Procedures has as its objective “to establish
performance parameters of measurement, analysis and improvement of the operators of
the collective transport system of the city of São Paulo27.
However, in order to measure and analyse performance, it is necessary to define
what quality is. As discussed, performance and quality are concepts that depend on the
wants and needs of the stakeholders to which they are related, opening the possibility
of the existence of contradictory quality definitions of the same service.
4.3.1.1 Quality attributes
The ITT uses twelve main points related to performance, called quality
attributes. They are:
Accessibility
Mobility
Ease of use
Reliability
Regularity
Security and Safety
Treatment to users
Waiting time in stops
Travel time
Cleanliness and conservation
Comfort
Respect to the environment
These points form a wide definition of the term quality, including factors that
are not usually included in the traditional model of operational efficiency, such as
27 Inserir fonte Edital
47
“respect to the environment”, “treatment to users” and “comfort”. Following, we will
clarify and discuss each attribute individually.
Accessibility is related to the distance that the user has to travel in order to
arrive to the transport network, considering the beginning and the end of the journey.
There is also a social factor in this attribute, which is the fact that the public transport
system should be accessible to all, including the elderly, pregnant women, handicapped
and obese people. This attribute can also include economic factors, in the form of
discounts for the less fortunate or other aid forms in order not to exclude any citizen
from the mobility system.
Mobility is the concept related to the journeys took by each individual daily.
Any obstacle or difficulty present in an individual’s path can be considered a loss for
his or hers mobility.
The attribute ease of use is related to the availability and clarity of information
related to the public transport system, including the existence of communication
channels to the users.
Reliability encompasses several factors that can generate ruptures in the
expected operational patterns of the system. It is closely related to the regularity
attribute, which focuses on the punctuality of the system.
Safety includes incidents that put at risk the physical integrity of users and
employees, while security includes the integrity of their material goods. It considers
traffic accidents, fallings, vandalism, thefts, robberies and assaults. In the ITT view,
those attributes do not include the safety and security of people that are not users nor
employees of the public transport system, but that can be affected by it, such as
pedestrians, cyclists e other automobiles drivers.
The users’ treatment involves the entire interface between users and
employees of the system, including aspects such as respectful treatment and physical
presentation. Employees specialized in helping users and supplying information can
complement this attribute and the ease of use.
Waiting time in the stop and travel time are two separate points in the ITT,
reinforcing the idea that the time spent in the system is an important quality factor. It is
worth noting that the total travel time spent by the user is different than the time spent
by users in the vehicles, as defined in the ITT, because it includes the waiting time, the
48
transfer time and the time taken to access the system in the beginning of the trip and to
exit it at the end. This last time is mentioned in the accessibility attribute, but it could
easily be featured in the same way that waiting time and travel time are.
The comfort attribute is related to the occupation of the system (vehicles,
transfer terminals and stops) and the existence of comfort items, such as Wi-Fi networks
in vehicles and stations and air conditioning systems. It could also include the attribute
cleanliness and conservation that encompasses the state of the vehicle fleet, garages,
bus lanes, terminals, transfer stations and bus stops.
In the last attribute, respect to the environment, the ITT describes not only an
ecological view, but also a social view of quality. The environmental side is strongly
related to pollutants’ emission, while the social side is related to the life quality.
The pollutants emission is an important factor to be considered, but it is not the
only one relative to the environment worth mentioning. The use of renewable fuels, like
ethanol and biodiesel, does not present a significant reduction in the emission of these
gases but has a much smaller environmental impact than fossil fuels.
There is also the question related to the disposing of material and components
used. Tires and lubricants used in vehicles, which should be replaced regularly, can
cause grave damages to the environment in case they are improperly disposed.
Last, the positive environmental impact of a collective transport system can be
the result of the migration of demand from individual to public modes.
The subcategory life quality included in this attribute in the ITT could be better
developed, explaining the points in which public transport could improve the life
quality of the system users and the city inhabitants.
An important attribute that is missing from the ITT is the impact that the
transport system has on the regions through which it passes, including in individuals
that are not users of the system. This attribute is partially included in the “respect to the
environment”, when it mentions “life quality”, but it is not clearly explicit in the ITT.
Factors related to the impact in communities can include sound pollution, increase in
accidents related to the public transport and the precariousness of the private transport
modes.
49
This set of attributes supplies a comprehensive view of the different aspects of
a public transport system. It is possible, however, to observe the existence of a great
difference between the attributes when it comes to their depth. Some of them are
generic concepts, like mobility and reliability, which can include several indicators and
areas of the system. Others, on the contrary, can be summarized in one measure, such
as stop waiting time and travel time.
It is also possible to observe that these attributes are not all under the
responsibility of the operators. Accessibility, for example, depends on decisions and
policies that are under responsibility of the municipality of SP, such as fare policy and
lines design and dimensioning. This way, this first listing of attributes represents the
vision of the municipality in relation to the quality of the entire system, not only the
expected quality of the service provided by the operators.
It is noteworthy that, even though the operators are responsible for the system
operation, they do not control the design and dimensioning of lines, a responsibility of
the conceding power, the SMT. Therefore, the ITT’s approach of establishing quality
definition for the entire network and then defining specific indicators that are under the
operators’ responsibilities is understandable.
4.3.1.2 Record sheet
The ITT continues to define ten measures used to evaluate the operators. To
better characterize each measure, the ITT presents a record sheet with the metrics used.
It is presented below.
50
Figure 4-1 - Measure's record sheet
Source – Adapted from ITT’s annex 4.4
Comparing this record sheet to the one presented by Neely et al. (2005), it is
possible to see that they possess several fields in common. The ITT’s record sheet,
however, does not possess the fields “who acts on the data” and “what do they do”. In
this way, the ITT allows a certain freedom to the operators so that they can take actions
in the form that they find more appropriate.
The ITT’s record sheet also presents an interesting field that was not mentioned
during the literature review, called “trend”. This field indicates what is the desired
behaviour of the measure through time, facilitating the understanding of the measure.
It is possible to perceive that the ITT prioritizes measures with an ascending trend,
using, for example:
Kilometres per accident instead of accidents per 100.000km
Average kilometres between failures instead of failures per 100.000km
Percentage of vehicles approved in emissions test over the entire tested fleet
instead of failed vehicles.
SPTrans, the actor responsible for monitoring the delivery of the service, is also
responsible to set standards for each measure, which will serve as base for the
operators’ evaluation. If the operator presents for two consecutive months
unsatisfactory results, it must elaborate a report explaining the cause of the problem, an
action plan to be adopted and who is responsible for the development of that plan.
4.3.1.3 ITT’s performance measures
The ITT follows defining ten measures that “best reflect the accordance to the
attributes of the quality of the services delivered under the view of the users”. This
CODE
VERSION
ACRONYM
MEASUREMENT UNIT RESULT PRESENTATION FORM MEASUREMENT FREQUENCY STRATIFICATION LEVEL GENERATING PROCESS
TREND
DATA COLLATING CRITERIA
COMPARATIVE REFERENCE
CALCULATION FORMULA DATA SOURCE
CONCEPT OF THE FORMULA'S COMPONENTS
SPTrans MEASURE'S RECORD SHEET
TITLE
OBJECTIVE
51
affirmation is not coherent to what is presented next, because, as it is going to be
demonstrated, there several quality attributes that are not covered by the measures
proposed here, including some attributes mentioned by the ITT.
The measures are classified into five categories, according to the following
table.
Table 4-1 - Assessment categories and measures from the ITT
Assessment categories Measures Acronym
User satisfaction
management
Service complaints IRS
Kilometres per accident IQA
Operational services
management
Departures fulfilment ICV
Departures punctuality IPP
Vehicle occupation IOP
AVL transmission IDTA
Maintenance
management
Average kilometres between
failures
MKBF
Fleet conservation, cleanliness
and maintenance
ICL
Environment
management
Pollutants emissions IEP
Human resources
management
Operators conduct complaints IRO
Source – Adapted from the ITT’s Annex 4.4
Next, I will present an analysis for each individual indicator specified in the
ITT.
4.3.1.3.1 Service Complaints
The measure Service Complaints, calculated by the division between all
complaints made by users and the total of transported passengers allows us to observe
the dissatisfaction of users as a whole. It fails by not classifying the complaints by
categories, identifying the real reasons behind them. Considering that all complaints
are the same, this measure loses lots of useful information for the operator.
In addition, the goal of this measure includes allowing the decision making on
pre-emptive actions, something that is not likely to be achieved since it measures the
results of what it would like to prevent, the users dissatisfaction, and not its possible
causes.
52
Through this measure, it is possible to know whether there is a grave
dissatisfaction of users, which will motivate them to make a formal complaint.
However, it does not evaluate smaller problems, which can be as relevant as the grave
ones, if they represent structural or daily problems. This way, measuring customer
satisfaction through the formal complaints received may not be precise. There is a
strong need to further refine its metric, or complement it with other measures.
Variations in the Service Complaints measure can be related not only to the
customer satisfaction, but also with the ease of making a formal complaint. A system
in which communication channels are well displayed and are of easy access will lead
to an increase in the complaints number, even when maintaining the service level. This
can lead to unwanted consequences. For example, a way to improve the results of this
measure could be to create difficulties and barriers that would hamper the users’ access
to the complaint systems, diminishing the number of complaints without a
corresponding improvement in service.
4.3.1.3.2 Kilometres per accident (IQA)
This measure fulfils partially its function, that is: “evaluate the occurrence of
accidents that endanger the physical integrity of users, passengers and third parties”.
This happens because the calculation formula only considers accidents for which the
operator was directly responsible. Therefore, a series of accidents provoked by third
parties that put in risk the physical integrity of the people involved are not considered.
This choice was probably made in order to link the variations in the measure’s
result to the operator’s performance. On the contrary, there could be an incorrect
assessment of the operator’s performance, considering factors outside its sphere of
influence in the results. As the ITT has the goal to influence and motivate the operator’s
behaviours to improve their individual performance, it is possible to understand its
choice in a formula that better evaluates the individual performance of the operator than
the total risk for users, employees and third parties.
This measure is strongly connected to the safety and security attribute, discussed
in the previous section. However, it is possible to observe that that attribute is a much
broader concept than what is evaluated by the measure, including incidents like thefts,
robbery, vandalism, assaults and aggressions, which are not related to the operation of
the system but occur in the area under the operator’s responsibilities.
53
4.3.1.3.3 Departures’ fulfilment and punctuality
These two measures together, aim at ensuring the regularity and reliability of
the system, considering that there is a backup fleet that can be put into service when
there are unexpected occurrences. Assuming an efficient use of the backup fleet, these
measures are representative of the relation between the service delivered by the operator
and the service predicted in the Service and Operation Order (SOO), defined by the
agency.
They are also closely related to each other. This happens because the operator
can choose between making a late departure or simply not make it at all. If it has a late
departure, it will worsen its departure’s punctuality, otherwise, if it misses a trip, it will
reflect in the departure’s reliability. Thus, the weight given to each measure or the way
in which they are used to motivate behaviour can affect significantly the operators’
actions.
In the SP case, discussed in the next section, only the departure’s fulfilment is
used in the Quality Index that multiplies the Basic Remuneration, incentivizing that all
trips are actually made, even that out of the scheduled time.
4.3.1.3.4 Vehicle occupation (IOP)
This measure represents the average amount of people without seats in the
length of a route. Its formula uses a renewal index, which is the average number of on
boarding and off boarding that is made during the route. By using this index, the
measure assumes that the number of people inside the bus is evenly distributed along
the journey, which most of the times is not true. This leads to an underestimation of the
impact of high demand route sections, where there can be overcrowding of the buses.
A measure that can be used to complement the vehicle occupation is the
vehicle’s maximum occupation during the trip, or in specific stops. Alternatively, there
are already technologies that are capable of precisely controlling the flow of passengers
inside the vehicle, allowing for a precise control of the occupancy in the bus. The ITT
mentions the gradual introduction in new buses of door sensors with such capabilities.
The objective of this measure is not aligned with what it really measures. The
ITT intend to use it to “monitor the degree of comfort offered to passengers inside the
54
vehicles” 28 excluding other relevant factors such as the driver’s technique, air
conditioning systems and the existence of other comfort items, for example, wireless
connection or energy outlets for mobile phones.
The use of a measure that includes these factors, not only it is better aligned to
the comfort attribute; it is also more pertinent to the ITT, because it assesses
characteristics under the operators’ responsibilities. The vehicle occupation depends
almost exclusively on route and dimensioning (frequency and capacity of buses), under
exclusive responsibility of the SMT.
This measure is a great to verify the relation between demand and supply of
collective transport and it should be used to analyse the system as a whole. Nonetheless,
there is a risk of penalizing the operators for a shortcoming that is not under their
control.
4.3.1.3.5 AVL transmission (IDTA)
As mentioned before, each vehicle is equipped with an Automatic Vehicle
Location system (AVL), which supplies periodically the exact vehicle location. It is
part of the Integrated Monitoring System (IMS).
This measure has as its objective to ensure that this system is in adequate
working conditions. This is vital for the control and monitoring of the delivered
services, since half of the ten measures defined by the ITT use data that is collected by
the IMS. However, a malfunctioning AVL does not have direct impact in the quality as
perceived by the user.
The adequate data collection and the monitoring and control of the delivered
service are indispensable for the improvement of the system as a whole and to ensure
the service quality, but they are not a direct performance attribute. This differentiates
this measure from the others included in the ITT. It is closely related to the quality of
the data gathered, and consequently to the quality and accuracy of the measures. Thus,
it is more representative of the control systems than of the bus system itself.
28 In the original: “monitorar o grau de conforto oferecido aos passageiros no interior do
veículo”
55
4.3.1.3.6 Average kilometres between failures (MKBF)
The average kilometres between failures is an excellent measure of pre-emptive
maintenance, as suggested in the ITT. In addition, mechanical failures can also affect
the reliability and regularity of the system. A good result in this measure can lead to an
increase in all those quality attributes, perceived directly by the users.
It is also noteworthy that, according to the ITT, the MKBF has a direct impact
in the operators’ remuneration, as discussed in section 4.3.2.1.
4.3.1.3.7 Fleet conservation, cleanliness and maintenance (ICL)
This measure sis defined in a manner that is coherent to its objective, which is
to monitor the state of the vehicle fleet and the users’ perception of it. It fails, however,
in evaluating all the operators’ responsibilities. They must also tend the transfer
terminals (including WCs), stops and garages.
4.3.1.3.8 Pollutants emissions (IEP)
This measure has as its objective to “assess the degree of commitment of the
companies to the preservation of the environment”29. When monitoring the vehicles
approval rates according to the limits established by the Green and Environment
Secretary, however, it only assesses whether the operators are respecting the minimum
levels demanded.
A measure that uses the average emission per vehicle kilometre would be more
representative of the real impact that the bus operation has in the city’s air quality, but
it would still have important shortcomings.
As discussed previously, the attribute respect to the environment has several
facets. In the bus operation, numerous opportunities of environmental impact reduction
are being ignored by this measure. Factors, such as the dispose of tires and lubricant
oils can drastically reduce the operator’s ecological footprint. Besides, the use of energy
from renewable sources is also beneficial to the environment, but not necessarily to the
vehicles’ emissions.
29In the original: “avaliar o grau de comprometimento das Empresas com a preservação do Meio
Ambiente”
56
Thus, a measure focused on measuring and influencing the actions of the
operators regarding the environment should include these factors, especially the use of
innovative procedures or technologies on the service delivery.
4.3.1.3.9 Operators conduct complaints - (IRO)
This measure is in the Human Resources Management category, which
“assesses the efficiency and efficacy of the personnel management in order to obtain
better performance results”30. This is a clear contradiction, since this measure is related
to the way in which occur the interactions between the systems’ users and the operators’
employees.
This interaction is important for the analysis of the service delivered by the
operators, but it has a small relation with the interaction of the operator with its
employees. More suitable indicators for this category are the absenteeism or the
turnover of employees.
In this case, there is also the danger of using the users’ complaints as the only
data source. In this scenario, a worsening in the users’ access to the communication
channels can lead to an improvement in the measure’s result, similarly to the IRS.
4.3.1.4 Use of the measures
The ITT establishes the way in which these measures will be used. The
administrator (SPTrans), responsible for managing the concessions, will set the targets,
or minimum standards, for each measure. The operators that present results below the
minimum required for two consecutive months will have to present a report containing
an explanation and a project to be implemented in order to improve the unsatisfactory
result.
This obligation is directly related to the record sheet fields mentioned by Neely
et al. and absent from the ITT’s sheet “who acts on the data” and “what do they do”. In
this way, the ITT allows the operators to develop their own improvement projects.
However, the use of only the measure that is insufficient is probably not enough to
30 In the original: “avalia a eficiência e eficácia na gestão de pessoas de forma a obter e melhorar
resultados de desempenho”
57
develop an adequate project. There is a need for more detailed measures, in order to
better identify and solve the underlying causes.
The ITT also establishes the Transport Quality Index (IQT, in Portuguese),
giving a single score from zero to 100 using all ten predetermined measures. For each
measure, the operators will receive a grade that depends also in the result of the other
operators. Each grade will be multiplied by its weight and summed, forming a rank of
all companies involved. The weights were attributed to each measure according to the
table below, showing the relative importance of each measure to the agency.
Table 4-2 - Measures and respective weights according to the ITT
Measure Weight
Departures fulfilment 1.4569
Average kilometres between failures 1.2190
Service complaints 1.0071
Operators conduct complaints 1.0000
Departures punctuality 1.0000
Pollutants emissions 1.0000
Kilometres per accident 0.9929
Vehicle occupation 0.8786
Fleet conservation, cleanliness and maintenance 0.7810
AVL transmission 0.6645
Source – Adapted from annex 4.4 of the ITT
The IQT’s main goal is, according to the ITT, to:
“Promote the continued improvement of the delivered
service, establishing a performance ranking of the operators. This
will make possible to those that present inferior results, to make
efforts in order to reach the others level, thus increasing the quality
of the transport system”31.
When analysing the ITT, however, it is not clear the relation between the
performance ranking and the actual incentives to the improvement of the service. The
ITT seems to assume that the simple existence of the IQT and its ranking will be
31In the original: “promover a melhoria contínua dos serviços prestados, estabelecendo um
ranking do desempenho das Concessionárias. Isto possibilitará àquelas que apresentarem resultados
inferiores, empreenderem esforços para atingir o nível das demais, elevando, assim, a qualidade do
Sistema de Transporte”.
58
sufficient to influence the operators into improving their processes and implementing
best practices, as confirmed by the above quote.
A more objective and concrete way of motivating behaviours and the
improvement of the IQT would be to tie part of the remuneration to the operator’s
performance. However, just a small part of the measures are used in the remuneration
methodology, and they only impact a small fraction of the overall amount, as will be
discussed in the next section.
The existence of a set of measures that represent the quality of the system is an
essential first step for controlling and monitoring the performance of a service, as
demanded by the ITT. However, just measuring the results is not enough to exploit the
full potential of the information available. These measures should also work as a trigger
for change. . They must be used to motivate wanted behaviours, and not only to assess
the state of the system.
In the following section, I will analyse the operators’ remuneration described in
the ITT, including the rewards and fines that depend on the performance and costs level.
As seen before, the remuneration is one of the main tools that the MST has in order to
influence the operators’ behaviours.
4.3.2 Annex 4.8 – Remuneration Methodology
The ITT establishes an incentive to the service improvement in the
remuneration methodology used by SPTrans to pay for the operators’ service. This
remuneration (R) is the sum of two parts: the basic remuneration (BR), which is based
on the costs of delivering the service reduced by the offered tariff (OF), the quality
index (QI) and the tax load (ISR); and the operator’s productivity (OP) related to the
increase in the system’s productivity, defined as the cost per passenger transported.
𝑅 = (𝐵𝑅 ∗ (𝑂𝑇
𝑅𝑇) ∗ 𝑄𝐼) ∗ 𝐼𝑆𝑅 + OP
59
Table 4-3 - Explanation of the remuneration formula
Element Content Application
R – Remuneration Value to be paid to the operator Result to be calculated
BR – Basic
Remuneration
Sum of costs, depending on
hours of service, kilometres
delivered and fleet size
Starting point to the
remuneration
OT - offered tariff
Offered value by the competing
companies – the main criteria
of decision
Applied on the
remuneration, reducing its
value proportionally to the
relation between OT and the
reference value (RT)
RT – Reference
tariff
Maximum value determined by
the ITT for each batch
Applied on the BR (see
above)
QI - quality index
Demand fulfilment, fleet
availability and departures
fulfilment
Applied on the BR
ISR – tax load According to local laws ISR = 1 / (1 - % tax)
OP – operator’s
productivity
Productivity gains, defined as
reduction of the cost per
passenger
Extra remuneration,
premium that can exceed
the costs of the system plus
the cost of capital
Source – adapted from ITT’s annex 4.8
4.3.2.1 Basic Remuneration (BR)
The basic remuneration (BR) is the estimated cost of the service delivery. It is
calculated with three main variables: service hours, operated mileage and fleet size
available per vehicle type. It also include the remuneration of the invested capital,
calculated with an Internal Rate of Return (IRR) of 9.79%.
Five terms form the BR. Each term is related directly to a cost of the system,
according to the following table:
60
Table 4-4 - Terms of the Basic Remuneration
Term Cost prices Cost unit of
measurement Related cost item
PA 1 = P1*Q1 P1 – Value per
hour
Q1 – Hours
available for
service
Personnel (driver and
collector), including salaries
and social charges and not
including benefits
PA2 = P2*Q2 P2 – Value per
kilometres
Q2 – Kilometres
driven on service
Fuel, vehicle operation,
lubricants
PA3 = P3*Q3
P3 – Value per
vehicle per
month
Q3 – Fleet
available Parts and accessories
P4 = P4*Q4
P4 – Value per
vehicle per
month
Q4 – Fleet
available
Investment (fleet, garage,
facilities, on board
equipment), administration,
maintenance and monitoring,
benefits
P5 = (P5 + P3)*QRT
P5 - Value per
vehicle per
month
QRT – Technical
reserve, limited to
7% of the fleet
Fixed costs related to the
technical reserve fleet –
investment, administration and
maintenance
Source – Adapted from Annex 4.8 of the ITT
It is worth noting a few important characteristics in the way in which the costs’
terms are calculated.
The PA 2, which includes the remuneration to costs related to the fuel
consumption, the vehicle operation and the use of engine oils and lubricants, has an
exception for the use of renewable fuels. It uses a different method of payment for these
fuels, paying exactly the costs beared by the operator. In this way, the SMT does not
make use of the opportunity to really motivate and influence the system towards the
use of renewable environmental friendly fuels.
Another important point present in this section of the ITT is related to the third
term of the BR, the PA 3, related to the cost of parts and accessories directly related to
the vehicles maintenance. The P3, the monthly price for parts and accessories per
vehicle, will suffer a proportional variation according to the result of the MKBF
(average kilometres between failures). Thus, operators that present fewer failures, this
means better maintenance performance, will receive a larger remuneration. The
opposite is also valid. The remuneration will vary according to the following table:
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Table 4-5 - Remuneration changes according to the MKBF
MKBF P3 variation
Up to 6.000 km -4%
Up to 7.000 km -3%
Up to 8.000 km -2%
Up to 9.000 km -1%
Up to 10.000 km 0%
Up to 11.000 km 1%
Up to 12.000 km 2%
Up to 13.000 km 3%
13.000 km or more 4%
Source – Adapted from annex 4.8 of the ITT
The basic remuneration, calculates with the prices proposed by the ITT, are
equivalent to the reference tariff (RT), in other words, the highest cost structure that the
SMT is willing to pay for the collective transport service. The offered tariff (OT) are
equivalent to the cost structure each operator has estimated for itself. They should be
equal or less than the RT. Therefore, the need for a factor (OT/RT) is explained, it is
used to adjust the remuneration according to the cost structure of the operator, which is
the main criteria in choosing the winner of the tendering.
The second factor that multiplies the BR is the quality index (QI), which ranges
from 0 to 1, therefore being able only to reduce the RB. Is if composed by four terms,
according to the following equation:
QI = 0,5 ∗ 𝐸𝐷 + 0,1 ∗ 𝐹𝐷𝐹 + 0,25 ∗ 𝐼𝐶𝑉𝑟 + 0,15
Table 4-6 - Quality index formula's terms
Element Content Formula
ED Demand’s effect on the
remuneration
Observed demand/reference
FDF Fleet availability factor Sum of available fleet per vehicle
type/total fleet
ICVr Departures fulfilment index for
the remuneration
Trips made/trips scheduled
Source – Adapted from annex 4.8 of the ITT
One characteristic that is present on this index is that it only uses one out of tem
measures mentioned in the ITT, the ICV. Another characteristic is that the three
measures used are directly linked to the fulfilment of the Service and Operation Order
(SOO), as determined by the SMT. Therefore, the quality index have a name that can
62
be misleading, because it is related to the SOO fulfilment, not with the majority of
quality attributes or measures previously defined.
This relation between the QI and the fulfilment of the SOO is clear in the last
term of the QI, the 0,15 that is fixed. It represents 15% of the BR that are fixed costs,
which, according to the SMT, should be remunerated even if the operators do not
comply completely with the SOO.
An index calculated the way that the QI is should be incorporated in the
operators’ remuneration, since, if the service is not quantitatively delivered according
to the scheduled, it should not be rewarded as such. Nonetheless, calling this type of
index as a quality measure is misrepresentative, because it does not denotes accurately
the performance quality of the system.
It is also possible to observe that only a small fraction of the quality measures
and attributes previously defined are actually used in the operators’ remuneration,
which is the main way the SMT has of influencing behaviours. Therefore, the measures
serve mainly as an indicative of the systems’ overall performance, having a much
smaller effect on it than could be possible if they were better applied.
4.3.2.2 Operator’s productivity (OP)
The second term of the remuneration, the operator’s productivity, rewards those
operators that achieve a productivity above that determined as a standard by the SMT.
The OP is calculated with the following equation:
𝑂𝑃 = 0,5 ∗ 𝑆𝑃 ∗ %𝑃𝑃
Where:
SP – System’s productivity; e,
%PP – Each operator’s participation in the productivity term
The system’s productivity is calculated with the following formula:
𝑆𝑃 = (∑𝐵𝑅𝑟𝑖 ∗
𝑂𝑇𝑅𝑇𝑖
𝐸𝑃𝑟𝑖
𝑁
𝑖
−∑𝐵𝑅𝑛𝑖 ∗
𝑂𝑇𝑖𝑅𝑇𝑖
𝐸𝑃𝑛𝑖
𝑁
𝑖
) ∗∑𝐸𝑃𝑛𝑖
𝑁
𝑖
Where:
63
Table 4-7 - Explanation of the system’s productivity formula
Element Description
SP Transport system productivity
BRr Base remuneration of the system for each batch as defined in the
ITT, or the average of the previous four years
BRn Base remuneration of the system in the period n, considering 100
% of departures fulfilment and fleet availability
OT Offered tariff by the operator
RT Reference tariff defined by the ITT
EPr Equivalent passengers32 calculated based in the first three
months of operation or the average of the previous four years
EPn Equivalent passengers of the batch in the period n
i Number of each batch
Source – Adapted from annex 4.8 of the ITT
Through this formula, the ITT defines productivity as the average cost per
passenger transported. This definition is simplistic and can lead to unwanted
consequences.
First, this definition creates a wicked perspective on the term productivity, since
an increase in the number of transported passengers, without a change in the operation
structure, will lead to an improvement in the result. This way, with the same costs
structure, the operators can increase the occupation of the vehicles in order to improve
the system’s productivity. In this case, the productivity increase, as defined by the ITT,
translates to an increase in the vehicles’ occupation, decreasing several quality factors
such as comfort and waiting times.
Second, the total cost of the bus system does not depend on the number of
passengers transported. It depends on the fleet utilized and the mileage operated, both
of which are scheduled according to the expected demand. When relating the system’s
productivity only with the amount of passengers transported, one is analysing only the
occupation of the vehicles, not its efficiency.
An alternative to this definition of productivity would be to calculate the costs
related to the real cost factors: mileage and fleet. What happens, however, is that an
improvement in productivity defined as such already generates benefits for the
32 Equivalent passenger is a measure that considers each passenger’s contribution related to the
regular fare. For example, a student the only pays half the fare is considered as half na equivalent
passenger.
64
operators, originated from the difference between their costs structure and the costs’
prices used in the calculation of the basic remuneration33.
Third, this definition of productivity is oriented only toward the financial
resources consumed by the system. There are several other aspects of productivity that
could be considered through other resources also consumed by the system. An example
would be the average travel time. In this definition, the resource used is the user’s time.
With it, a system that transports passengers in the quickest possible way is rewarded.
The user’s travel time depend on a variety of factors, as mentioned before, many
of them being beyond the operators’ responsibilities. Therefore, the productivity based
in the user’s time consume is not a good measure to be use in the remuneration formula,
despite being a good measure of the system’s efficiency as a whole.
After this discussion, it is possible to affirm that remunerating the operators
based in the system’s productivity, as defined by the ITT, is detrimental to the system’s
quality because it fosters the high occupation of vehicles. In addition, this remuneration
formula is loosely related to the actual performance of the operators, since a large part
of the costs depend solely on the SOO.
One last noteworthy point about the ITT’s productivity definition is related to
the equivalent passenger concept, which excludes non-paying passengers. There can be
cases in which a decrease in the system’s productivity can be led by the increase in
gratuities or discounts offered by the municipality, without any changes in the costs
structure or the total amount of passengers.
At this point, there is a similar confusion to what has been discussed above. The
number of transported passengers is not a direct cost factor and, therefore, should not
be used as an indicative of the system’s productivity. The number of equivalent
transported passengers also does not represent directly the system’s cost, but it is a good
representative of its revenues. This measure could be useful to assess the system’s fare
revenues.
Considering this controversial definition of productivity, the discussion on how
the distribution of this extra remuneration is made also deserves to be analysed. At first,
33 See section 4.3.2.1
65
half of all gains go to the municipality, while the other half will be distributed only
between the operators that achieved a positive result in their own batches.
The way in which the productivity is calculated to the operators is slightly
different from that used by the system as a whole. While that, for the system, it is used
the amount of equivalent passengers, for each batch, it is use the total amount of
transported passengers, according to the following formula:
BP = (𝐵𝑅𝑟 ∗
𝑂𝑇𝑅𝑇
𝑇𝑃𝑟−𝐵𝑅𝑛 ∗
𝑂𝑇𝑅𝑇
𝑇𝑃𝑛) ∗ 𝑇𝑃𝑛
Where:
Table 4-8 - Explanation of the system’s productivity formula
Element Description
BP Operating batch productivity
BRr Base remuneration of the system for each batch as defined in the
ITT, or the average of the previous four years
BRn Base remuneration of the system in the period n, considering 100
% of departures fulfilment and fleet availability
OT Offered tariff by the operator
RT Reference tariff defined by the ITT
TPr
Total passengers transported in the batch calculated based in the
first three months of operation or the average of the previous
four years
TPn Total passengers transported in the batch in period n
Source – Adapted from annex 4.8 of the ITT
As discussed previously, the use of the equivalent passenger concept can lead
to changes in the system’s productivity without any actual changes in the cost structure
and in the amount of transported passengers. Even worst, gains in productivity realized
by the operators can be neutralized by the SMT with an increase in discounts and
gratuities of the transport fare. In this case, even with productivity gains for each batch,
there may not be the distribution of this improvement because there will be a loss in the
system’s productivity due to the new benefits offered.
The distribution criteria uses the productivity gains of each operator multiplied
by an index that ranges from 0 to 100. It is composed by 70% of the final grade received
by the user satisfaction survey made annually and 30% of the annual IQT. The %PP of
66
the operators will be the result of the above calculation divided by the sum of all the
results of the operators that achieved productivity gains.
In this manner, the remuneration is only affected by the IQT and users’
satisfaction survey when first there is a productivity gain in the system. This model
makes the productivity a priority to the operators, leaving the quality of the delivered
service as a differentiator for those that achieve an elevated productivity.
It is important to remember, however, that this ITT is about the concession of
the delivery of a service to a private entity, whose final goal is return on its capital.
Therefore, the ITT should be attractive to both the municipality and to the private entity
that will deliver the service. Excessive regulation and requirements can increase the
operators’ cots, making impossible the service concession or requiring a higher amount
of subsidies to finance the system and fully reward the capital invested by the private
operators.
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5 CONCLUSION
In the previous chapters, I discussed in depth the literature and case studies
about performance measurement systems and its applications in the collective urban
transport system. I also made a critical analysis of the 2015 Invitation to Tender, which
will regulate the offering of the bus service in São Paulo for twenty years. This analysis
focused on the quality definition of the ITT, through the proposed measures, and the
mechanisms in place in order to ensure minimum service levels and standards and to
influence the operators’ behaviours.
This last part is extremely important for the organization and for the actual
performance of the system. A PMS has a fundamental function: guide and motivate
behaviours. Galbraith (2011), in particular, characterizes the measures as an integral
part of the reward systems of an organization, responsible for motivating and
reinforcing actions that add value to the organization. Kaplan and Norton (1996) also
recognize the part that a PMS has as a strategy management tool, transforming an
abstract definition of quality in concrete action with palpable results.
A relevant factor to be considered is the relation between the actor and the
quality attributes that are being measured. If a measure is not under direct responsibility
of an actor, in other words, if this actor’s actions cannot alter the result of the measure,
there is no use in creating a reward system around this element. No matter how many
incentives an actor has, be they positive or negative, he will not be able to take the
necessary actions to improve the result, which is the main goal of the incentive
mechanisms.
SPTrans, the main actor responsible for planning and delegating the bus service
in São Paulo, is also responsible for setting quality standards and performance targets
for the operation. It can implement mechanisms that will guide and influence
behaviours.
This agency has two major forms of exerting influence on the operators. First,
through factors and mechanisms included in the concession contract. The main example
is the association of the operator’s remuneration with its performance. Another
mechanism is the creation of non-financial rewards for operators, such as the public
display of the best performing companies. In addition, there is the possibility of setting
68
as a reward the prolongation of the present contract, ensuring a source of revenues for
the operators for a longer period.
Second, through changes in the tendering process. This could lead to a more
competitive environment, which would empower SPTrans to demand better offers or
better conditions. It also could create benefits to operators that perform well or take
certain desired actions in the next tendering process, considering more criteria than the
lowest offered fare.
The framework published by the 2015 ITT already have a few innovations and
mechanisms with potential to positively impact the collective bus transport system of
São Paulo. However, several simple and low costs changes could improve even more
this performance. In the biggest bus service tendering process in the world34, it is
important to profit from every opportunity.
In this final chapter, I will present a few suggestions of mechanisms for the São
Paulo context that would help to ensure minimum quality levels and influence
behaviours. Suggestions are made primarily based on the case studies and in the current
contracting model in place in São Paulo, in order to avoid structural ruptures with what
is being proposed. I will focus on the relation between SPTrans and the operators,
regulated by the contract established in the ITT.
5.1 Contract
On the contract proposed by SPTrans through the ITT, it is possible to observe
that the main mechanism of influencing behaviours is the remuneration methodology.
Its formula, presented below, was discussed in details in section 0.
𝑅 = (𝐵𝑅 ∗ (𝑂𝑇
𝑅𝑇) ∗ 𝑄𝐼) ∗ 𝐼𝑆𝑅 + 𝑂𝑃
The basic remuneration (BR) is composed of five terms, encompassing all the
system costs payed by the operator. The ITT introduced an interesting mechanism in
the BR, specifically in the PA 3, related to the costs of parts and maintenance. For each
34Available at: https://blogpontodeonibus.wordpress.com/2015/11/12/tcm-suspende-licitacao-
dos-transportes-de-sao-paulo/ (last accessed at Nov 15th, 2015)
69
range of results of the MKBF there is a corresponding variation in the PA 3, which can
be positive or negative35.
This mechanism is extremely efficient and should be more exploited in the ITT.
An example could be in the first term of the BR, the PA 1, related to personnel costs.
The PA 1 could vary according to the treatment the employees give to the users. This
could be measured by the amount of user’s complaints about employees’ misconduct.
The operators could also share part of this extra remuneration with their employees, in
order to influence even more the improvement of the employees’ conduct.
The quality index (QI), as discussed in section 4.3.1.4, is an essential factor of
the remuneration formula. It establishes the payment deductions related to the
incomplete fulfilment of the service and operations order (SOO) and to the achievement
or not of the reference demand for the batch. It was possible to observe that this index
has little relation to the service quality, despite the name given to it by the ITT.
The fourth term of the QI is fixed in 0,15, representing 15% of fixed costs, that
should not vary according to the fulfilment of the SOO. By guaranteeing this share of
the remuneration to the operators, SPTrans loses an opportunity of creating another
incentive mechanism. This term could also be multiplied by an index, similar to the
first three terms. This index could be truly representative of the system’s quality and it
could have an upper limit higher than one. Thus, a good performance could lead to an
increase in the operator’s remuneration. The IQT is a good candidate for that index,
especially with the adjustments suggested in the measures in chapter 4.3.1.3.
In this model, there is a chance that too many operators deliver an above
expectations performance, making this incentive too onerous for the municipality. The
bus system in Bogotá, Colombia, which is self-sufficient financially, presents an
interesting solution. Instead of using the absolute value of the index, the Colombian
system uses the relation between the single operator result and the average, augmenting
the remuneration for those above the average and deducting for those below. In this
way, the amount of payments and deductions is fairly balanced, creating almost no costs
to the municipality.
35 See table Table 4-5 - Remuneration changes according to the MKBF
70
In Bogotá, they also apply the concept of relative results influencing the
remuneration for individual measures. It sets the top performer as the reference for the
entire system, penalizing those that fail to reach the target by more than 5%. The
penalties increase as the difference between the operator’s result and the reference
increases.
There are two ways of controlling the line dimensioning regarding the amount
of departures. First, through a fixed schedule establishing the exact time of each
departure. Second, through the definition of the headway between consecutive
departures, or, in other words, the maximum users’ waiting time. The ITT proposes a
mix of these two models, defining maximum headways and a minimum amount of
service delivery and demanding that both requisites are fulfilled.
According to Cats (2014), for high frequency lines (five or more departures per
hour), the regularity of the system, this is, the adequate and constant headway between
vehicles, is more important than its punctuality. He affirms that
“Improved service regularity yields shorter passenger
waiting times, lower levels of experienced crowing, better capacity
utilization and higher operational certainty.”
This occurs because, for intervals shorter than twelve minutes, most users do
not plan their trips based on the schedule, but they arrive in a random fashion to the
stops. Thus, in these high frequency lines, the bus occupancy depends directly in the
headway regularity.
The structural system, as defined in the São Paulo ITT, fits seamlessly in the
definition of high frequency lines. Therefore, it would be beneficial to control this
system’s departures according to the line regularity and planned headway, as discussed
by Cats (2014). In London, as well the system is divided in high and low frequency
lines, with different criteria and measures being used for each part of the system.
Therefore, the ITT should use different sets of measures for the different
systems. The case of the regularity and reliability of the service is very illustrative of
that necessary differentiation. Using a measure as excess waiting time for a high
frequency line and a punctuality measure for low frequency ones makes more sense
than trying to use the same measure for all lines.
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5.2 Tendering process
The tendering process has several mechanisms that influence and motivate
behaviours, especially related to the tender awarding criteria, the definition of entry
barriers and the contract duration.
About the contracting duration, the current ITT creates an initial moment of
intense competition, the tendering process, and then there will be twenty years of
undisturbed operation, with few threats to the service continuity and the operators’ cash
flow. This characteristic renders low flexibility to the contract, dispossessing it of the
ability to adapt to new technological and social spatial contexts.
An example that has a high level of competition and flexibility is the London
bus system, in England. There, each line is tendered individually and the contracts last
for five years. In the British capital, the tendering is a continuous process, in which
15% to 20% of the network is disputed each year. This ensures a high level of
competition, with operators trying to improve their performance in order to do better in
the future tendering process. It also gives the agency Transport for London (TfL),
responsible for the bus system in the city, the possibility to try different contracts, with
innovative mechanisms. São Paulo should review this in its ITT, diminishing the
contract duration and planning for a transition to a continuous tendering model.
The criteria that is used to define the tendering winner is also relevant. Curitiba,
in Brazil, and London, in England present interesting uses of this mechanism. Changes
in the tendering criteria, especially if it is going to include past performance as one,
should be communicated timely to the bidding companies, in order to allow them time
to change their behaviours.
In London, the awarding process has two distinct phases. First, a restrict number
of people, directed by the Contracts Tendering Manager, assesse the proposals in a
technical and commercial basis. Second, the Tender Evaluation Committee, formed by
the directors of London Bus Services Ltd. (a business unit of TfL), has total liberty to
decide who are the winners of the tender.
This model concentrates power and freedom in the group responsible for the
bids’ selection, allowing for subjective criteria and personal interests to influence in the
choice of the winning bid. A more objective model that also includes different criteria
in the bid choosing process was implemented in Curitiba.
72
In this Brazilian city, the choosing of the winner bid is made through a formula
that includes the least offered tariff, as in São Paulo, and five performance related
criteria. For each performance criteria, there is a clear methodology for attributing a
score, which will be included in the final score formula. Thus, the tendering process
makes a better analysis of the bids, choosing those that are truly superior to the others,
not only those that offer better financial terms. In addition, criteria that considers past
performance will have be a strong motivator for operators to perform well, or to provide
specific services, in order to have better chances at winning the tender.
Two criteria used in Curitiba should be applied in the São Paulo ITT. First, the
criteria “social interest transport” is defined in Curitiba’s ITT as follows:
“Amount of kilometres in non-remunerated services made
available monthly per batch, for solidary transport of public and
social interest, to be delivered in week days, not in peak hours, and
Saturdays and Sundays (cultural activities of municipal schools,
transport of handicapped people, etc.)”36.
With this criterion, the Curitiban ITT motivates operators in participating on
social interest activities, with the goal of increasing their chances in future tendering
processes. In addition, participants that have fewer than 6.000 km delivered in this
category are automatically excluded, making the delivery of a minimum of this service
mandatory.
The second criteria is “operational improvement projects”. The tendering
participants should present projects with established goals and deadlines that will
generate improvements to the system. Each goal is related to a score that is considered
in the final score formula. This turns the operators into active actors in the improvement
process of the system. As a way of ensuring that the projects are actually implemented,
the non-achievement of goals and deadlines will lead to fines to the operators.
5.3 Next steps
36 ITT 005/2009 of the city of Curitiba. In the original: “Quantidade de quilômetros em serviços
não remunerados disponibilizados mensalmente por lote, para transporte solidário de interesse público e
social, a ser executado em dias úteis fora dos horários de pico, aos sábados e aos domingos (atividades
culturais das escolas municipais, deslocamento de pessoas com deficiência e sem condições de utilizar o
sistema normal etc.) .”
73
The present project brings to light several questions that can be further explored
in subsequent researches.
A first path to be explored is the monitoring of the service delivery and its
evaluation through the PMS discussed in this work. It is also interesting to analyse the
decision making of the operators in regard to the model discussed.
Another path that complements this project is the study of the main actors
involved in the case of the city of São Paulo. A better understanding of the relations
between the different actors involved and their interests could lead to a better
framework and could further improve the performance of the overall system.
In addition, the present work believes that the definition of a public agency’s
objectives should include social and environmental perspectives of performance. This
is a crescent trend in public administration research, which is still not fully developed
and requires further investigation.
There is potential for further research in the regional level. There is not much
academic literature on transport integration in a metropolitan region. In Lombardy,
Italy, a law has been introduced in 2012 that tried to improve the integration of the
transport planning and development of cities near each other. This law divided the
region into five basins and created an agency responsible for each one. It also
established regional and basin level conferences to be realized periodically,
incentivizing the cooperation among cities and benchmarking of best practices. The
benefits of such a policy could be further analysed and there could be investigations in
whether this would be advisable for the metropolitan region of São Paulo.
74
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