Competitive Procurement Design: Evidence from Regional Passenger Railway Services in Germany
ZEW Discussion Paper No. 13-009 // 2013A major reform of the German regional passenger railway services was established with the so called Regionalisierungsgesetz in 1996. As a consequence, regional passenger railway services have been procured by regional public agencies from railway companies since then. A central goal of this reform was the establishment of a competitive transport market.
In this article we study the competitive awarding procedures of the years since the reform by means of a new data set. The procurement agencies design the awarding procedures in different manners such that the question arises which design yields better awarding results. Among others, the design includes the contract duration as well as the revenue risk sharing between agency and operator. We investigate how the design parameters influence how many railway companies participate in a tender, which of them wins the contract and which price the agency has to pay.
Our results indicate that more companies participate in an awarding procedure when the contract duration is long and when the company’s revenue risks are low. The market leader DB Regio is more likely to win contracts when it already served the awarded lines in the past and when the line network is long. Moreover, DB Regio is more likely to win contracts with a long runtime, when used vehicles are allowed and when fewer competitors participate in the awarding procedure. Concerning the resulting payments of the agencies our only robust finding is that the agencies have to pay less if they do not receive the ticket revenue realized by the railway companies.
In the following years a large fraction of the regional passenger railway network is to be procured. Our results can be applied in order to enhance the performance of the upcoming awarding procedures.
Hunold, Matthias and Christoph Wolf (2013), Competitive Procurement Design: Evidence from Regional Passenger Railway Services in Germany, ZEW Discussion Paper No. 13-009, Mannheim.