ECONOMICS OF PRIVATE OPERATOR SERVICE

Current evidence suggests that private firms can operate urban transit service at about one-half to two-thirds the costs experienced by typical publicly owned regional authorities. Competition appears to be critical in disciplining labor and management, and hence a means of achieving such low cost is to have private firms bid competitively for contracts to operate service. A public agency would retain control over what service is provided and act as a service sponsor engaged in planning, finance, and contracting with private service operators. Contracting service to private firms has already begun in many metropolitan areas; in smaller systems all services are often contracted, and in larger systems contracting has been used for services for which the cost savings are expected to be especially large.