Competitive tendering within the Norwegian local public transport leads to reduced job security for the employees. But there are ways to improve the employment protection. Introducing national regulations is one alternative.

In 1994 the Norwegian government opened up for competitive tendering, and today half of the counties responsible for local public transport have introduced competitive tendering. This has led to an
average cost saving for public authorities of about ten per cent. The authorities may, in other words, reduce their public spending on local public transport and prioritize other political areas, or improve the local
public transport service.

As employees make up approximately two thirds of the production costs of a bus company, there is a discussion going on whether the employees, and especially the bus drivers, pay for the cost reduction. According to labour unions the employees have experienced worsened working conditions in terms of wages, pensions, shorter breaks and so on.

The employees’ rights
In a study carried out last year, the Institute of Transport Economics evaluated how employees’ rights are protected in the Norwegian regulatory regime today. In the study state regulations, collective agreements and contracts regulating the relations between counties and operators are analysed. We find that most aspects of mployment relations, i.e. wages and pensions, working time, qualification requirements and workers’ participation are highly regulated in Norway today. The primary exception is job security and work intensification. Hence, the most important negative effect of tendering for employees is reduced employment protection. Competitive tendering implies increased job turnover. Workers may loose their job if their company looses the competition and has to reduce its production.

Measures to improve job security for bus drivers may be introduced in different ways. Some of these are also used in competitive tendering today. One measure is to enhance contract length. Another is to
require the winning operator to hire drivers from the loosing company if the new operator is in need of drivers. In such cases, the Public Transport Authority may also demand that employees who are 55
years or older should be prioritized. This is in order to reduce the risk faced by older job seekers to be discriminated when jobs are distributed.

National regulations
Another alternative is to introduce the national regulation that the public transport authorities may demand similar rights in cases of competitive tendering as employees’ rights in the events of transfer of
undertakings. Such a regulation would imply that the employees in the transferring company, whose tasks are associated with the area or routes put out for competitive tendering, will be transferred to the
winning company. This requirement increases the job security of employees from the transferring company. Such regulations are today used in different variations at regional level both in Norway (Nordland) and in the neighbouring countries (in the city areas of Stockholm and
Copenhagen).

How may the introduction of such national regulations affect cost efficiency gained through competitive tendering? The regulation of employees’ rights in the event of transfer of undertakings will probably add to the costs of the Public Transport Authorities, as operators may add costs related to the following risks in their bids:
The operators are uncertain about who the transferred employees are and what agreements they may have and acquire. Conflicts
between new employees and those already working in the firm may arise because of different agreements or seniority. The size
of the risk may vary according to whether the route or area has been put out for competitive tendering in the period before the call for tender, type of contract (gross-cost versus net-cost contracts), and characteristics of the labour market, i.e. whether there is a lack of drivers or not.

Increased stability
Notwithstanding the probability of such short-term effects, one could argue that, in the long term, effects of such regulations may increase stability in the labour market for drivers. Increased job security will probably lead to increased stability in the work force, and may even attract other employees as it is not an uncertain job. In the long
run this may improve the situation for operators as well as for Public Transport Authorities in terms of getting a stable work force in the sector.

Merethe Dotterud Leiren and Oddgeir Osland,
Institute of Transport Economics, Norway

Contact
Merethe Dotterud Leiren

For more information
TØI report, Competitive Tendering and Employment Relations in Local Public Transport.  (in Norwegian)