Optimal contracting and incentives for public transport in Sydney: what has been learned from the Sydney Metro experience?

The New South Wales (NSW) government created the Sydney Metro Authority to design, build and operate a completely separate underground Metro rail system to supplement the 

existing public transport network in Sydney. By the time the NSW government abruptly cancelled the entire Metro project in early 2010, the Authority had conceived and designed a 

contract that was proceeding to procurement. This paper examines the nature of the proposed Sydney Metro contract in relation to its performance framework and compares this 

to the frameworks in current contracts for bus, rail and ferry public transport in NSW. Against this background, the paper examines the extent to which the Sydney Metro approach has 

had an impact on subsequent public transport contracts in the context of the literature on optimal contracting and optimal incentives. The paper concludes that little has been 

implemented, although the other mode contracts now enable more performance measurement and incentivisation. In particular, the decision to award contracts to existing 

(and mostly public sector) operators appears to have acted as a brake on developing these performance elements.