In France, the procurement of urban public transport services is under the responsibility of local municipalities who can choose between several institutional arrangements to operate their network. Direct management is one possibility but local authorities massively (91%) prefer to turn to the technical expertise and the managerial skills of private firms, that is to say to contract out the operation of services. Once they have decided to delegate, authorities have then to select the type of regulatory contract they will sign with the private operator. Three main categories of delegation contracts are traditionally distinguished, according to the type and proportion of risks that are shouldered by each contracting party: management contracts, gross cost contracts and net cost contracts.
The objective of this paper is to investigate the impact of contractual choices on performances, and more particularly on technical efficiency, in the French urban public transport sector. Our central proposition, which relies on a classical Transaction Cost Economics argument (Williamson 1996), is indeed that contractual practices are a key determinant of performances.
To test this proposition, we use an original panel data set covering 136 different French urban transport networks over the period 1995-2002 and we apply the frontier methodology developed by Battese and Coelli (1995) and Dalen and Gomez-Lobo (2003). The econometric results of this study, which is the first to apply this methodology to French data, corroborate our proposition: the technical efficiency of urban public transport operators depends on the type of contract that governs their transactions. More precisely, technical efficiency is positively correlated to the amount of risks shouldered by the private operator.