A question mark hangs over some bus services in west Auckland where one operator is trying to quit routes months into a new contracting regime.

Photo: RNZ / Todd Niall

One trade union, along with transport industry sources, said problems were emerging with the new public transport operating model (PTOM) contracting system brought in by the former government and now part-way through its roll-out in Auckland

RNZ has been told relationships between some operators and the council transport agency have become toxic, and that the system of bonuses and penalties could endanger services.

Pavlovich Coachlines Limited (PCL), which successfully tendered for services in the West in June, is understood to have been looking for another operator to take over the routes. Other operators rejected taking over the services because they would obliged to run them in line with the existing contract between PCL and Auckland Transport.

PCL chief executive Bernard Pavlovich declined to comment, as did bus operators, some citing the terms of their contracts with the council agency Auckland Transport.

Auckland Transport said only that in general there was no provision to renegotiate contracts and penalties would apply if an operator bailed out.

Photo: 123RF

The public transport operating model introduced in 2013 was driven by former Transport Minister Steven Joyce to add commercial incentives and partnerships into how councils contracted services.

The transition to the new regime is nearing the half-way stage in Auckland, with the South and West now under PTOM, and the East since yesterday.

New operators have won some contracts previously held by long-established players, with NZ Bus losing all its work in the South, and some in the West.

RNZ understands some operators have been hit hard by penalties that can be imposed under PTOM on those who fail to meet punctuality and reliability targets.

Auckland Transport said both penalties and bonuses are paid according to how well an operator delivers the contracted services.

"If two to three trips don't operate - we don't pay for them," said, public transport service delivery manager Colin Homan. An operator might face both penalties and bonuses of $10,000-plus in a month, and some might end up with a net bill to pay of $10,000-plus, depending on performance, he said.

Photo: RNZ

Auckland is the most advanced region in rolling out PTOM, which has shaken up a long-established club of operators.

New players entering the region - iwi-owned Go Bus, a significantly expanding Pavlovich, and Murphy Buses in a joint venture with major company Ritchies - have undercut and partially displaced firms like the once-dominant NZ Bus.

All the newcomers have invested heavily in new buses, and have had to recruit hundreds of staff during a nationwide shortage of bus drivers.

Those winning new contracts have three months to get up to speed, before the penalty/bonus regime kicks in.

The competitive tendering PTOM system has delivered big savings to Auckland Transport, which in the first tranche of contracts - South Auckland - gained a 15 percent increase in services, for $3.1 million less subsidy.

The agency estimated that once the re-tendering for Auckland is complete, there will be a 28 percent increase in services, costing 6 percent less in subsidies.

First Union said the PTOM system, with companies tendering against each other, is driving down drivers' wages.

Despite the statements from AT about it being 40 percent quality and 60 percent cost, generally the low-cost providers have won the day, Rudd Hughes, the union's bus organiser, said.

"You've got providers coming in where the margins are very slim and that's a real problem for them maintaining profitability," he said.

Mr Hughes said some drivers had left the industry rather than switch companies for lower wages.

Minister of Transport Phil Twyford said he wanted to ensure that gains under PTOM were not at the cost of worker.

Mr Twyford said while it's too early for a full review of PTOM, there could be changes to protect workers' conditions.

"One of them could be ringfencing labour costs as part of the process so you'd then be requiring the provider to compete on the basis of quality of service rather than reducing wages and conditions," he said.