Decades-old, family-owned bus contracts could be cast aside as the Victorian government tries to turn around the least popular form of public transport.

Twelve of the 13 contracts for Melbourne's bus network will be opened to competition for the first time in generations, in a bid to get more people using the city's lagging bus services.

Melbourne's bus contracts are set to be overhauled. Credit:Michael Clayton-Jones

Bus passenger numbers have been falling since 2014, despite rapid population growth across the city, particularly in the outer suburbs where buses are often the only available public transport.

In an effort to reverse the declining use of buses, which cost taxpayers $600 million a year, the Andrews government is preparing to kill off the old system of exclusive, heavily subsidised contracts that have existed since the mid-1970s.