Directly Awarded Public Service Obligations (PSOs) Can Cost Twice as Much as Competitive Tenders - Taxpayer Money is Wasted, Which Could Be Better Used Elsewhere | ALLRAIL

Directly Awarded Public Service Obligations (PSOs) Can Cost Twice as Much as Competitive Tenders – Taxpayer Money is Wasted, Which Could Be Better Used Elsewhere

BRUSSELS, 11 January 2024: In the closing weeks of 2023, we witnessed yet another striking example of the benefits of competitively tendering Public Service Obligation (PSO) contracts over direct awards.

Indeed, later this year, a new subsidised cross-border long distance service will connect Prague (Czech Republic) to Gdynia (Poland). This service was competitively tendered in the Czech Republic and directly awarded in Poland. How much will the taxpayer of each country pay for this very same train service?

In the Czech Republic, where the service was competitively tendered, taxpayers will pay €3.11 per train-kilometre;
In Poland, where the contract was directly awarded, taxpayers will pay €7.09 per train-km, expected to rise to €9.18/train-km!

The Polish taxpayers will pay at least more than twice as much as the Czechs. Unfortunately, there will be no tenders for long-distance passenger services in Poland until 2030.

The previous populist government in Poland not only placed political appointees to its state-owned incumbent operator PKP Intercity but also protected its inefficient structure, willingly paying double the taxpayer money to ensure exclusive awards of long-distance PSO contracts to PKP Intercity.

This is because when you have no competitive tendering, the recipient of the direct award can dictate what the taxpayer must pay with no incentive to become more efficient.

At the same time, there is no evidence that directly awarded PSOs improve rail passenger satisfaction – instead we see how satisfaction is higher in European countries with competitive tendering than in those without.

ALLRAIL Secretary General Nick Brooks says: “Overspending to finance the internal structure of PKP Intercity leads to wastage of funds that could be better utilised, for instance, in building new infrastructure or providing more services. This would ensure that more people take the train and environmental goals are met.”

With the New Year 2024 theoretically ushering in a new era of mandatory competitive tendering for the benefit of the EU rail system, it is crucial that the EU Commission now implements this new system to prevent such egregious wastages of public money.