Academic journal article Business Case Journal

Tendering for Bus Transport: A Bumpy Ride for PCL

Academic journal article Business Case Journal

Tendering for Bus Transport: A Bumpy Ride for PCL

Article excerpt

The Birth of PCL

PCL was founded by Marco Pavlovich in 1938 on a farm on the outskirts of Hamilton, New Zealand. PCL began after Marco purchased a 12-seater open-back cream truck to take his own and other local children to and from school. He also used the truck to transport cream cans of milk from the farm to markets in the local town. Over time, the demand for school bus services increased and by the 1960s the company grew to have six buses in the fleet, servicing rural communities with contracts with the Ministry of Education. There was also a growing demand for buses to be used by 'charter' groups and PCL began to offer three week 'deluxe coach' package tours of the beautiful South Island that was more accessible following the establishment of the Interislander Ferry, linking the North and South Islands.

By the early 1970s, Marco had retired and his eldest son, Ivan, was now running the business. PCL had a strong charter and tourism focus and needed reliable, heavier vehicles that had the space to handle the capacity requirements and could perform to the New Zealand road conditions. In 1972, Ivan became the first in Australasia to purchase the deluxe Scania Coach chassis (Cable Price, 2012), which allowed for coaches to be designed to meet the passenger and baggage hold requirements for the long-distance travel that PCL was performing. Coaches performed different passenger services than buses. Coaches traveled long distances and had other facilities, such as more comfortable seats, luggage space, large windows and often amenities such as toilets. In comparison, buses were designed for shorter transit and travel distances, had fewer amenities and were generally used within urban areas or short rural services.

The 1980s and 1990s proved to be difficult times financially, with decreasing revenue from the tourism charter side of the business. This was due to deregulation of the New Zealand economy in 1983. Prior to deregulation, the industry was protected and exclusive, in that operators (about 5-6 at the time according to Ivan) had to have a license to pick up tourists from the airport, limiting the number of competitors. After deregulation, the Transport Amendment Act of 1983 changed the licensing system and as long as companies could show that they could deliver a safe and reliable service they could operate. A positive consequence of deregulation was the government informed local councils that they could no longer run their own city bus services and would need to outsource this function.

Steering a way into the City Bus Segment

Bernard Pavlovich, Ivan's son could see that the city bus model had an even return both financially and operationally and during the mid-nineties put his effort into learning the tender and procurement process used by councils, both in Hamilton and Auckland. Bernard chose to include Auckland, which is where the head office is now located, as it was New Zealand's largest city and offered many bus route opportunities. Each council's tendering processes were slightly different which brought additional complexities to tendering for city bus work. For example, in Hamilton the bus service had already been run external to the council, and in the 1990s Buses Ltd were the sole contractor in the city bus sector. In contrast, Auckland Transport had begun outsourcing all of its city bus routes through the tendering process.

PCL's first city bus contract, won in 1999, was in Auckland, branded Urban Express ( and ran buses between two shopping areas in Auckland. The contract, according to Bernard was, "The right size to not put the company at too much risk." The company purchased half a dozen low capital second-hand vehicles for the fleet and also set up a more substantial depot in Auckland. "It was a good solid bus route which allowed the company to learn about how the city bus market ran" stated Bernard.

After demonstrating to both the customer (Auckland Transport) and financiers that the business model worked, PCL tendered for, and won another larger contract in Auckland in 2003, which allowed it to increase the city bus fleet to 18. …

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