Conditions for Tendering Norwegian Passenger Train Services Not Adequately Met 

This may provide grounds for direct allocation. The Norwegian railway has specific characteristics that make it vulnerable in a tendering process. 

Through the EEA Agreement, Norway commits to following various EU directives to ensure the free movement of goods, services, people, and capital. This has contributed to the liberalization of the aviation and railway sectors.

In areas where an important transport service will not be provided by the market because it would be unprofitable, the government can step in and support this service. The main rule is that contracts for public service provision should be handled through a competitive tendering process, but in certain cases, exceptions are made, allowing for direct allocation. 

Can Norway directly allocate responsibility for rail passenger transport?

A recent TØI report has investigated whether Norway can utilize the exceptions in EU legislation to directly allocate responsibility for passenger transport by rail when the current tender contracts (traffic packages South, North, and West) expire. If Norwegian authorities wish to make direct allocations, they must justify and document that the railway in Norway has special characteristics that allows this. 

• Structural characteristics of the network are likely what distinguishes the railway in Norway the most from railways in other European countries, says senior researcher at TØI, Inga Margrete Ydersbond. 

There is a very low proportion of double tracks, there are few—and often no—detour options, and the railway is relatively isolated geographically. A significant maintenance backlog that has developed over several decades makes the situation worse. This greatly affects railway operations, making the Norwegian railway a fragile system with substantial capacity- and stability challenges. 

Conditions for Tendering Met to a Small to Moderate Degree 

In the study, the researchers identified five conditions that should be satisfied for a tendering competition for railway traffic agreements to achieve the desired effects. These are discussed and explored against the current situation: 

1. Passenger transport by rail should occur in a robust system with few operational disruptions. This condition is not met. On the contrary, the number of operational disruptions has increased in recent years. Norway has, among other things, few stretches of double tracks. Furthermore, the Norwegian railway network has very few detour options, and the infrastructure capacity is undersized relative to demand, especially in densely populated areas in the South-East Norway 
2. There should be a sufficient number of bidders participating in the tendering processes. This condition is met. 
3. There should be deficiencies in the pre-regime that competition can alleviate. This condition is significantly met. The tendering competition appears to have made the companies more efficient and customer-oriented. At the same time, the companies are also less robust than before because, to win the tenders, they must operate with narrower margins across all parts of the organization. This affects, for example, access to and allocation of equipment and personnel. 
4. Train companies should have significant control over inputs and other important conditions for their production. This condition is met only to a small degree. 
5. Reorganization should not result in new and significant management challenges. This condition is met only to a small degree. 
6. We find that the conditions for tendering are met only to a small to moderate degree, says Inga Margrete Ydersbond. 

Many Loose Ends Create Significant Need for more knowledge 

The exception clause discussed further stipulates that direct allocation will provide better service quality and/or cost-effectiveness. It is challenging to isolate the effect of the procurement system on indicators for quality of the service and cost-effectiveness, as both tendering and direct allocation can have various impacts.

Measuring the expected effects on service quality and cost-effectiveness is even more challenging. Common indicators for service quality, such as punctuality, frequency, quality of rolling stock, customer satisfaction, cleanliness, and passenger numbers, can be quantified and measured in different ways. This is currently being done and monitored in contracts between the Railway Directorate and train companies. 

• We therefore believe that these matters should be thoroughly investigated. Possible large scale-advantages and disadvantages of reducing the number of traffic agreements from the current situation are particularly relevant. The same applies to what can be done about the management challenges in the railway sector and how liberalization may have affected employees’ wages and working conditions, Ydersbond concludes. 

Legal Status Remains Unclear 

Since legal precedent is not established in this area as of 2024, and all cases must be evaluated individually, it is difficult to know whether direct allocation of future traffic agreements in Norway will be considered legally acceptable if someone were to challenge such an allocation in the EFTA Court. 

• Regardless of the solution chosen, it should be thoroughly investigated, justified, and documented, says Inga Margrete Ydersbond. 

The study is funded by the Norwegian Railway Association and the Norwegian Locomotive Drivers’ Association. 

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