Optimal bus transit route packaging in a privatized contracting regime

This study presents an optimization model as a methodology for the transit regulator (or a government authority) to design bus transit route packages to be tendered out to contesting operators through competitive tendering (CT). The optimal route packaging takes into account the perspectives of all stakeholders in a bus transit system- the commuters, operators and the regulator. The problem is formulated as a Mixed Integer Nonlinear Programming (MINLP) problem. To solve the formulated MINLP, we transform it into a Mixed Integer Linear Program (MILP) by using linearization techniques so that global optimality of the solution could be guaranteed. A numerical study is then performed on a real-life transit network to evaluate the model validity. The proposed methodology provides a comprehensive decision making framework for the regulator contemplating to contract out bus transit route packages through CT so as to achieve the objectives of encouraging competition, ensuring the attractiveness of the bus transit market to contesting operators and meeting commuters' expected service levels.