Quality cost in bus operations based on activity-based costing

The study of service quality and its implication for transport contracts has several approaches in research and practical applications, where the main emphasis is the consideration of quality from the user's point of view, thus obtaining a customer satisfaction index as a measurement of the overall quality with no further implications for service providers. The main aim of this paper is to estimate the real economic impact of improving quality attributes for a bus operator. An application of the activity-based costing methodology is developed for a bus contract in Madrid, using quality data from surveys together with economic and performance information, and focusing on headway as a quality variable. Results show the consistency and practicality of this methodology, overcoming simplifications from traditional procedures. This method is a powerful tool in quality-based contracting as well as for effective investment in transport quality under poverty funding constraints