As part of ongoing efforts to develop the public transport system, facilitate the transition from car-oriented cities to citizen-oriented cities, and promote micromobility, another important innovation has been introduced: the “gross contract” model. Within the framework of implementing relevant state programs and projects, Azerbaijan’s public transport management and financing system is regularly undergoing changes and improvements. In this regard, the introduction of a new “gross contract” model for regular passenger transportation by road as of September 2026 represents a significant development in terms of changing the management philosophy of the public transport sector. The new system is being implemented based on the Rules for the Calculation and Payment of Subsidies for the Provision of Distance-Based Road Transport Services by Carriers Engaged in Regular Passenger Transportation by Road, approved by the Cabinet of Ministers of the Republic of Azerbaijan.

Agil Asadov, Head of Department at the Center for Analysis of Economic Reforms and Communication and Doctor of Economics, notes that the main essence of the “gross contract” model is that a carrier’s revenue does not depend solely on the number of passengers boarding its buses. Instead, the carrier receives an additional payment—a subsidy—based on predetermined service parameters, including the number of buses, service intervals, distance travelled, and quality of service. In other words, the state or an authorized institution, in a sense, becomes the party “purchasing” the transport service, while the carrier provides transportation services in accordance with established standards. Naturally, under such a system, service quality, safety, flexibility, and other related factors become higher priorities. This is because the approach differs fundamentally from the traditional model. In a system that relies more heavily on passenger revenues, carriers may, from a commercial perspective, prioritize routes that attract more passengers and focus on carrying higher passenger volumes. On routes with low passenger demand, the volume and quality of services may decline, making such routes less attractive to carriers. Under the “gross contract” model, however, the carrier’s primary financial incentive is not based on the number of passengers, but on providing the specified transport service on time, in full, and at the required level of quality. In this respect, the system allows greater consideration of the social-service nature of public transport rather than treating it primarily as a commercial service.

According to the department head, one of the key advantages of the new model is the centralization of route planning and the prior establishment of service standards. Since the number of buses operating on each route, their service intervals, and the distance they are expected to cover throughout the day are determined in advance, transport services become easier to plan and forecast. In this regard, one of the main objectives of introducing the “gross contract” model is not only to improve the quality of services but also to ensure that bus routes operate in accordance with established schedules. 

One of the key expectations from the introduction of the “gross contract” model is the integration of service quality into the financial mechanism. If a carrier is evaluated not only on the basis of whether a bus is deployed on a route but also on the quality of service provided, factors such as the technical condition of buses, compliance with schedules, adherence to intervals between buses, renewal of the bus fleet, and the level of passenger service become more important. This means that the “gross contract” is not merely a new subsidy mechanism, but also serves as a quality-based management model.

Aqil Asadov notes that the success of the new model will depend not only on the implementation of the contractual mechanism but also on the effectiveness of monitoring and measurement systems. This is because, for the principle of “payment based on service quality” to function effectively, quality indicators must be precise and measurable. Factors such as whether buses enter service on time, comply with established intervals, complete all scheduled trips, meet technical and sanitary requirements, ensure passenger safety, and satisfy other relevant criteria will be monitored through electronic systems. Otherwise, the main objective of the system—ensuring that public funds are allocated in accordance with services actually delivered and their quality—may not be fully achieved. Digitalization is therefore of critical importance. GPS, electronic ticketing systems, automated route monitoring, passenger-flow analysis, and data analytics can contribute to making the “gross contract” model more transparent and efficient. Therefore, the new contractual model is likely to achieve greater success if it is developed in parallel with the digital transformation of public transport.

Another advantage of the “gross contract” model is that it makes it possible to preserve socially important but commercially less viable routes. If passenger demand in a particular area is low, there may be a risk that services on that route will be reduced or discontinued purely for commercial reasons.Under the new model, however, the state finances a specified level of service, making it possible to maintain operations on such routes. This is particularly important for peripheral areas of cities and routes serving communities that rely heavily on public transport, giving the model significant social value.

Thus, the launch of the “gross contract” system in Azerbaijan in 2026 can be regarded as the beginning of a new institutional stage in the development of public transport. Ultimately, the significance of the “gross contract” extends beyond changing the financing mechanism for bus carriers. The model represents a shift from a “revenue based on passenger numbers” approach to a “payment for transport services provided” approach. If this mechanism is complemented by effective monitoring, transparent subsidization, digital oversight, and clearly defined quality standards, it can make a significant contribution to transforming public transport in Baku and other cities into a more planned, reliable, safe, and passenger-oriented system. From this perspective, it would be more appropriate to view the new system not merely as a financial reform, but as a project aimed at modernizing public transport management. It is hoped that the long-term success of the reform will be reflected in passengers’ everyday experience—buses arriving on time, consistent service intervals, greater comfort and safety, and improved service quality.