Service contracts are the natural method to set bilateral commitments. In transport service context, public authorities and transport operators have different goals, therefore regulation plays an important role especially failing competition. After a brief description of the most important regulatory procedures, we focus our attention on the quality framework in service contracts. In recent years the inclusion of quality requirements in contracts is becoming common practice, especially when adopting price cap regulation. This paper suggests a criterion for service quality definition, measurement and integration in contracts for the production of socially valuable transport services. Using choice-based conjoint analysis to analyse customer preferences we estimate the passengers’ evaluation of different service features and calculate a robust specification of a service quality index from the customers’ point of view. A case study demonstrates the procedure to follow for measuring service quality in local public transport differentiated by geographical service segments.
