Contracting Out in the Transit Industry: Recent Perspectives of Transit Agency Managers

Introduction

Historically, the post-World-War II period has resulted in large financial losses for the public transportation industry in the US (Nayan & Wang, 2017), especially with the increase in automobile use and the implementation of the interstate highway system in the 1950s. In the 1960s many private bus transportation companies were no longer profitable so many state and local government agencies stepped in. However, the environmental concerns over vehicle emissions, the cost of gasoline and increased congestion challenge the sustainability of reliance on cars as American’s primary mode of transportation. Therefore, public transportation continues to be a subsidized industry in order to promote sustainable transportation (Wachs, 1989). The other chapters in this book discuss other ways to achieve financial sustainability such as toll roads or HOT lanes, earmarked sales taxes, or public private partnerships, this chapter examines a different aspect of the financial sustainability of public transportation in the United States - the current contracting practices of the public transportation industry. This chapter echoes the importance of political factors in the cost efficiency consideration that are discussed in other chapters as well. The cost savings are important as they can make transportation infrastructure and funding more sustainable.

This chapter highlights a survey of public transit industry managers’ views on their current type of service provision arrangements. They were asked to provide a description of their governing structures, what modes of transportation they provide (bus, rail, ferry boat etc.), their contracting activities and current characteristics of their service areas. They were also asked questions concerning the performance indicators and monitoring and the size and length of current contracts to improve our understanding of the level of oversight and control over their contractual arrangements. This survey is needed because the Transportation Review Board (TRB) last studied this issue in 2001 in report #258 “Special Report: Contracting for Bus and Demand-Responsive Transit Services”. Even the most recent Government Accountability Office report (GAO-13-782) “Transit Agencies” Use of Contracting to Provide Service,” that showed a growing interest in contracting out a is over five years old. Also, both reports are not fully anonymous which may affect the way the administrators reply or phrase their replies. The GAO report was sanctioned by the Congress with the heightened interest in contracting out. “Political language is political reality” (Edelman 1985, p.10); hence, the beliefs or perceptions of politicians play an important role in contracting out decision-making. At the same time, the empirical literature (Leland and Smirnova, 2010; Zullo, 2008; Warner and Hebdon, 2001; Brown and Potoski 2005) finds little to no cost savings in contracting out.

This chapter looks at the factors that transit managers identify as the most important in the decision-making on contracting as well as the factors that influence their decisions.