CHAPTER 1

Introduction

To provide transit service, a transit agency can directly operate service using agency staff, contract out service to a third party, or a mix of both. When service is contracted out (also known as outsourcing), there are many different models possible; for example, service could be contracted out to another public transit agency or a private firm; a portion of service could be contracted out (e.g., specific modes, garages, or routes); and contractors may or may not provide facilities and vehicles. Transit agencies may contract out for a wide variety of reasons, including cost efficiency, legal requirements, historical practice, or to obtain resources that are not readily available (e.g., vehicles or staff). Outsourcing may provide benefits to transit agencies; however, whether the quality and cost efficiency of outsourced service will compare favorably to insourced service depends on many local, contractual, and managerial factors.

This synthesis report, which is the product of Transit Cooperative Research Program (TCRP) Synthesis Project J-07/Topic SG-20, continues the work of TCRP Synthesis 136: Contracting Fixed-Route Bus Transit Service, which provided an excellent synopsis of practices regarding procurement, contract structures, transitioning between contractors, oversight of contractors, and labor issues. Although TCRP Synthesis 136 found that most transit agencies evaluate the performance of their contractors, more detail was needed to assess the types of performance measures and performance standards used to monitor and oversee contractors and to hold contractors accountable to the terms and conditions in contracts.

This report aims to extend the findings of TCRP Synthesis 136 by focusing specifically on the performance metrics used in contracts for fixed-route bus operations and maintenance.

Terminology

In this study, the following terms are used:

• Bus service. Refers to fixed-route local bus service, which is the focus of this study. In the National Transit Database (NTD), this type of service is referred to as the motor bus (MB) mode. Bus service, for purposes of this study, does not include commuter bus service. A transit agency that contracts out bus service might contract out operations or operations and maintenance.
• Contract. The written agreement between a transit agency and a third party responsible for operating bus services.
• Contracting out/outsourcing. These terms will be used interchangeably and refer to when a transit agency has a contract with a third party in which the third party operates transit services in exchange for payment from the transit agency.
• Contractor. Refers to the third party, usually a private for-profit entity, that is operating the outsourced bus service.

• Directly operating / operating in-house / insourcing. These terms will be used interchangeably and refer to when a transit agency operates its bus services using transit agency employees rather than a third party.
• Maintenance. Refers to the act of performing preventative and corrective maintenance (i.e., inspections and repairs) on bus revenue vehicles. Maintenance includes the work of mechanics, technicians, and maintenance supervision.
• Operations. Refers to the act of delivering revenue service. Operations includes the work of bus operators, dispatchers and radio room personnel, and street supervision.

Objective and Scope

This report documents current practices and metrics used to contract out bus service in the United States of America (U.S.). For the purpose of this report, contracting out bus service refers to when a transit agency outsources its fixed-route local bus service, including operations, maintenance, or both, to any type of entity (e.g., a private company or a public agency)—whether a portion or all of the bus service.

The focus of this report is on the following topics within the context of contracting out bus service:

• The nature of current contractual arrangements
• Reasons, measures, and analyses used when deciding whether to outsource
• The measures and methods for monitoring contractors and holding them accountable for performance

This study included a focused literature review and industry scan, a survey of transit agencies that contract out bus service (selected based on NTD data), case examples of transit agencies that contract out bus service (including one case example of an agency that formerly contracted out), and development of a project report. Each of these tasks is described in more detail below.

Literature Review and Industry Scan

First, the team reviewed relevant professional and academic literature about contracting out bus service. The study team also downloaded and analyzed 15 years of NTD data to determine the prevalence of and trends related to contracting out bus service (at least among recipients of Federal Transit Administration [FTA] formula funds). The NTD analysis, literature review, and industry scan are detailed in Chapter 2.

Survey of Transit Agencies

Second, using NTD data, the team developed a list of U.S. transit agencies that outsourced bus service in at least one of the 5 years from 2016 to 2020. The team randomly selected 25 transit agencies from three groups based on the number of peak vehicles reported for their outsourced bus service in 2020. The team also selected 12 transit agencies that were no longer outsourcing their bus service in 2020. After removing agencies with invalid contact information or NTD data, the team invited 83 transit agencies to participate in the survey. Thirty-seven transit agencies completed the survey. The survey methodology and results are discussed in Chapter 3.

Case Examples

After the survey was complete, the team selected five transit agencies as case examples that together formed a representative sample of geographic regions, outsourced service size (as defined by outsourced bus peak vehicles), and outsourced service mix. One case example was a transit

Table 1. Case example agencies.

Source: ¹NTD 2020.

Note: ²Survey responses or case example interviews.

agency that switched from outsourcing to insourcing its bus service (i.e., Escambia County Area Transit). Table 1 displays the five transit agencies selected as case examples.

Report Organization

Aside from this introduction, this report is broken into the following additional sections:

• Chapter 2: Background—summarizes the NTD data analysis, literature review, and industry scan.
• Chapter 3: Transit Agency Survey—presents the methodology and results of the industry survey.
• Chapter 4: Case Examples—presents the five case examples.
• Chapter 5: Conclusions and Future Study—provides a summary of findings and suggestions for future study.
• A list of references and several appendices follow the synthesis report:
  • Appendix A provides a list defining key terms related to contractual relationships.
  • Appendix B provides excerpts from performance measures and LDs.
  • Appendix C is a survey flowchart depicting the ordering of survey sections and questions based on anticipated conditional logic.
  • Appendix D reproduces the survey questionnaire.
  • Appendix E contains tables sharing details of San Diego MTS incentives and penalties.
  • Appendix F contains tables sharing details of Sun Tran incentives and penalties.

Chapters 2, 3, and 4 each conclude with a chapter summary that presents the key points in the respective chapter.