Contracting Fixed-Route Bus Transit Service (2018)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

38 Introduction The previous two chapters examined issues related to contracting fixed-route bus service from the transit agency’s perspective. This study also included a brief survey of firms that pro- vide transit services (i.e., contractors) to obtain their views of the contracting process. With the assistance of panel members for this study, the synthesis team received surveys from six of the seven contractors contacted. Both the chief executive officer and the vice president of business development at one firm submitted surveys that focused on different elements in the contract- ing process, resulting in seven completed surveys. A sample this small offers no guarantees of statistical validity, but the level of detail in responses and representation of nearly every national contracting firm in the United States provide a highly useful supplement to information gathered from the transit agencies. Decision to Bid Respondents rated the importance of various factors in terms of influencing their decision to bid on a specific RFP. A majority of respondents cited the evaluation criteria used and the clarity of the RFP as extremely important in determining whether or not to bid (Table 2). Respondents added other important factors affecting their decision to bid. The following factors were mentioned by multiple respondents: • Time frame to respond (longer is better); • Size of team required (larger is more difficult to assemble); • Capital requirements (high capital requirements will discourage contractors from bidding); • Flexibility of agency/ability to negotiate contract terms; and • Geographic location (near other contractor locations is desirable). Respondents answered open-ended questions regarding elements of an RFP that would encourage or discourage them to bid. Elements that encourage and discourage bids are presented in Table 3. Response to Agency Survey Results Contractors were asked to respond to comments from the transit agency survey in two areas. The first area involved clear communication of agency goals and objectives along with an under- standing of contractor needs. The contractors elaborated on ways that the agency can help them understand its goals. C h a p t e r 5 Contractor Assessment of the Contracting Process

Contractor assessment of the Contracting process 39 • A Request for Information (RFI) process is extremely valuable. The initial step of having an RFI and indus- try meetings BEFORE the RFP is finalized helps both the contractor and agency to have a more successful process. The agency obtains input from contractors regarding potential elements of the scope of service and contractors gain clarity on what is most important to the agency. • A workshop held by the agency to explain their goals is important. Questions are not answered in many pre-bid meetings. An open workshop that would allow for dialogue before writing the RFP is key to success. A pre-RFP industry review has been useful to agencies and contractors. Contractors are not seeking “easy,” they are seeking clarity, specificity, equitable price/performance measures. • Other ideas: understanding what is working, what isn’t and why; a sense of where changes in the scope are a result of missed opportunities in the current contract; honesty about how much price is a consideration. This is useful feedback for transit agencies because meetings while the RFP is still in draft form are not typically included in the RFP process. Responding agencies that do convene such meet- ings report that the feedback from contractors is helpful. The second area involved a difference of opinion among transit agencies about how best to evaluate contractors. Is the proposed local team or the company’s experience more important? The survey asked contractors to offer their perspective on where the agency’s focus should be. As with the transit agencies, contractors had different opinions: five suggested greater attention to the company and two recommended a focus on the proposed local team. Those favoring greater attention to the company offered longer answers that identified issues faced by contractors in assembling a proposed local team. The following are verbatim answers from the contractor survey and solely represent the opinions of the respondents. • I think it is innovative for the agency to focus on the company process, procedures, training, culture, support, etc.—allowing for a wider range of talent to be considered once the agency selects the company Factor Important Very Important Evaluation criteria 0% 71% Clarity of RFP 43% 57% Agency reputation 43% 43% Familiarity with agency 43% 43% Need to find maintenance facility 43% 43% Incumbent contractor 14% 29% System size 43% 14% Source: Survey results Table 2. Ratings of factors affecting the decision to submit a bid. Elements that Encourage Elements that Discourage Quality and clarity of RFP Appropriate amount of lead time Agency provided facilities Openness to innovation Price heavily weighted Lack of current information or data in RFP Short lead time Short-term contract, especially if capital requirements are high Agency unwilling to negotiate either terms of contract or issues out of the control of the contractor Source: Survey results Table 3. Elements of an RFP that encourage or discourage bids.

40 Contracting Fixed-route Bus transit Service it wants to work with. The agency could outline in the RFP that all final management team selections have to be approved by the agency. • This is a legitimate issue. I think the current process makes it difficult to recruit good candidates from similar industries that could easily be trained to meet the agency’s requirements. This results in recycling, bait and switch and interim management issues. I do agree that agencies should focus on the competencies of the company and allow for interim management for a minimum period of time and then agree with their vendor on a formal selection and interview process as well as onboarding and training of the new management staff. Our company has a rigorous selection process that allows us to pick the best candidates for the long term health of the contract. When we are forced into short selection timeframes we may not be able to access the best candidate. One of my favorite phrases is hire slow and fire fast. We would like to hire slower. We would like to have a partnership and be allowed to develop talent through coaching and mentoring. • The RFP that did not ask for a specific management team was brilliant. We participated in one of those and the focus was on the proposed operational strategies. In addition, choosing the team was said to be a joint process between the agency and the contractor. Really demonstrates their willingness to be a true partner. These responses offer a different perspective for transit agencies to consider. What appears as a “bait and switch” approach reflects difficulties faced by contractors in assembling a qualified team on relatively short notice and/or keeping the team together through a long bid process. Contractor Assessment of the Contracting Process Contractors were asked the same question that was asked of transit agencies: “If you could change ONE aspect in the contracting process that your agency uses, what would you change?” Responses include: • Incentives along with liquidated damages; • Length of contract (longer contract preferred); • A minimum wage or reference to living wage indices for drivers; • No requirement to name the entire local team if the work will not start for at least six months; • Consistency in the weight of price in the evaluation criteria versus the extent to which price actually drives the decision to award; • Use of the RFI process to create dialogue between contractor and agency that improves the procurement process; and • Allowance in the RFP to renegotiate price based on significant changes in scope of work, economic factors, or fleet condition. Lessons Learned Contractors shared lessons learned that would be helpful for transit agencies in preparing an RFP and in the contracting process and procedures. These solely represent the opinions of contractor survey respondents. • Craft the provisions in the RFP to limit an adversarial relationship in the subsequent contract. Strive for clarity in terms and conditions in the RFP and resulting contract. Monitor contractor performance with a priority focus on safety and customer service. Consider the agency–contractor relationship as a partnership, with equal weighting for both penalties and incentives. Develop communications frame- work for constant updating and feedback, blending input from passengers, agency staff, contractor, and contractor employees. Work to leverage capital and operating funds for facilities and fleet that opti- mizes contractor competition. Cooperatively develop technologies in a holistic and complementary manner, using agency, vendor, and contractor expertise. Innovate using the RFP process to encour- age alternative approaches. Work towards longer term base contracts to allow service continuity and employee retention as well as employee development and succession planning, maintaining mutual contract termination language as needed. • Staff of contractor should play a large role in an RFP requirement—requiring a general manager (GM) that has 10 years of experience is not always a good thing. Commitment of corporate support by contractor.

Contractor assessment of the Contracting process 41 • Yes, it is very important that current wages and benefits for the current employees are disclosed, espe- cially when there is a labor agreement in place today. If not, then bidders are making guesses that could end up hurting the incumbent employees after contract award. It is important to both the agency and the incoming contractor to protect the incumbent employees and their experience going forward, so we actively work with the agency to try to ensure as much information as possible is out there for bid- ders. Agencies should make it mandatory that any labor agreement associated with their work should terminate at the same time as the contract. Anything else usually results in labor unrest not in the best interest of the agencies or the system passengers. • Be prepared to accept innovative alternatives—for example, be open to alternate fleet requirements that assure quality but reduce cost. To level the playing field and promote competition reduce inherent advantage for incumbent, for example, require incumbent to provide detailed labor information, require incumbent to give agency right to lease maintenance facility if they are not successful proposer, if there is a large team required give proposers access to lower level staff positions for recruitment. Include incen- tives as well as liquidated damages in the contract. Don’t overwhelm contractor with agency staff whose only mission is to find penalties to reduce agency cost. • Our company has talented manager candidates that are proven in other industries and verticals; how- ever, unless these candidates have experience in the exact scope of the contract, we are unable to bid them based on how agencies evaluate our credentials. Our industry has a huge challenge in talent; loosening experience requirements would help open up opportunities to unconventional yet talented candidates. On a similar note, if a proposal is due months before decision date, consider not request- ing to name managers. Holding a potential candidate for a period is nearly impossible and perpetu- ates the image that “bait and switch” drives candidate selection (versus the actual inability to hold on to viable candidates for that time period). Timelines for proposal responses are also an important factor in the quality of bid. If you provide your bidders adequate time to respond—and adequate time after questions are answered—the responses will be more thorough. The more information that can be provided about current state, future vision, and statistical information will help bidders to assess an opportunity and agencies are more likely to get more responses. • Best practices that I have seen include site visits for contractor at existing locations to understand how that vendor manages and operates its locations, fixed and variable based pricing methodologies, and value based contracting. If an agency is materially changing their operation, we suggest first going to an RFI and then to an RFP. RFIs help ensure that new ideas are incorporated and that vendor comments to major changes are received to ensure those changes can be properly implemented and managed. Final Thoughts At the end of the survey, we asked respondents: “Is there any other information you would like to share that could benefit transit systems that contract fixed-route service?” Contractors look for advance notice that an RFP will be issued, an emphasis on partnership with the transit agency, a willingness to entertain creative proposals, agency consideration of risk management and employee costs under a directly operated model in making the decision to contract, and a bid process based on revenue hours.