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.

42 Introduction Survey results provide an overview of transit agencies’ evaluations of their processes and issues in relation to contracting fixed-route bus service. After a review of these results, six agencies were chosen as case examples. Personnel directly involved with the contracting process were interviewed by telephone. The case examples provide additional details on the RFP process, challenges, lessons learned, and keys to success. The selection process for case examples had the following criteria: 1. Transit agencies of various sizes in different parts of North America, with a special emphasis on small agencies; 2. Agencies that have taken innovative approaches or faced significant challenges; and 3. Agencies that provided detailed survey responses and interesting observations. Over 85% of responding agencies offered to serve as a case example. The six case example cities and agencies are: • Denver, Colorado: Denver Regional Transportation District; • Lawrenceville, Georgia: Gwinnett County Transit; • Moorhead, Minnesota/Fargo, North Dakota: Metropolitan Area Transit; • Oceanside, California: North County Transit District; • Petaluma, California: Petaluma Transit; and • Woodbridge, Virginia: Potomac and Rappahannock Transportation Commission. A basic description of the transit agencies included in the case examples, including ridership, revenue hours of service, and peak bus requirements, has been developed from FY 2015 NTD reports and/or data provided by the agency (Table 4). The case example interviews explore issues raised by the survey responses in greater depth and provide a more complete view of the contracting process at the individual agency level. The opinions and findings presented in each case example are relevant for that transit agency and are not necessarily recommendations of this study. Denver Regional Transportation District, Denver, Colorado The Denver Regional Transportation District (RTD) provides public transportation in eight counties in the Denver metropolitan region. Its services include bus, rail, shuttles, Americans with Disabilities Act (ADA) paratransit services, demand responsive services (Call-n-Ride), C h a p t e r 6 Case Examples

Case examples 43 special event services, vanpools, and many more. According to the 2015 NTD data, RTD’s service area population is 2.876 million. RTD operates 482 buses directly and contracts for the operation of 372 buses in maximum service. Annual bus ridership in 2015 was 75.5 million. RFP Process RTD began to contract fixed-route bus service in response to a legislative mandate. The man- date originally required RTD to contract 20% of its service, later raised to 50%. The contracted service had to be geographically representative of the RTD service area; the agency could not contract only the low-productivity routes. The legislation has been changed from requiring a minimum amount of contracted service to establishing a cap of no more than 58%. RTD cur- rently has four contracts covering 45% of its fixed-route bus service, based on the benefits of contracting rather than on a mandate. The benefits of contracting include lower costs, flexibility to make modifications to service, learning best practices from the contractor, and identifying better ways to do things. Draw- backs are difficulty in quickly addressing service issues, contractual restrictions to making service changes, and perceived (by the public) lower quality of service. RTD has worked to eliminate this perception by ensuring that the level of performance is the same for directly operated and con- tracted services. The goal is that the customer not know who is operating the bus he/she is riding. The RFP process included a service monitoring format from the beginning. The format and the process have evolved. RTD includes a specific scope of work that lists all of the agency’s expectations regarding hiring, training, operations, maintenance, safety, and performance. In the early days of contracting, the scope of work required the contractor to provide the vehicles but did not go into detail. The result was school buses operating on contracted routes. RTD now provides the vehicles. The RFP process begins about 10 months before the contract award and at least 6 months before the RFP is released. RTD revises its RFP based on experience under the current contract and updated technology. There is a question-and-answer period before the bid date. Once bids are received, the evaluation panel reviews the proposals, interviews highly ranked bidders, and makes its recommendation to the RTD board of directors. Examples of major changes to the RFP (in addition to provision of vehicles by RTD) are dis- cussed in the following paragraphs. • Fare boxes. The contractor originally had the responsibility to maintain the fare boxes and count the money. After an issue with theft, RTD assumed responsibility for fare box maintenance, Agency Annual Bus Ridership Annual Bus Revenue Hours Number of Peak Vehicles Number of Contracted Peak Vehicles Denver Regional Transportation District 75,502,787 2,764,150 854 372 Gwinnett County Transit 1,557,543 107,007 59 59 Metropolitan Area Transit 459,288 28,899 8 8 North County Transit District 8,030,008 464,822 136 136 Petaluma Transit 373,949 18,620 8 8 Potomac and Rappahannock Transportation Commission 3,076,409 169,519 122 122 Source: FY 2015 NTD reports and agency data Table 4. Characteristics of case example agencies.

44 Contracting Fixed-route Bus transit Service and the contractor had only limited access to the fare boxes. RTD required camera systems and instituted other security measures. • Training. RTD provides 8 weeks of training for its own operators. Contractors in the early days would propose as few as 3 weeks of training for operators. RTD has expanded the required hours of training and required similar content in classroom training and behind-the-wheel training equivalent to its in-house program. • Technology. Operating and maintenance data had previously been self-reported. With the evolution of technology, the contractor is now required to enter all information into the RTD system. This provision makes it easy to track data and trends. • Collaborative efforts. Communication between RTD and its contractors regarding training programs has improved, and they now hold regularly scheduled meetings to ensure consis- tency and discuss any upcoming changes in training requirements owing to new equipment or technology. RTD’s street supervisors meet monthly with each contractor’s supervisors to discuss issues and procedures. A conference call occurs every week with maintenance per- sonnel for RTD and each contractor to keep everyone on the same page. These collaborative efforts are important in achieving seamless service regardless of operator throughout the RTD service area. RTD staff considered themselves the “experts” on transit service in the Denver area when contracting began, but it turns out that contractors know a lot. Contractors bring their experi- ence in different cities and at different agencies to the table, and this shared knowledge improves service provision on both the directly operated and contracted sides. Initially, RTD used a two-stage selection process to choose its contractors. The first phase evaluated the contractors with regard to their capability to operate service. RTD selected the low bid among the qualified contractors in the second phase. When problems occurred and con- tracts had to be terminated, RTD changed its evaluation procedures to include multiple factors, such as experience, understanding of the scope, and the proposed plan along with price. RTD includes liquidated damages in its contracts, and the RFP provides a detailed list of service elements subject to liquidated damages as well as standards for measuring performance. All radio communication is routed through the RTD dispatch center, allowing RTD to “see” what is happening in the field every day. All customer complaints are also received directly by RTD staff. Liquidated damages are issued on a daily basis. RTD holds monthly meetings with each contractor to discuss performance indicators. RTD also conducts a quarterly performance review with each of its contractors, examining factors such as miles between road calls, on-time performance, and customer complaints. The RTD Board establishes performance goals that apply to all service. As a result of the quarterly review, RTD may assess liquidated damages and/or grant performance bonuses. Incentives are provided only on a quarterly basis; there are no daily incentives. The RTD manager of competitive services and his staff prepare an annual schedule that details oversight activities. Staff members visit each division to check on eight or nine areas each month. A major review includes pullout checks, required paperwork to document training, review of accident reports, participation in a safety meeting (sometimes RTD identifies topics of discussion as appropriate), review of preventive maintenance, and evidence that bulletins are being distributed to operators and mechanics. All findings are entered into a master spread- sheet, and contractors are required to respond to deficiencies. In addition to these reviews, quality control staff from the RTD maintenance department conducts inspections and follows up on maintenance issues. RTD uses a third-party inspector to conduct a complete inspection of a sample of buses at each contractor’s location every quarter. An independent set of eyes is helpful in the oversight process.

Case examples 45 RTD staff also inspects buses from the customer perspective, looking at cleanliness, operator courtesy, announcements, and other factors that affect the customer’s ride. Secret riders, many with disabilities, ride directly operated and contracted bus routes. RTD supervisors are empow- ered to write up a contracted employee if they observe a violation in the field. RTD views the local contractor team, especially the general manager, operations manager, and maintenance manager, as critical to the success of operations. A good relationship with corporate staff is also important. RTD will often discuss issues with the contractor’s regional manager. Ultimately, building a team with both local and corporate staff enhances service delivery. Condition of the vehicles is a major issue in transitioning from one contractor to another. RTD specifies in its contracts that its quality control inspectors will identify problems beyond normal wear and tear that must be fixed by the outgoing contractor. The incoming contractor can add to this list as it begins operations in the field, and all parties will meet to decide on a course of action. The outgoing contractor must provide access to all employees, many of whom typically stay on with the incoming contractor. The incoming contractor must honor the collective bargaining agreement and offer the wages and benefits specified in the agreement. The outgoing contractor must also complete a check sheet summarizing all training records. Challenges RTD reports no major challenges in the contracting process and attributes this to the years of experience in refining the process and to its good relationships with its contractors. An issue that arose in its last contract that went out to bid is that the requirement that the contractor provide the facility appears to discourage bidders, according to informal communication with contractors who did not bid. RTD noted on the survey that this requirement is the one aspect of the contracting process that it might change. RTD and its contractors are experiencing an operator shortage, which the agency attributes to an aging population among its current operators and an increase in the minimum wage. The agency notes that millennials do not see driving as a career and that there appear to be fewer workers who take pride in serving the public. Lessons Learned RTD reports the following lessons learned: • Be specific in the scope of work regarding requirements and expectations. • Hold contractors to the same standard as the agency with regard to service quality and performance standards. • Establish and implement a good monitoring program. • Build a strong cooperative working relationship with your contractors. Contractor success equals agency success. • Do not be afraid to use metrics such as the number of buses per mechanic in the evaluation process. • Conduct reference checks on all bidders. These can be very informative. Keys to Success Keys to success as reported by RTD are provided here. • Crossing our t’s and dotting our i’s throughout the process. Attention to detail is critical to a successful contracting process. • Continuously improving the RFP. The agency started with a basic format and has adjusted it with each bid.

46 Contracting Fixed-route Bus transit Service • Establishing a relationship with the local and corporate teams that allows and even encourages honest discussion. As an example, the agency heard complaints about a local team from contractor employees in the course of oversight activities in the field and was able to discuss its concerns with the regional manager, who appreciated both the information and the non-confrontational approach. • Analyzing performance data on a regular basis, discussing this data with the contractors on a regular basis, tracking trends, and not allowing a problem to go unresolved. Once contractor performance deteriorates, it is very difficult to get it back to an acceptable level. Gwinnett County Transit, Lawrenceville, Georgia Gwinnett County Transit (GCT) operates local bus service in Gwinnett County and express bus service to and from Atlanta. According to the 2015 NTD data, GCT’s service area popula- tion is 895,823. GCT contracts for the operation of all 59 buses in maximum service. Annual bus ridership in 2015 was 975,454 on local bus and 582,089 on express bus. RFP Process The last procurement was done jointly with a state agency that operates express service to/from Atlanta. The contractor operates all GCT service and about 40% of the state agency’s service out of what was GCT’s facility. As a county agency, GCT follows county policy that no service agree- ment can be more than 1 year in duration. GCT requests fixed-route pricing for 5 years, but the contract is structured for 1 year with four additional 1-year options. The positive aspects of contracting are transferring risk to the contractor and lower costs. The down side is that the agency is at arm’s length from operations. A solid oversight pro- cess in which all parties know what is being measured mitigates this negative aspect of contracting. Accidents and incidents are the biggest risk assumed by the contractor. GCT is indemnified, and its contractor handles all the insurance requirements. The transit agency provides the vehicles because it can purchase them with federal funding. As an agency with fewer than 100 buses and a metropolitan area population of over 200,000, GCT can flex the equivalent capital expense for operating expenses when the contractor provides the facility. The agency understands that contractors consider price, politics, people, and proposal when making the decision to bid on an RFP. It is important that the evaluation team under- stands that comparisons between bidders are not strictly apples to apples. For example, train- ing programs may appear similar, but one bidder may require 60 h of training and another 180 h. It is crucial that the transit agency state its goals and values and communicate what is important in the RFP. The next contract may include performance incentives; the current contract has liquidated damages but no performance incentives. GCT offered several observations on liquidated dam- ages, as described here. • In a sense, liquidated damages are a necessary evil: the agency wants service, not money, but money is the surest way to get the contractor’s attention. • Consistency in how the agency assesses liquidated damages is important. If the contractor responds with a viable improvement program, GCT may adjust the dollar amount. • Under the previous contract, liquidated damages were not well used, and there were numer- ous contract violations. At the beginning of the new contract, GCT assessed liquidated

Case examples 47 damages for the most important items. This approach emphasized that, although contract compliance is important, the agency wants the contractor to succeed. Long lists of liquidated damages were contrary to this approach. Select application of liquidated damages resulted in an increase of more than 10 percentage points in on-time performance. • Setting clear expectations is the key to contract oversight. To this end, GCT is developing a compliance tool that defines what the agency checks and when. Prior oversight efforts were limited because of the small size of the agency staff. New technology is coming online that will help in this area. • Although corporate support is important, the national contractors are beginning to become more alike. At the end of the day the local team has the biggest impact on the success of the contract. GCT contracts for operations and maintenance (O&M), which is the standard approach in the United States. O&M contracts save the transit agency money by transfer of risk to the contractor and by the contractor’s pay scale typically being lower than in the public sector. A management contract (sometimes required by the state) can bring in expertise unavailable at the local level but does not generate savings. Complete contracts such as in New Orleans and Nassau County, New York, are public–private partnerships in which the contractor assumes all responsibility for service provision, procurement, and compliance. These contracts provide more levers to gener- ate savings through service design, fare policy, and procurement policies. Challenges GCT reports its major challenge in the contracting process is the “loss” of control over day- to-day operation. It helps if both parties are thoroughly familiar with the contracting terms and if the entity writing the contract makes sure it is thorough enough to cover acceptable baseline service delivery but with enough flexibility to grow and adjust the service as needed. Equally important is that the agency responsible for contract oversight does its part. The best contracts are a partnership and not a “gotcha” game. If GCT could change one aspect of the contracting process, it might have proposed a phased approach to joint contracting with a state agency for transportation services. The state agency was switching from a management contract model to an O&M contract model. In retrospect, it may have been easier for the state agency to switch to its new contract model and then work together with GCT for a joint O&M contract. There is a transition period when agencies change contracting models as the staff changes how they work with the contractor. The contract is less than 6 months old, and the process is already improving as it becomes more routine. Changing contracting models and doing a joint procurement creates challenges for all parties. Lessons Learned GCT reports the following lessons learned. • Develop an RFP that clearly defines expectations and rules. • When issues arise, make notes in the contract about things to change in the next RFP before you forget. • Develop a network of peers and contractors to review the draft RFP before its release. This helps to identify areas of potential risk that may drive up the cost unnecessarily. For example, if the RFP requires the contractor to pay for fuel but has no inflator factor, the contractor will incorporate all the risk in its proposal price. • Don’t over-promise. For example, if your agency is not sure it will replace vehicles in the next fiscal year then do not include new vehicles as a given in your RFP, because bidders will assume lower mainte- nance costs in their pricing. It is always easier to adjust budget and costs downward with the contractor if and when new vehicles arrive than to have the contractor request additional funding owing to higher than anticipated maintenance costs if vehicles are not replaced.

48 Contracting Fixed-route Bus transit Service • Ensure frequent and clear communication between the contractor and the agency. This helps everyone to understand the goals of the agency and concerns on both sides. When both parties have a better understanding of the challenges and opportunities, contract management is smoother and in the end the transit customer enjoys better service on the street. Keys to Success GCT reports the following keys to success. • A good solid RFP that clearly communicates expectations. • Constant communication throughout the life of the contract. • The contractor as your partner. This approach opens the door to big improvements in service delivery. Metropolitan Area Transit, Moorhead, Minnesota/Fargo, North Dakota Metropolitan Area Transit (MATBUS) is the public transportation system serving the com- munities of Fargo and West Fargo, North Dakota, and Moorhead and Dilworth, Minnesota. According to the 2015 NTD data, its service area population on the Minnesota side of the river is 45,025. MATBUS contracts for the operation of all eight fixed-route buses in maximum service. Annual fixed-route ridership in 2015 was 459,288. RFP Process Driver seniority and wages are particularly important in the RFP development process. The agency uses pay schedules and wage studies in the area to set a minimum wage for drivers. An exhibit in the RFP specifies the minimum salary by year (for operators, not for supervisors and other managerial personnel), the percentage of health insurance premium that the contractor will pay, and the cash value paid to an employee who chooses to forego health insurance. The RFP also invites the contractor to propose ideas, especially in the technology realm. In evaluating proposals, MATBUS views the proposed local team as more important than corporate support because it will rely on the expertise of the local team in day-to-day opera- tions. Over the years, the agency has seen a difference in general managers in terms of attention to corporate versus local needs. The agency insures the vehicles. There is an accident review committee (MATBUS and the contractor) that reviews accidents to assess fault. If the accident is deemed preventable, the agency will assess a fine from $500 to $5,000. This encourages safety. Committee meetings are helpful in identifying and recommending technology useful in reducing accidents. The agency has installed backup cameras in response to a committee recommendation. Safety is important to the agency and is included as a selection criterion worth 15% of a bid- der’s overall score. The agency requires the contractor to hold monthly safety meetings with staff participation and will sometimes provide topics. Customer service is also a major focus. All employees go through an ambassador training program, providing guidance on issues such as when to deflect issues back to the administration

Case examples 49 as opposed to arguing with riders. The agency has an app and a web page and will direct callers to these. Training provides customer-friendly phrases to use, with the approach of giving tools to the customer. MATBUS coordinates with local policy and security to address loitering issues at transfer facilities. The agency provides uniforms for bus operators and emphasizes that everyone is a MATBUS employee. Contractor logos and union jackets are not acceptable attire while workers on the job at MATBUS. The agency also provides computer equipment, supplies, and the facility for the contractor. This benefits the agency in terms of clearly defined ownership and also benefits the contractor in terms of reduced requirements. MATBUS changed contractors in 2007, when it issued a joint RFP for contracting services with its neighboring system in Fargo, North Dakota. The incumbent in Fargo was selected, and the transition was reasonably smooth. The process of working together has been phased in over the years. Each agency manages its own system, with a joint power agreement to share costs. A minor complication is that the agencies are in different states and different FTA regions. Challenges MATBUS reported its major challenge in the contracting process as making sure that the price proposed maintains driver seniority and wages. The agency dictates the minimum wages that must be paid and provides a seniority list by dates of hire. One disadvantage of contracting is a lack of control in training. The contractor uses its national training program, but local policies and procedures are not necessarily covered. MATBUS requires operators to pass a test on local policies and procedures, asking questions about how to enter discount fares on the fare box, are stops allowed in a right-turn lane, and other local topics. Turnover, a huge issue for the agency, creates a need for good training materials. Lessons Learned MATBUS reports the following lessons learned. • Include detailed spreadsheets in the RFP so the agency can check that bidders are addressing everything that needs addressing and can understand the overhead cost of each bidder. This minimizes requests for change orders by the contractor. • Do the work at the outset to get the RFP to where it needs to be, then clean it up as you go. • Dictate minimum wages for drivers and dispatchers, as well as benefits. Review the benefit package and require they honor seniority and hire all current drivers and dispatchers under a one-year pro- bationary period. • Review and pre-approve training programs and require a timetable and curriculum for each position. • Require that you interview all management staff and approve prior to hiring to fill positions. • Monitoring the contract is important but is difficult for a small transit agency with few staff. MATBUS wrestles with this issue at budget time every year. Do we add more people to provide the service or do we strengthen our oversight? There are weekly meetings with management on both sides to review policy and assign issues for resolution. • Have a process to address customer complaints. Agency staff downloads and reviews what the on- board camera captures, then the process is automated using MS SharePoint to distribute complaints and monitor the stages of response, from “received” to “investigated” to “completed.” The contractor has access only to what they need in the automated system. • Decide how much technology is operated by the contractor versus the agency. The app needs to work always. Technology is a big challenge for a small agency. There is still not enough staff to manage all the technology it wants to manage.

50 Contracting Fixed-route Bus transit Service Keys to Success MATBUS reports the following keys to success. • A long-term approach. Both sides are committed to the contracting relationship. • Fairness. This applies to the selection process as well as to the ongoing working relationship within the boundaries set by the contract. • Agency-provided facilities and equipment. This improves and simplifies the process for both sides. • Team approach. Contracting is not all about penalties and fines. The team approach can be applied in surprising ways. One new GM on the contracting side brought a very adversarial approach and wanted to fire his entire administrative staff. MATBUS reminded him that your team is our team. Firing the entire team means losing all institutional knowledge; until the new GM knows the operation, including technology, procedures, and forms, such drastic measures should not be taken. • Co-location. The agency and contractor are in the same building, enabling communication and creating a friendlier atmosphere. North County Transit District, Oceanside, California North County Transit District (NCTD) is a multimodal transit agency serving northern San Diego County, California. According to the 2015 NTD data, its service area population is 849,420. NCTD contracts for the operation of all 136 buses in maximum service. Annual bus ridership in 2015 was 8.03 million. RFP Process It helps to start the RFP process early; one year ahead of issuing the RFP may not be enough time. On NCTD’s last contract, few staff members were available to help because several positions were being outsourced, so preparation of the RFP was a much more intensive effort. A robust RFP is always desirable, but if limited staff are working on it, it will take quite a while to develop or will not be robust. Allow time for all leadership of the agency to review the RFP to ensure they all have a hand in drafting sections that pertain to them. Even though the contract is for O&M of fixed-route and paratransit buses, every single department at NCTD has ties to that contract in one way or another. In the RFP process, all department leads need to be onboard with the sections that pertain to them to make sure they know what is in the RFP and that it meets their needs. The positive aspect of contracting is lower costs. Diminished quality of service, loss of a sense of ownership on the part of bus operators and maintenance staff, and the need for extensive oversight are negative aspects of contracting. Transferring risk to the contractor happens through indemnification and insurance require- ments. The agency has gone back and forth on the insurance issue: if the contractor is responsi- ble for insurance, it will mark up the cost. NCTD is still finding the balance on this issue. Because NCTD owns the transit centers, it has some exposure. NCTD avoids underbidding by ensuring that its scope of work is prescriptive and clear. It defines “key personnel” as every member of the management team and describes the required management structure. The bidders follow this structure, but some have suggested fewer hourly employees. One issue in the most recent procurement was that there were too many unknowns on the facility side.

Case examples 51 An agency can take two approaches: define minimum staffing or define the contract as performance based. The minimum staffing approach always opens the door to requests for additional staff. In its first contract, NCTD did not make it clear that the contract was perfor- mance based. Subsequent contracts clarified this. There appears to be a move away from time and materials to performance-based contracts. NCTD provides detailed cost forms with its RFP, asking for salary/overhead by staff person. The cost of living is high in its service area, so the detailed information on salaries helps NCTD to estimate turnover rates. Liquidated damages are challenging in the sense of finding the right level of encouraging good performance without discouraging the contractor. There are also cases where the agency knows that if the contractor does not do X it will hurt the agency, but it is difficult to quan- tify for FTA. An argument against bonuses is “why incentivize the contractor to do what the agency pays them to do?” Experience is a great teacher. NCTD underestimated the need for oversight early on, then realized that it is not a perfect world and created a defined oversight plan. The plan describes procedures, documentation requirements, use of technology to monitor performance, fuel management, pretrip procedures, and required contractor management information systems (MIS). Four specific procedures are defined for what NCTD will check by day/week/month/ quarter. NCTD issues a monthly report card. One lesson is that contractor-reported data need to be validated, no matter how time consuming the validation process is. In its most recent contract, NCTD has brought as much technology in-house as possible. The contractor is still allowed to use its MIS system but must provide the agency with links to key elements. Other agencies that have contacted NCTD for advice adapted this oversight plan to their contracted operations. NCTD’s evaluation process was detailed, with between three and ten subsets within each category to be scored. Evaluation criteria included corporate experience, experience of the pro- posed local team, description of a “typical day,” price, and safety and security plans. NCTD asked for samples of safety and security plans as well as maintenance plans. Five staff members were the primary members of the evaluation committee. Each scored the proposals independently, and then the evaluation committee conferenced for a week to go over all of the scores. All of the scores were in the 55% to 65% range, leaving some room at the top to reward proposers who went above and beyond the minimum requirements. Interviews with bidders and BAFOs led to final revised scores and a selection based on those scores. The agency also has a limited pool of persons with operations experience to draw from in establishing the evaluation committee. The local team and corporate experience were rated equally. NCTD notes that the local team needs to have decision-making authority. The agency has much more of a relationship with the local team, based on day-to-day experience, with the result that the local team is the real agency partner. NCTD states in its RFP that key members of the local team cannot be reassigned within a certain number of years. It has had little turnover under its current contact, with the exception of the general manager and maintenance manager positions. Part of the evaluation process is an assessment of whether the local team is the right fit, and the likelihood that the local team members will stay. The evaluation process also considers the level of support from the regional level. The local team needs the authority to make decisions, but the resources normally come from corporate. Challenges NCTD did not list any major challenges in the contracting process. The agency attributes this to a mature contracting approach that has evolved over 25+ years with four different providers.

52 Contracting Fixed-route Bus transit Service If NCTD could change one aspect of the contracting process, the agency would provide as much information as possible in its RFP to help in preparing proposals and ensuring complete understanding of complexities, challenges, and expectations. Its RFPs have evolved over the years in this direction. Lessons Learned NCTD reports the following lessons learned. • Get input from many different departments in developing the scope of work. Take the time to meet regularly with each department and get feedback and direction to ensure the scope of work is complete. Allow plenty of time in the procurement schedule to obtain internal feedback. Under recently adopted provisions at the state level, NCTD needs to allow for Caltrans review and approval. • Allow time also for reviews by peer agencies and potential bidders. They will be able to point out flaws in thinking or mistakes and identify elements that could increase the price without necessarily adding benefit to the agency. Use the results of these reviews to strengthen the scope or work and to “de-scope” the RFP as needed. • Establish a small dedicated team working on nothing but the SOW [scope of work] to ensure its completeness. • Develop a very detailed cost sheet—it cannot be long enough. Be as descriptive as possible. Specify where a bidder can and cannot add lines. • Take the time to build an oversight plan and make sure you include all of the requirements of the scope of work. Multiply your first estimate of required oversight by a factor of ten. Once the contract is awarded, oversight is a must from a federal audit standpoint and especially from a safety standpoint. It makes no sense to ask the contractor to do something that you are paying for without a clear means to check that it is being done correctly. • Get a price for anything that could possibly be required in the RFP. This avoids disputes down the road. • Make sure schedule estimates are accurate and do not underestimate the time required to complete. • Decide the agency’s liquidated damages policy. Every bidder in the last procurement requested an offset to liquidated damages. Keys to Success NCTD reports the following keys to success. • A good scope of work. Do your homework and be as clear as possible regarding agency and contractor responsibilities. • Tools to hold the contractor accountable. Oversight is critical. • A plan to retain key employees. Strong technical people who understand all aspects of scheduling and maintenance are needed within the agency. Petaluma Transit, Petaluma, California Petaluma Transit operates transit service in and around the city of Petaluma, California. According to the 2015 NTD data, its service area population is 59,953. Petaluma Transit con- tracts for the operation of all eight fixed-route buses in maximum service. Annual fixed-route ridership in 2015 was 373,949. RFP Process The evaluation process needs to consider both the local team and the national company. The agency will be working with the local team, so it is appropriate to put more weight on the qualifications and abilities of the proposed local staff. In evaluating the parent company,

Case examples 53 it is important to consider if other resources are readily available below the national level (e.g., if it has other fixed-route contracts at nearby agencies). Price was weighted equally with experience and references, followed by technical capacity of the contractor. The City used innovation as a final criterion, with interest in new technologies that the contractor can bring to the agency. Successful transfer of risk is an important benefit of contracting. How and where does the agency draw the line on pushing risk to contractors? First, make the contract as detailed as pos- sible to clarify the agency’s expectations. This will typically increase costs, but bidders will have a greater understanding of agency goals. The “wiggle room” clause defining the level of change in service that will trigger a renegotiation is important. If the level is set at 10%, it is easy for small operators to exceed, especially if funding changes. If it is set at 20%, bidders may balk because this introduces too much uncertainty. Finally, include high insurance requirements to protect the agency, at least $10 million per occurrence. Insurance is the front line of risk management. If the contractor has to pay, this incentivizes safety. Underbidding can occur. There are ways to guard against this. In developing the RFP, use peer RFPs as a starting point, then adapt to your specific circumstances to develop a strong RFP. Prepare a detailed bid form asking for extensive information on costs and cost per position. This establishes the agency’s expectations and provides a sound means of comparison among bid- ders. The agency can see where proposed costs are below expectations and discuss with bidders. Contact references. Although some individuals may be reluctant to speak honestly, an agency can still get a good sense of satisfaction with contractor performance. Bonuses and penalties or liquidated damages are great in theory. Questions about who is the referee, who gets to decide, and how penalties are enforced bedevil small transit agencies. Tech- nological advances such as AVL systems provide an objective way to measure elements such as on-time performance. If an agency decides to include liquidated damages and bonuses, state in the contract that AVL data will be used to assess performance. Do not use liquidated damages and bonuses on any item that cannot be measured. Be willing to work with your contractor. The agency’s current contractor was overextended, owing to the length of the contract (7 years) and changes in funding levels as the region came out of the recession. Proposed staffing levels were based on the existing service level at the time of the bid. The skeleton crew from the bid model was not able to handle the demands when service increased. Petaluma Transit recognized the problem, approached the contrac- tor regarding expected cost per line item, and negotiated two additional positions (dispatcher/ supervisor and maintenance). The agency has not experienced a transition in contractors. In anticipation of a possible tran- sition, Petaluma Transit began the RFP process with enough lead time to allow for a transition. Oversight is a glass half full. All the technological “toys” make it easier for an agency to manage the contract by providing objective measures of performance. The agency needs a staff person to manage and oversee the contract; otherwise, complaint-driven management will result. If the frontline customer service representatives work for the contractor, it is unlikely that the agency will get a true count of complaints. Customer service staff should always be in-house for this reason. Ideally, the agency would have one FTE position dedicated to contract management. Challenges Low wages and poor benefits are a huge issue. Northern California is an expensive area in which to live. The number of transit agencies in the Bay Area creates a strong market for

54 Contracting Fixed-route Bus transit Service bus operators, resulting in lots of turnover. This creates a need for ongoing training, and the agency is so small that road supervisors conduct the training, which leaves no super- vision on the street. Turnover also makes it difficult for the rider–operator relationship to develop or be sustained. The current contract does not have a floor for wages. The collective bargaining agreement covers all employees except dispatchers and supervisors. Even so, wages are between $5 and $7 lower than those of neighboring agencies. No contractor offers good benefits. One way to mitigate the low wage issue is to require a plan for decent wage increases as part of all proposals. This can increase operator retention, especially when combined with an agency emphasis on safety and a positive working environment. The City recently passed a living wage ordinance that covers nonunion employees, and this helps to retain good workers. Lessons Learned Petaluma Transit reports the following lessons learned. • Pay the deadhead. If the contract is based only on revenue hours, the risk is on contractor if something changes. Paying deadhead hours will result in a better price and increase the contractor’s comfort. • To encourage bidding, court the industry. There are several means to do this: – Go to conferences. – Make contact with contractors and let them know when RFP is coming out. – Make it clear that the agency is not wed to its current contractor and is willing to make a switch. – Offer the opportunity to visit prior to release of RFP to get the tour. Only two or three may take you up on it, but it shows the agency’s interest in attracting firms to bid. All these actions make it clear to contractors that the agency will take a good proposal seriously. • Consider handling parts as a pass-through with no markup, or clarify that the agency will purchase all or most of what is needed. Either option will make the contract as close to a pure “labor contract” as possible. Keys to Success Petaluma Transit reports the following keys to success. • An awareness that low wages and poor benefits will increase turnover. The City’s living wage ordi- nance has helped in this regard, along with a plan for decent wage increases. This can increase operator retention, especially combined with an agency emphasis on safety and a positive working environment. • Willingness to take time in developing the RFP to ensure that it clearly communicates agency goals, solicits detailed cost proposals, and provides sufficient lead time in the event of a transition of contractors. • A commitment to work with our contractor as problems arise. Potomac and Rappahannock Transportation Commission, Woodbridge, Virginia Potomac and Rappahannock Transportation Commission (PRTC) is a multijurisdictional agency representing three counties and three cities in Virginia about 25 to 50 mi southwest of Washington, D.C. PRTC provides commuter bus service along the busy I-95 and I-66 corridors to points north and local bus services in Prince William County and the cities of Manassas and Manassas Park. According to the 2015 NTD data, the agency’s service area population is 454,096. PRTC contracts for the operation of all 36 local buses and 86 commuter buses in

Case examples 55 maximum service. Annual bus ridership in 2015 was 1.42 million on local bus and 1.66 million on commuter bus. RFP Process Over many years, PRTC has developed and refined its RFP to provide as much information as possible. In the most recent RFP, the agency specifically stated the number of staff needed by position (except for bus operators, which depends on the runcut). Potential bidders could clearly see what they needed to provide. The primary positive aspect of contracting is flexibility in changing service size without regard for the consequences of hiring/terminating employees. Lack of control, inability to have the con- tractor “own” the service, poor service quality, poor vehicle maintenance, and extreme operator turnover were significant issues in the early years of contracting. PRTC refined its RFPs over the years to address these issues. As an example, PRTC does all dispatching in-house. The agency needed more information than the contractor would provide. Keeping the dispatching function in-house may not be so important with the advent of new technologies. The big-ticket items are the source of risk. PRTC takes a three-part approach. 1. Agency pays for fuel. This removes significant risk/uncertainty from the contractor. The agency pays for it one way or another. PRTC has programs to ensure that fuel is not being wasted. 2. Agency owns its vehicles and facility. Fleet monitoring is important under this approach because the contractor maintains the vehicles. PRTC hires an independent contractor to audit one-third of the fleet every 4 months and tracks other indicators on an ongoing basis. Although PRTC’s approach may not work for all agencies, it is critical that periodic fleet monitoring is conducted and that a detailed fleet report is prepared to document fleet condi- tion before the end of the contract. 3. Agency negotiates the unforeseen. Especially under long contracts, things change. In the last contract, insurance costs skyrocketed through no fault of the contractor. PRTC negotiated a change order with the contractor regarding this item. PRTC was one of the first transit agencies to move toward a longer 10-year contract. The cur- rent contract is structured as a 3-year contract plus seven annual options that can be combined if it is in the agency’s best interest. With more complicated contracts and a more involved agency, longer contracts are the best choice. Underbidding can be avoided by owning all equipment, specifying positions and personnel levels in the RFP, and being absolutely clear on responsibilities and expectations. PRTC prepares massive appendices to the RFP, including the most recent vehicle audit and the warranties for every item on the vehicles. Liquidated damages (or “contractor deductions,” the preferred term for FTA) are needed to protect the agency, but they need to be fair. PRTC will levy liquidated damages and, if it is not a safety issue, provide the contractor the opportunity to address and correct the situation. If the contractor corrects the situation within 1 business day, the agency waives the liquidated damages; if correction takes place within 2 business days, two-thirds is waived; and one-third is waived if correction occurs by the third business day. Each quarter, the net liquidated dam- ages assessed are compared with the amount assessed for the prior quarter. If the amount has decreased, the agency returns the difference to the contractor. The contractor can also earn back as much as half of the amount collected at the end of the year, based upon performance over

56 Contracting Fixed-route Bus transit Service the year. An example of PRTC’s ever-evolving contracting approach is the agency’s handling of inadequate bus operator staffing; initially, such liquidated damages qualified for monthly and quarterly earn-backs. However, after years of improving and declining cycles, PRTC exempted such liquidated earnings from quarterly earn-back eligibility. PRTC suggests that the need for a fair approach to liquidated damages is learned only through experience. Oversight is provided by a dedicated staff of bus monitors who ride with operators at regular intervals, supplemented by specific checks, as needed. New technologies provide useful data for oversight. Contractor safety and training staff also ride with bus operators; PRTC does not assess liquidated damages for infractions reported by contractor staff to encourage honest assessments. Additionally, because PRTC retained the dispatching function in-house, the agency is essentially monitoring most other system elements all the time. The agency created a bus service operat- ing procedures manual that is included in its RFPs. This helps to ensure consistency even in the event of high staff turnover. In evaluating proposals, PRTC views the proposed local team in light of its minimum stan- dards for certain positions. The on-site team, especially the proposed general manager, is critical. Each individual proposed for a key personnel position is required to sign a contract with the contractor stating they will forego other opportunities within the contractor’s organization for at least one year from the contract start date, unless PRTC agrees to allow a change or requests a replacement. When members of the local team leave for other jobs, PRTC reserves the right to review and reject replacement candidates. Challenges PRTC has faced a wide variety of challenge in its 25+ years contracting with four different pro- viders, thus it did not name any specific major challenges in the contracting process. The agency attributes this to a mature contracting approach that has evolved over time with a commitment to not repeat past mistakes and oversights. If PRTC were to make one single recommendation, it would be to provide as much informa- tion as possible in its RFP to help in preparing proposals and ensuring complete understanding of complexities, challenges, and expectations. Its RFPs have evolved over the years in this direction. Lessons Learned PRTC reports the following lessons learned. • Build your RFP based on a good RFP from your peers, and tailor it to your own situation. • Continuously track issues with contracting and address them through discussion/development of action plans, use of liquidated damages, and change orders. Then modify subsequent procurement documents accordingly. • With the agency’s long history of contracting, it was confident that it knew what resources were neces- sary on the contractor’s part; therefore, its most recent RFP required all vendors to propose the same number and composition of management, maintenance, administrative, supervision, and support personnel to prevent low-ball, naive bids. Keys to Success PRTC reports the following keys to success. • Consistency. Communicate with the contractor, hold them responsible, and make notes of what went wrong and incorporate it into the next contract. • A decent package for the workers. Get the perspective of bus operators, trainers, and supervisors. Beyond the numbers in the package, make the agency a place where they want to work and stay.

Case examples 57 Postscript During the course of this study, PRTC named a new executive director who brings a differ- ent contracting philosophy to the agency. The current model defines the role of the contrac- tor in a lengthy RFP. The new executive director favors a more descriptive approach that is mission oriented as opposed to role driven. Under this approach, the agency defines its goals and the desired quality of service, and potential contractors rely on their extensive experience to identify potential innovations that can help the agency reach its goals. In today’s world of rapidly changing transit technology, this approach taps the broader technological experience of contractors to enhance the day-to-day operation of the transit system. Although this case example defines how PRTC has historically approached contracting, future contracting efforts will use a different approach.