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Privatization in mass transit :
an issue paper /
prepared by Center for Urban Transportation Research, College of Engineering, University of South Florida.
[Tampa, Fla. :
University of South Florida, Center for Urban Transportation Research,
18 leaves ;
"January 21, 1993."
"Prepared for the Florida Department of Transportation Public Transit Office."
Also issued online.
University of South Florida.
Center for Urban Transportation Research.
t Center for Urban Transportation Research Publications [USF].
y USF ONLINE ACCESS
PRIVATIZATION IN MASS TRANSIT An Issue Paper Prepared for the Florida Department of Transportation Public Transit Office Prepared by: Center for Urban Transportation Research College of Engineering University of South Florida January 21, 1993
PRIVATIZATION IN MASS TRANSIT An Issue Paper for the Flor ida Department of Transportation INTRODUCTION The purpose of this issue paper is to review the overall status and direc tion of the two-year transit privatization study be ing conducted by CUIR for t he Florida Department of Tran sp ort ation The two tec hnical memoranda prepared as part of this project bave resulted in a n extensive rev iew of the issues associated with the use o f privatization in the transit industry. Technical Memorandum # 1 provided an overview of privatization in the tran sit industry and i ncluded the following sections: Privatization Defined Gover nment Role in Transit Privatization The T ransit Privatization Debate Inven t ory of Transit Priva t ization Activities The Contracting Decision Summary Technical Memorandum #2 reviewed t he status and characteristics of transit privat iza tio n in Florida and the United States and included the following sections: Extent and Performance of Purchased Transportation Privatization Legislation Non-Florida Transit System Privatization Init iatives Florida Transit System Privatization Initiatives Identification of Privatization Issues The most important result of the research conducted in these two technical memoranda was the identification of privatization iss ues that should be addressed in the process of implementing privatization initiatives. The information presente d in Technical Memoranda #1 and #2 indicates that Tasks 1-3 and a significant portion of Tasks 5-7 (as currently structured) have been successfully completed. As a reminder, the task titles are reiterated below: 1
Task 1 : Overview of Privatization i n Public Transit T ask 2: Describe P r ivat i zation Efforts Nationally. Task 3: Describe Privat i zat ion Efforts in Florida. Task 4: Refine Project Direction and Subsequent Task Structure. Task 5: Evaluate and Analyze Privatization Efforts in Florida Task 6 : Compa r e Florida Results With National Results. Task 7 : Findings on Privatiza t ion St r ategies for Florida At this point in the project CUTR believes tha t a sufficient amount of researc h bas been conducted and t hat subsequent efforts should be directed toward addressing selected issues more thoroughly and toward determining and implementing activities regarding privatization that will be of the grea t est be n efit to the transit i ndustry in Florida. As a r esult, it is recomme n ded that th e subseque n t task structure be revise d to reflec t a more decision and im plementation-ori e nted approach. S u bsequent tasks shou l d be structured to reflect the outcome of our discussions regarding this i ssue paper. The re m ainde r of this issue paper includes a series of one page proposa l s categorized into two maj o r areas, researc h ori e ntation and service orientat ion. The intent of this effort is to provide FOOT with opt ions to review and ultima t ely select for inclus i o n in a r e vised task strucrure. It is clear that it is not withi n the scope or budge t for CUTR to implement all ideas presented in this issue paper. FOOT and CUTR will jointly select a n umber of id e as that woul d be mos t useful for assisting Florida's transit indus t ry in tbe area of transit privatization. 2
SUMMARY OF POTENTIAL TASKS FOR IMPLEMENTATION A list of potential tasks for subsequent implemen tat ion is provided below. The tasks are distrib uted among two major categories, research orientation and service orientation. A one-pa ge discuss ion of each of the proposals is provided following the Jist below. Research Orientation 1. Research the implications of privatization on transit labor. 2. Prepare an application for a federal privatization demonstration grant. 3 Research the privatization issues identified as specific to Florida. 4. Prepare a short report recommending specific legislative ini t iadves that FDOT could undertake to encourage and facilitate transit privatization efforts. Service Orientation 1. Develop sample requests for proposals (RFPs) and contracts. 2. Organize a statewide transit privatization conference. 3. Sponsor, coordinate, and teach workshops on selected privati za tion issues. 4. Prep are a directory of private firms willing to respond to RFPs for various transit services (statewide directory). 5. Prepare a transit privatization handbook. 6. Publish a Florida Department of Transportation tra ns it privatiza tion news letter. 7. Create a clearinghouse for the dissemination of privatization information (similar to TMA Clearinghouse). 8. Develop a publicly sponsored/privately operated vanpool promotion program. 3
RESEARCH ORIENTATION 4
1. Research additional detail concerning the implications of privaJization on transit labor. The implicat ions of privatization on transit labor is arguably the most important issue in t h e decision to contract transit operations. It is proposed that a d etailed report be prepared that outlines and discusses these implications. In particular, Section 13(c) of the Urban Mass Transportation Act of 1964 would be thoroughly reviewed, along with existing literature concerning this issue. This would erthance the overall understanding of its role in the decision to contract transit services. In particular, the report will review case studies of h ow transit systems across the country have resolved this issue in the process of implementing privatization initiatives. In summary, Section.13(c) mandates that "it shall be a condition of any assistance ... of this Act that fair and equitable arrangements are made, ... to pro tect the interests of employees affe cted by such assistance." The terms and conditions related to compliance with this mandate must be included in the trans it service contract. This includes provisions for: rights p r ivileges and benefits under existing collective bargaining agreements; continuation of collective bargaining rights; protection of individual employees against worsening of t h eir positions with respect to employment; assurances of employment to employees of acquired mass transportation systems and priority reemployment of employees terminated or laid off. paid training or retraining programs. It is propose d that a report be prepared that presents and discusses the transit labor issues associated with privatization. The document would identify mechanisms for the contracting of transit services while still complying with Section 13(c). These mechanisms will be identified primarily the use of case studies which describe how transit systems resolved this issue in the process of implementing priva ti z atio n initiatives. 5
2 Prepare application for a federal prl.iatization demonstration granL CUTR woul d investigate all privatization prog rams administered by the Federal Transit Administration, particula rl y those run by the Office of Private Sector Initiatives. Based on this inves t igation, CUI'R would prepare a brief memorandum summarizing the programs a n d recommending whether FOOT should seek a grant award through any of the programs. If a demonstration grant application is recommended, the memorandum would also sugge s t a process for selecting the site for t he demonstration I f determined to be appropriate and f easible, the Flo r ida Department of T r ansportation, with the assistance of CUTR, would submit a federal privatization demonwation grant application to the recommended program office. If the gra n t is awarded to FOOT, CUTR proposes to assist in the creation of a technical advisory committe e to hel p admi nister and monitor the d e monstration project. Given that severa l trans it privatization initiatives in Flo r ida ha ve been d i sappointing i t is apparent that a majority of existing transit system officials in Florida are hesitant to support further privatiza t io n efforts, particularly in t h e area of cont r acting fiXed-route operations. A widely-publicjzed, successful demonstratio n project may sig n ificantly contribute to Florida's transit officials becoming more open-minded to pri vatization alternatives. 6
3. Research additional details on the privatization issues identified as specific to Flcrida. Numerous issues were identified in Technica l Memorandum #2 that are specific to Florida's transit industry, such as the following: Could tourist markets be better served by mass transit services through the use of privat iza tion? Does Florida's el der ly population require different types of t ransit services that might be bette r provided by the p r ivate sector? Do the compensation differences betwee n the pub li c and private sectors for transit opera ti ons and maint enance i n Florida im pac t the potential and motivation to privatize? Is the c h arter bus service industry in Florida capable of responding t o requests for proposa l s for various t r ans i t services? Can private jit n eys be strategically used to enh a n ce t h e overall transportation system particularly in Miami? Is the modest transit usage in Flor ida relative to other parts of the country an important factor in the decision t o use privatization? It is proposed t h at CUlR analyze these Florida-specific issues in detail in a separate report for FDOT. The operating environment for Florida's transit systems is unique whe n compared to conventional transit systems in other parts of the United States. As a result, t h e private sector may be able to assist the public secto r in further developing some of the unique markets in Florida. 7
4. Prepare a shcrt report recommending specific legislative initiatives thai FDOT could undertake to encourage and facili!aJe transit privaJizaJion efforts. Legislative initiatives have been important mechanisms for enco ura ging and mandating privatization in the United States. The structure and content of privatization legislative initiatives are key factors in discouraging or facilitating the implementation of these efforts. Initiatives range from privatization mandates to general e nabling legis lat ion. An example of a mandate is observed in Colorado legislation, where t he Regional Transportation District (RTD) is required to contract at least 20 pe rcent of its bus s ervice as meas ured by the n umber of vehicle ho urs of service. An exa m p le of general enabling l'egislation is the Florida Transportation Corporation Act, which was passed to promote and develop transportation facilit ies and systems by new and alternative means. It is proposed that a report be prepared t hat addresses the leg islative issues identified in T echnical Memorandum #2. Should legis lative initiatives be considered for Flor i da to establish guidelines for the implemen t ation of privatization? Could legislation help ease or eliminate some of the uncertainties associated with the imp lementation of privatization efforts? Should the Florida Department of Transporiation take an active role in encouraging or discouraging the use of privatization in Florida's transit i nd ustry? 8
SERVICE ORIENTATION 9
J. Develop sample requests for proposals (RFP) and contracts. In most of the interviews with transit officials, the design of the RFP and contract was identified as the key indicator in successfully contracting with a private sector entity. Unsuccessful privatization efforts at Florida's transit systems were generally blamed on problems and inco nsis tencies resulting from the structure of the RFP and/ or contract. It is proposed that a series of samp le RFPs and contracts be prepared and dis t ributed to Florida's transit systems. Samples may include those directed at the co ntr a cting of fixed route operations, paratransit operations, vanpooling, mainte nance activities, and administrative activities. The various samples would address the many c ontractual issues previously identified, including the structure and clarity of the contract, contract administratio n and enforcement, a n d the optima l size of the contract. In addition, the RFPs and contracts would be d esig ned specifically for use in Florida. Legal assistance could be obtained t o assist in the design process. The structure and clarity of the contract is important from the start in order to mini mize the probability of conflicting interpretations of contract language once the arrangement is signed and in place. Contract administration and enforcement continue to be imp o rtant iss ues, given the sensitivity involved with the quality and reliability of contracted services. A tradeoff inherently exists between the l evel of effort required for the ad ministration of a contract and t he extent of monitoring and enforcement. This tradeoff m ust be explicitly addressed prior to the preparation of an RFP and contract. The optimal size of a contract clearly varies with the type of service being contracted and the number of qualified providers willing to respond to a given RFP. To t he extent possible, sample contract scenarios would be presented and reviewed to present a range of optimal contracts given a set of criteria .. The series of sample contracts, along with a discussion of the major issues involved with the preparation of contracts, would be compiled in a document for distribution to Florida's transit systems and would be particularly usefu l to the small to medium size trans it systems. The Massachusetts Institut e of Technology (M.LT.) is currently conducting a comprehensive study of transit service contracting, the results of which would be incorporated into this document as they become available. 10
2 Organize a statewide conference. . It is proposed that a statewide conference be organized and hel d at a centra l location in Florida (such as Orlando). Three conference formats are suggested below. Transit Privatization in FlQrida The purpose of this conference would be to discuss general privatization issues over the course of two days. The primary target audience would be decisionmakers (trans it system Board members, politicians, etc.) in the state of Florida; however, representation would also be soug h t from each Florida t ransit system as well as from other transit systems throughout the country A ddi t io nal interest would be sought from FOOT district offices, metropolitan planning organizations, regional planning councils, private sector firms and orga niza tions, and others. The intent would b e to invite nationally recognized e xperts to the conference to discuss various transit privatizat ion issues, such as service co ntra cting, cost allocation, case studies, transit l abor implica t ions, and others. The format could include roundtable discuss i ons along with the expert speaker presentations. The primary objective of this format would be to educate the decisionmake r s regarding the use of privat ization as an implementation alternative. It is anticipated that conference proceedings cou l d also be published foll owing the conference. Specific Transit Privatization Issue The purpose of this co nfe rence wou ld be to discuss a selected important issue facing Florida's t ran sit systems in their decision to implement privatization initiatives. For example, the i nte rviews of tran sit system officials r evealed that one o f the most importan t issues involved in implementing a privatization init iative is the structure of the RFP /contract. Envisioned as one full day, the conferenee agenda would include a series of sessions foc usin g on the design of the RFP /contract. Sessions could be held on incentive/pena lty clauses, contract requirements, contract administration, division o f respon sibili ty and others. Expert speakers would also be invited to a conference in this format to discuss the specific issue selected. A conferenee report would be prepared following the conference. Transit Privatization Brain -St orming SessionThe purpose of this type o f conference would be to bold a brain-storming session to discuss the direction that Florida should take (i f any) with respect to transit privatization. CUTR and FDOT would join tly prepare an invitation list to the major leaders and decisionmakers within Florida's transit industry. A skeleton agenda would be prepared identifying major issues for the invited attendees to discuss. FDOT could then use this input to develop a statewide policy concerning transit privatization. 11
3. Sponsor, coordinate, and teach workshops on selected privatization issues. It i s proposed t hat a series of workshops be sponsored by FDOT and CUTR, with CUTR coordinating a nd making arrangements for the workshops Unlike the conference f ormat where privatizat i on iss ue s wou ld be discussed in more general terrns, the workshop format would be designed to target a more technical audience to discuss t h e i ssues in much more detail. The workshops are envisioned as being one full day and perhaps offering co ntinui ng units of educat i on. A workbook would be prepared for each s ponso red works h op. Som e examples of workshops that could be held i nclu de contract design, contrac t admi nis trati on, procurement procedures, maintena nce contracting, and numerous others. The focus of each workshop woul d be on the "hands-on" imp leme nta tion aspects of e a ch issue 12
4. Prepare a directory of private [117'1'1S willing to respond to RFP's for various transit services (statewide directory). I t is proposed t hat CUTR compile a directory of private sector organizations that are willing to contract to perform various services for transit systems in Florida. This directory would include private sector o rganizations, including those willing to operate transit services, to perform various maintenance activities, and to perform various administrative activities. The direc tory would include firm names, addresses, phone num bers, contact names, and types of services willing to provide under contract. Distr ibution of the dir ectory would include transit systems, transportation disadvantaged providers, and o ther public agencies interested in contracting maintenance and a dministrative activities. These d irectories would be extremely u s eful when a transit system is preparing to reques t proposals or bids for specific services. A transit system could refer to the directory to determine which private sector organizations indicated a willingness to respond to proposals or bids for t he sp ec ific service they are proposing to contract. The directory is not intende d to be a mechanism for screening or pre-qualifying private sector organizations to perform specific contractual services. The purpose is to provide a list that is as extensive as possible to maximize the number of responses and encourage a competitive cont r ac ting process. To maintain its usefulness over time, the directory would need to be updated annually and redistributed to trans it systems throughout the state of Florida. 13
5. Prepare a transit privatization handbook. It is proposed that a transit privat izat ion handbook be prepared which summarizes all of the major issues associated with the process of implementing various priva tizatio n initiatives, including the contracting of operations, maintenance, and administration, as well as other forms of public/private partnershi ps, such as joint development, cross border leasing, and others. The handbook would serve as a reference manual for those transit systems seeking a straightforward approach to the basics of implementing various privatization initiatives. T his how to" handbook would r eview privatization impleme ntat ion processes from start to finish For a transit system that wants to contract its parat ransit service would be provided with some basic guidelines for the pre paration of requests for proposals, the structure of contracts, the administration, monitoring, and enforcement of contracts, and other issues associated with the implementation o f initiatives. It is proposed that t his handbook be very general in natur e since the environment for implementing privat ization initiat ives i s different in each situation. As a result, each initiative should be structured and implemented with these diffe renc es in mind. However, a general hand book would provide a good overview and starting point for each transit system. The guidelines could then b e customized by each transit system in light of the specific characteristics surrounding the proposed privatization i nitiative. 14
6. Publish a Florida DepartmenJ of Transportation trOJISit privatization newsletter. It is proposed that CUTR publish a F lorida Department of Transportation transit privatization newsletter (quarterly) for national distribution. The initi al mailing list would include every fll(edroute transit system in the United States, with this list expanding over time to i nclude other interested parties throughout the state and country. The newsletter would include the latest information on t ransit privatization e ffor ts throughout the country. Examples of articles that cou ld be presented in t he newsletter inclu de case studies of recent privat iza tion efforts, review of recen t priv ati zat ion legislation, present ation of results of studies on privatization efforts, a directory of privatizatio n organizations and conferences in t he United S tates, and a discussion of other important iss ues r elated to tr ansit privatization. It is anticipated that a kickoff news letter could be prepared and distributed within the existing privatization project; how ever, additio n al funding would be required to con t inue the new s letter in the future. 15
7. Create a clearinghouse for the dissemination of privatization information (similar to TMA Clearinghouse). I t is proposed t ha t a Transit Privatization Clearinghouse be estab lished to disseminate i nformation on privatization issues in the transit industry. Modelled after the TMA C le aringhouse, the privatization clearinghouse would serve as a source of privatization information primarily for Flor ida 's transit systems; however, requests for assi s tance outside of Florida may also be included in t h e project. The intent of the clearinghouse would not be to compete with the services offered by the Public/Private Transportation Network (PPTN), but to provide teclmical assistance at a more intens ive leve l in Florida. The Privatization Clearinghouse would assist the Florida Department of Transportation in educating Florida's t ransit systems about the various areas of transit privatization. Many examples of specific services that could be provided under t he Privatization Clearinghouse were proposed previously in this issue paper. These and other services are provided below. contin ue to deve lop a comprehensive of tran sit privatization informat ion (an extens i ve info r mati o n center has already been created as a result of the existing privatization project). develop sample requests for proposals (RFP) and contracts based on types of services and size of contracts. prepare a directory of private firms willing to r espond to RFP's for various transit services (statewide directory). prepare a transit privat izatio n handbook. publish a q u arterly transit privatization newsletter. res pond to inquiries and requests for tr ansit privatization information. monitor and evaluate the performance of privatizatio n initiatives implemented in Florida. The initial establishment of the Privatization Clearinghouse could be funded with the existing privatization project; however, additional funding would be required to continue offering these services ori an annual basis. 16
8. Develop a publicly sponsoredjprivaJely operaJed vanpool promotion program. . Pu b licly sponso red vanpool programs, which are manage d by private vanpoo l service com panies, are easytoimplement pu b lic-private part nershi ps. This project would use publicly sponsored vanpool programs as a model of how public-private partnerships could work as a part of the transit system within each urbanized area of F lo rida. Unl ike more internal operati ons-ori ented privatization eff orts, vanpool programs can also contribute almost immediately to the reduction of peak hour congestion. Publicly sponso red vanpool programs can begin within a matter of months of conceptual approval. Vanpools are fully eligib l e for federal capital assistance under either Section 3 o r 9 of t he Federal Transit Act, as amended. Vanpool programs do n o t imp act transit labor, since the operation of vanpools is handled by pa r t i cipan ts who vo l unteer to d riv e. In add ition, vanpools result in completely n ew service and do n ot affect any existing transit services. Publicly sponsored vanpool programs have been im ple m ented a t Brevard County's Space Coast Area T ransit T ri County Trans it i n Orla ndo and the Lakeland Area Mass Transit Dis t r ict. Also, Tri-Co unty Commuter Rail Authority is currently seeking proposals for a private vanpool services company. 1l1e Pinellas Suncoast Transit Alltbority has indicate d plans fo r the establis h ment of a publicly sponsored vanpoo l program in its five year trans i t developme n t program. This pro ject would provide direct technical assista nc e to every transit age ncy in Florida to help establish publicly sponsored vanpool p rograms. The objective would be to establish a vanpool program within every public t ransit system in F lorida within two years. Tech nical assistance would begin at the program concept level and continue through the p r o curement process for both vans and a vanpool services company to operate the program. 17
FDOT Response Following the r eview of the issue paper, th e Florida Department of Transportation directed CUTR to prepare a transit privatization handbook that would be available to the public transit systems in Florida and would contain the following elements at a minimum: 1. Develop sample requests for proposals (RFP) and contracts 2. Summarize the major issues associated with the process of implementing privatization initiatives. 3. Explore the best method for attracting companies to respond to RFP's on P,rivatization. 4. Explain the requirements o f Section 13( c) concerning privatization. 5. Describe how a public transit agency in Florida can establish a publicly sponsored va n pool program. 6. Sponsor, coordinate, and teach a workshop on how to use this handbook. As a result of this directive, the remaining tasks in the contract are in the process of being revised to reflect the preparation of a handbook. CUTR will prepare a revised scope of services and budget for FDOT review. 18