Transit Manager's Toolkit

Introduction

It is a common practice for Federal Transit Administration (FTA) grantees to contract out part or all of the functions involved in the operations of transit systems. There are many factors to consider when deciding whether or not to use a third-party contractor for transit system management and/or operations These may include: the cost associated with a particular program, availability of staff and the level of expertise, state or local laws, larger planning strategies, control over operations, customer service, and training standards.  All these factors should be considered and evaluated in order to determine the best course of action for the agency. The organization’s mission, vision, and long-range plans should guide the decision-making process. Keep in mind that using a third-party operator does not relieve the grantee from compliance with federal requirements which are introduced in the Grant Compliance Requirements section of this Toolkit.  The process of selecting the contractor is also subject to the procurement requirements discussed in the Procurement 101 and Procurement - Beyond 101 sections. 

This section of the Toolkit is organized in the following subsections: 

• Contracting Approaches 
• Case Study – Managing Operations In-house: Crawford Area Transit Authority, Meadville, PA 
• Case Study – Contracting Out Services: Franklin Regional Transit Authority, Greenfield, MA 
• Coordinating Operations and Supporting Functions 
• Section Sources

If the transit agency (or governing board) decides that contracting out a program is the best action for the agency, factors to be taken into consideration include how the contractor will be obtained (in accordance with the agency’s procurement policies), who will take part in that process, and the length of the contract. Once a contractor is secured, the transit manager should work with the contractor to determine the type of relationship the agency will have with the contractor and clearly define which party is responsible for what tasks. 

It is also important to be aware of the different contracting models to decide which model is best for the agency depending on its needs and resources. The different contracting models are as follows: 

• Turnkey contract - involves a company that takes care of everything from providing the management team and staff members to owning and maintaining all necessary capital including vehicles, equipment, and operating/administrative facilities. The responsibilities of a transit agency as an FTA grantee would include planning, applying for and administering the grant, establishing policies, and overseeing the contract.  
• Executive employment contract - involves the hiring of high-profile executives for upper management transit professionals while all other employees and capital equipment would be an in-house responsibility. 
• Full-time or part-time employment contract - provides all transit staff positions for the complete administration and operation of the transit agency. Contractor can be a single individual or a contracting firm. The transit agency owns all the capital equipment.  
• Service contract - an agency may work with one or several contractors to provide service for fixed route, demand response, and human service transportation. The agency might also contract out for vehicle maintenance and/or other support functions associated with the service.        

Regardless of which model chosen, advertise the contract solicitation and requirements to a large audience to get as many responses to the proposal as possible. This will ensure that there is a competitive bidding process and will help to find the best fit for the agency.  

It is important to remember that whether the program is administered in-house or by using a contractor, the agency must comply with all applicable federal regulations.  

This includes: 

• Conducting a competitive procurement to select a contractor and 
• Requiring the contractor to comply with the requirements that would apply to the organization if the services were operated in-house, such as the Americans with Disabilities Act (ADA), civil rights, drug and alcohol testing, and other federal requirements explained in this Toolkit.  

According to FTA Third Party Contracting Guidance, "each third party contractor and subcontractor is required to comply with the terms of its third party contract or subcontract, including requirements to extend those federally required clauses and provisions to its subcontractors at the lowest tier required." The person responsible for procurement within the agency must be aware that compliance with federal requirements is a condition of being a subrecipient of federal funds and must include federally-required clauses and certifications in the solicitation and executed contract. Importantly, the grantee is responsible for oversight of the contractor throughout the life of the contract. 

The FTA procurement requirements are detailed in FTA Circular C 4220.1F, "Third Party Contracting Guidance." (Note that this circular has not yet be updated to reflect most recent federal regulations, and transit managers should also consult the “Super Circular,” 2 CFR Part 200, Section 200.318 through Section 200.326.) Federal procurement requirements are introduced in the Procurement 101 section of this Toolkit, and expanded upon in the Procurement - Beyond 101 section of this Toolkit. 

This section presents two case studies: one rural transit agency that contracts out its operations, and another that handles everything in-house. The case studies describe the services provided by each system, discuss the reasons for third party contracting vs. operating in-house, and raise issues to consider when deciding whether third party contracting or in-house operating is right for a transit system. 

As illustrated by these case studies, the structure, capacity, environment, needs, and resources of systems can be different. Contracts with a third-party will most likely differ case by case. Advice provided within these case studies may be helpful to make a well-informed decision as to whether or not to engage in a third party contract and how to structure that relationship.  

Crawford Area Transit Authority, Meadville, PA

The Crawford Area Transit Authority (CATA) provides service to Crawford and Venango Counties in the northwest corner of Pennsylvania. Services include fixed bus routes and door-to-door transportation. In the past, CATA had contracted out its services, but decided to bring it back in-house to regain direct control over all aspects of operations. In 2016 CATA entered into a management contract with the Venango County Commissioners to operate the Venango County Transportation program, which in 2018 became a member municipality of CATA. This resulted in CATA expanding services and almost doubling in size. The case study is taken from an interview with the General Manager of CATA, Timothy Geibel, who discussed some of the factors considered when deciding whether to bring operations back in-house or outsource them with a contractor. 



Scheduling and Personnel Responsibilities

When operations are contracted out, it is the contractor’s responsibility to ensure that service is operating per the schedules defined by the transportation provider. The contractor also handles all personnel issues such as absent employees, vacation requests, disciplinary actions, and other issues. 

CATA assessed the additional workload that would be created by taking on the scheduling and personnel management and determined that it was more important to have the internal control over the daily operations than to work with a third-party contractor and simply play the role of overseer. Internal control of operations necessitated the hiring of qualified individuals that know and understand transportation. Recruiting such persons in smaller, non-urban areas can prove to be difficult. Taking advantage of training resources in the region, through the Pennsylvania Department of Transportation (PennDOT) and various national organizations such as National RTAP, greatly aided in CATA’s ability to get new staff up to speed on public transportation. 

Managing Bus Drivers

When operations are contracted out, the transportation provider does not have direct contact with or authority over the bus drivers. Any issues that arise, such as complaints from riders, typically go through the contractor, not through the transit agency manager. While the agency can establish policies for the bus drivers, it is the contractor who will address the issue with the bus driver. This poses challenges, delays, and additional layers of communication when trying to resolve issues and at times may come down to contractual language that is in place with the contractors on how to handle drivers. 

By bringing operations back in-house, CATA was able to quickly address issues with bus drivers by setting the policies and then having direct interaction with the drivers when enforcing those policies.

Training Standards

Under contracted operations, the transportation provider can establish guidelines for standard and refresher training for drivers, but it is the responsibility of the contractor to ensure that all drivers meet those guidelines.  

CATA determined that it was in their best interest to have the ability to directly train, re-train, and educate their drivers.  Managing operations internally does place a greater administrative burden on the transportation provider. However, from a risk management perspective, the agency will be better positioned to implement stronger training programs, refresher training and ongoing evaluations of bus drivers than if the service was contracted out.  

Customer Service

In most cases, under contracted operations, internal staff still field all calls, complaints, and concerns from the public. However, when a complaint comes in, the agency must work through the contractor to address the issue. With internal operations the transportation provider can speak directly to the bus driver to remedy the situation. 



Cost-Benefit Analysis

CATA has found that proper internal operations can be a more cost-efficient option than contracting out operations. A public transportation provider may be able to secure better liability and workers compensation insurance than a private provider if the transportation provider can document sound training and hiring practices. Internal operations also alleviate the need for paying contractor wages, contractor profit and overhead expenses at the contractor’s facility.  



Technology Assessment

Transit managers should assess various technologies that can aid in the direct operation of service and complete a cost-benefit analysis of each technology. Some technologies to consider are: 

• Payroll/Accounting Software: reduces the need for financial staff along with saving time in preparing payroll and processing monthly financial activities. Web-based models exist that provide low-cost service, do not need additional computers, and provide a wealth of data reports to help with tracking state, and federal reporting criteria. 
• Scheduling/Dispatch Software: many models exist for computer-aided dispatch (CAD) / automatic vehicle location (AVL) programs that can provide easy, paperless scheduling through mobile data terminals in vehicles. These products also produce a wealth of data reports to help determine efficiency, productivity, and more.  
• Maintenance Software: aids in tracking preventive maintenance and due dates for inspections and provides a wealth of data on vehicle history and trends.  

Technologies are continuing to evolve and must be considered when determining in-house operations. As with any technology, costs need to be considered for the maintenance, upgrade, and continual use of the technology.  

Mr. Geibel also gave the following advice to systems that are deciding whether or not to contract out their operations: 

1. Start planning early. Transitioning operation of service should begin in the planning stages 9-12 months prior to the anticipated transition date.  
2. Look at the expense per passenger for the agency’s system versus peer transportation providers’ expense per passenger. If agency costs are significantly higher, consider assessing the feasibility of internal operations.  
3. Receive input from the agency’s governing board. Transitioning from contracted to in-house operations is a major project that needs buy-in from the board of directors, county commissioners, or whoever is responsible for the oversight of the agency. 
4. Keep communication active. Keep the key players informed of what is taking place. Once a decision to operate internally is made, let employees know. 
5. When transitioning to internal operations, give contractor employees an opportunity to apply for a position with the agency, and make it known that the agency will hire the best candidates for the positions. 
6. When a decision is made that service will be operated internally rather than by a contractor, control the process for public information. Be proactive in discussing any changes with the public. There will most likely be opposition to any change, but if the public can understand that transitioning to internal operations will not adversely affect service on the street, buy-in from the public will be easier to obtain. 
7. Expect potential opposition from the contractor and be prepared to defend the agency’s decision to operate service internally. Focus on responsible use of taxpayer funds and providing the most efficient service to the public. In most cases, the contractor will not want to lose the contract as it will result in lost revenue to their organization. After services are brought in-house, there is still potential for the agency to work with the previous contractor on a new, reduced level which may involve maintenance services, towing of vehicles, etc. Try and keep a positive relationship in place. 
8. Assess current staffing levels. Does the agency need to create additional positions to properly operate service internally, such as additional dispatchers, supervisors, etc.? These costs should be included in the assessment of making a transition. Technology can aid in this process by streamlining processes for managing staffing levels to ensure regulatory compliance with employment laws. Examples include human resource technologies for tracking employment requirements (driver’s license updates, medical certifications for drivers, safety sensitive training requirements, etc.). Payroll technologies further streamline the administrative burden of managing staffing levels. 
9. Once the transition is made, track the results. How is the transit agency doing? Are costs where the manager thought they would be? If not, what factors changed? What was missed in the assessment? 

Read more about the Crawford Area Transit Authority. 

The Franklin Regional Transit Authority (FRTA) provides service to 41 communities throughout four counties in western Massachusetts, covering the largest and most rural geographic area in the state. The FRTA develops, finances and contracts for the operation of transportation facilities and services within its transit area, and daily activities are managed by the administrator, appointed by the advisory board. The following is taken from an interview with the Tina Cote, Administrator of FRTA.  

According to Chapter 161B Section 25 of the Massachusetts General Laws, regional transit authorities cannot operate service directly. Instead, they must contract with private operators for the provision of service. For a long time, the FRTA contracted with a local agency, but in 2007, they released a request for proposals (RFP) to find a new contractor to oversee the operations of their fixed route, ADA paratransit, and some of their demand response service. During this period, FRTA was consolidating services with another agency and a great deal was in transition, making it a complicated situation for a contractor to take on.  A professional management company won the bid and, at the time of the interview (2012), was in the fifth year of its contract with FRTA. FRTA has continued to contract with the same vendor, primarily because there is not a lot of competition to bid on work for rural agencies in the area, and they submitted the only proposal. FRTA awarded a contract that began in July of 2018 with the option to renew for an additional 9 years. 

The contractor employs the general manager, assistant general manager, and training manager. The contractor manages the day-to-day operations: maintenance, drivers, dispatchers, schedulers, etc. FRTA pays the contractor a management fee, which covers the cost of manager salaries. FRTA, however, oversees the rest of the budget.  FRTA works with the managers employed through the contract on a regular basis to oversee the budget. 

Ms. Cote explained that her team has daily contact with the general manager, but this does not take much of their time. Ms. Cote also meets with the operations team (general manager, assistant general manager, and safety and training manager) once a week to go over everything that is taking place. This system works well, and she attributes the success of the partnership to having a good operations team. She also remarked that even if FRTA did operate services in-house, they would still hire a general manager to oversee the daily tasks—a structure not unlike what is currently found with the contractor. 

Ms. Cote advises agencies that are considering putting their operations out to bid to be as specific as possible in the RFP and incorporate lessons learned from previous contracting experiences or issues the agency has run into with in-house operations. Outlining a payment structure within the contract and other performance measurements are also crucial. She also emphasized the importance of an opt-out clause in case the contractor is not the right fit. The first contract was for one year, with the option to renew for four years after. FRTA had the option to terminate the contract at any point after the first year.  

Lastly, she emphasized the importance of a well-qualified general manager and having a strong relationship with the contractor. If there is an issue with the general manager, make sure that the contractor will “have your back” in the event changes need to be made, especially if that change involves the general manager. Ask the contractor to include the resume of the person they are proposing to fill the position of general manager and set up an interview with that person. The general manager is the person the transit manager will have the most contact with, and they will be the person who will go to bat for the team when issues arise. Because FRTA has such a strong relationship with their general manager and contractor, they have had a positive experience contracting out their operations. 

FRTA also contracts with various councils on aging (COAs) and agencies to operate demand response services that are not covered under the above contract. Because the FRTA service area is so spread out (over 1,100 square miles), it would be extremely difficult to use the same contractor for all 41 towns. Contracts are put in place with each COA to operate an FRTA van. The COAs hire their drivers (who usually become a town employee) and do their own dispatching and driving. FRTA reimburses each agency on a monthly basis for costs incurred as a result of the service being provided. Services are determined by the amount of funding available and the request of each town. A budget is established at the beginning of the fiscal year and monitored by FRTA. The COAs still must participate in driver training and drug testing, and their drivers are subject to criminal background and driving record checks. In each case, it is imperative that there is a good relationship with the COA and that there is a mutual understanding of how the program operates in addition to a contract that spells out guidelines for the use of the FRTA van. 

Read more about Franklin Regional Transit Authority. 

In addition to in-house and contractual models, another approach to consider is coordinating operations and support functions with other organizations that the transit agency works with.  For coordinated services, there is the opportunity to coordinate agency operations as well as functions that support operations. For example, the Regional Maintenance Center in Springfield, Illinois, developed by the Sangamon Mass Transit District in conjunction with the Illinois Department of Transportation, is an example of coordinated maintenance available to Section 5311 subrecipients and other grantees lacking local technical expertise for non-routine maintenance and repairs.  Other possibilities include coordinating training, planning, marketing, procurement of vehicles or technology, and other agency functions.  FTA has recently expanded the coordination guidance available through its Transportation Coordination web page.  For more about coordination, see the Coordination and Mobility Management section of the Toolkit. 

• FTA Circular 4220.1F, "Third Party Contracting Guidance" 
• FTA Transportation Coordination web page
• Interviews with Timothy Geibel, Executive Director of CATA, May 2012 and December 2018
• Interviews with Tina Cote, Administrator of FRTA, April 11, 2012 and December 2018
• Sangamon Mass Transit District, Regional Maintenance Center web page