Privatization of Public Transit: A Review of the Research on Contracting of Bus Services in the United States

Abstract

In the face of escalating costs, declining productivity, and constraints on funding for public transit, many governments have turned to transit privatization in an eff ort to improve cost effi ciency. Privatization of bus services occurs in a range of forms and regulatory environments. Privatization proponents argue that publicly owned and subsidized transit operations are ineffi cient due to higher labor costs, restrictive work rules, and large bureaucracies. Critics of privatization argue that several market failures counteract these theorized benefi ts, resulting in under-insurance, substandard vehicle maintenance, and higher levels of pollution, congestion, and accident rates, among other inadequacies. This paper reviews the research and debates on privatization in the form of contracting, including its eff ects on cost-effi ciency, quality of transit provision, and labor.

Deregulation, Franchising, Outsourcing and Corporatisation in Local Public Transport

“…Evidence from bus contracting in the US is more mixed. Scholl (2006) summarises published evidence and found that:  Early studies identified cost savings from contracting of 10-40% (generally consistent with findings of first round tenders noted above in Wallis and Hensher (2007).…”

Legislating Transit “Coopetition”

“…Since the latter half of the 20th century, market liberalization has been touted as a means to create a more nimble and efficient marketplace for public utilities-including transit service. The benefits of opening the public transportation sector to competition are thought to include lower costs, improved quality of services, and greater innovation (9). However, unrestricted private enterprise can conflict with the vital noninfrastructural components of transit services, such as the robustness and seamlessness of the network.…”

Exploring Opportunities to Expand Public Transportation Services in Florida Through Potential Private Sector Participation: Phase I – Analysis of Contracting for Fixed Route Bus Service

“…Scholl (2006) reported results from his review of research and debates on privatization in the form of contracting, including its effects on cost efficiency, quality of transit provision and labor.Scholl found that while contracting appears to have the potential to substantially reduce costs, the tradeoffs involved may be considerable and the broader social objectives of transit need to Analysis of Contracting for Fixed Route Bus Service ___________________________________________________________________________ recommended that various alternatives to contracting, such as broader organizational changes or addressing larger transportation system inefficiencies, and their tradeoffs, should be weighed in a broader policy context. Furthermore, Scholl indicated that where contracting is utilized, it should be accompanied by appropriate and enforceable service quality standards and labor practices, which support those standards Zullo (2007).…”