Transit Service Contracting and Cost-Efficiency

Abstract

Contracting out for services is a controversial issue in public transit. Proponents argue that contracting always saves money in comparison with public operation, whereas critics respond that cost savings through contracting are overstated and come almost exclusively at the expense of labor. In order to determine the medium-term effectiveness of contracting out transit services, the impacts of contracting on the cost per vehicle-hour of fixed-route bus services are examined. A national sample of operators is studied, including some that contract out none of their routes, others that contract out all of their routes, and some that contract out a portion of their service. The effects of contracting on costs are examined for the years between 1989 and 1993. The findings show that bus services operated under contract are sometimes, but not always, less costly than directly operated services. A regression model is used to test the influence of a variety of factors on cost per vehicle-hour, and contracting is found not to be the most significant variable influencing operating costs. The findings indicate that vehicle and labor use have far more influence on cost-efficiency than either wages or contracting arrangement. It is concluded that cost-efficiency can be achieved in many different ways, depending upon local conditions, and contracting should not be assumed to be the most appropriate strategy in every situation.

Does Performance Management Lead to Better Outcomes? Evidence from the U.S. Public Transit Industry

“…Th us, in the present study, each model constructed to test the infl uence of performance management on a particular measure of transit system performance in fi scal year 2008 included a measure of that same performance indicator in fi scal year 2004 as a control variable. In addition, to take diff erences in transit system characteristics into account, we also included as control variables measures of population density, automobile ownership, institutional structure, and privatization of service delivery (Giuliano 1980;Iseki 2008;Leland and Smirnova 2009;McCullough, Taylor, and Wachs 1998;Perry and Babitsky 1986). Th e positive eff ect of strategic planning on passenger trips per capita is substantially stronger in transit agencies that also engage more fully in logical incrementalism, while the negative impact of logical incrementalism on performance diminishes noticeably in agencies that engage more fully in formal strategic planning.…”

“…We test these hypotheses by examining performance management practices and specifi c outcome data in a set of urban public transit agencies in the United States. Public transit systems have often been used in research designed to analyze the performance implications of variables that are of interest to public management scholars, such as size (Brown and Th ompson 2008;Perry and Babitsky 1986), institutional structure (Leland and Smirnova 2009;Perry and Babitsky 1986), and privatization (Giuliano 1980;Iseki 2008;Leland and Smirnova 2009;McCullough, Taylor, and Wachs 1998;Perry and Babitsky 1986).…”

Bus transit technical efficiency using latent class stochastic indirect production frontier

“…The Z variables are a subset of organizational and environmental variables, which past studies show explain differences in output, cost and efficiency. They include hours of service, the peak-base ratio and service area (Guiliano, 1980); purchased transportation (contracting), ownership, vehicle speed and subsidies (Kerstens, 1996); agency size (Iseki, 2008), peak vehicles and vehicles operated (McCullough et al, 1998). From these studies, fleet age (Z age ), average vehicle speed (Z speed ) and purchased transportation ðZ pur Þ are used as heterogeneity variables.…”

Strategy Formulation and Performance

“…collectively, these studies have identified a wide range of transit system characteristics and service operation variables along with service area characteristics and structural variables that influence the performance of local public transit systems. Key variables that have been found to influence aspects of transit system performance include ser-vice area population density (Fielding et al, 1978;leland & Smirnova, 2008), institutional structure, that is, whether special-purpose authority vs. unit of general purpose local government (leland & Smirnova, 2008;Perry & babitsky, 1986), size and scale of operations (brown & thompson, 2008;leland & Smirnova, 2009;Perry & babitsky, 1986), and privatization of service delivery (giuliano, 1981;leland & Smirnova, 2008;Mccullough, taylor, & wachs, 1998;Perry & babitsky, 1986).…”