Stock Transportation, the Canadian subsidiary of National Express Corporation, is closing shop in Ottawa after contract negotiations with the Ottawa Student Transportation Authority broke down last month. Stock had served the Eastern Ontario area for the past 20 years, but exits amid a controversy over a competitive procurement mandate from the local government that alters the traditional contractor-school board relationship.
"The operating environment in Ottawa has become too challenging due to the severe disconnect between what operators require to deliver service and what the Ottawa Student Transportation Association can pay for these services," Stock Transportation said in a statement. "We will continue to provide the same safe and reliable service for which Stock has been known for decades and will assist our drivers through the transition. Our team of drivers is extremely dedicated to the students of Ottawa."
In April, Stock wrote OSTA that the company required a contract extension for the 2014-2015 school year to include at least a 10-percent increase, mostly to cover driver wage increases as well as to address rising fuel costs. Kim Worster, chief operating officer for Stock, said the company contracts in Eastern Ontario had not "provided a reasonable return on invested capital" and had not "provided long-term security for some time."
Worster also cited the company's need to invest several million dollars to upgrade its bus fleet, and she pointed out that Stock increased driver wages by more than 15 percent over the past four years to attract and retain qualified employees. Yet company revenues only increased by less than 4 percent.
Instead, OSTA offered a 2-percent increase based on the money the government made available to the consortia this spring as part of the province's new Competitive Procurement, or RFP, program. Three local companies – Direct Transportation Logistics, Roxborough Bus Lines and Campeau Bus Lines – are taking on the new contracts and are hiring the former Stock drivers.
Karen Cameron, executive director of the Independent School Bus Operators' Association, said she applauded Stock for standing up to new RFP legislation pushed by the Ministry of Education in response to a series of recent procurement scandals involving how the government awarded contracts. While she said that school buses had nothing to do with those scandals, the local industry has suffered from the resulting program that fails to adequately fund contracts based upon real-world costs.
Contractors formed the ISBOA in the fall of 2008 when the Ministry of Education began pushing the new program. The association said it now represents 120 companies, including Roxborough Bus Lines, or more than 75 percent of the provinces bus companies. In 2009, according to the ISBOA website, the province was home to more than 250 bus companies. Meanwhile, there are more than 500 bus contractors in neighboring Quebec, alone.
ISBOA's website cites Ministry of Transportation Safety Ratings that show independent, family-owned school bus companies have the best safety ratings of any form of public transport on Ontario's highways. These companies also have the lowest turnover of drivers "and are therefore best able to provide consistent, punctual, worry-free service for families and school boards."
"I give all kinds of credit to Stock," Cameron added. "Everybody has been in survival mode for the last three years. Whether or not these are sustainable rates has not come up. Everybody was simply worried if they'd still be in business by October 2013."
That was when a trial was set to begin on the validity of the RFPs. Cameron told STN that the RFP process renders the Ontario school bus industry as a non-viable business model going forward. Ninety-five percent of routes are contracted, so investments into driver training and new vehicles makes sense to company bottom lines as long as they can enter long-term agreements, she explained.
The government, she then reasoned, can't pretend companies have been paid back and then "flip a switch," which can essentially bankrupt companies, especially the smaller ones, because they are left without the ability to recoup their investments.
"Quality service at great prices has been disrupted strictly for bureaucratic purposes," she added. "Stock told the Ministry (of Education) what we've been saying all along, that once you've changed nature of biz relationship, and you're investing into routes, one year contracts won't cut it. Rates will go up. The Ministry has been actively ignoring that fact. This is that fact coming home to roost."
The Ontario School Bus Association, to which many ISBOA members were formally aligned, also voiced concern with Competitive Procurement in February 2012, shortly before the Ministry of Education received final recommendations from a task force. OSBA ultimately decided to work with the Ministry so it could be at the table and help influence how the RFP program is administered, and to help train bus companies on navigating the process.