School Bus Transportation News at STN Media

New Jersey Contractors, State Fight
Over Pupil Transportation Bids

School bus contractors say legislation would level playing field; state disagrees

By Ryan Gray | Senior Editor

TRENTON, N.J. - Proposed state legislation would require that all school district transportation services go through a competitive bidding process, in response to a judge's ruling that a local Educational Services Commission (ESC) violated the law by using taxpayer money to provide entrepreneurial services.

In 2003, a state Superior Court found Hunterdon County Education Services Commission guilty of operating outside its state school board charter by engaging in private-enterprise taxi, limousine and vehicle repair services. A 1989 state law created non-profit ESCs, county special services school districts, jointure commissions, and cooperative transportation services agencies to coordinate various educational services, including regular pupil and special needs transportation, for the state's 600 school districts. In doing so, they were designed to secure lower prices for services through bulk purchasing. However, the law does not require them to bid services competitively throughout the private sector, raising the ire of the state's school bus contractors.

School districts that are not members of an Educational Services or Jointure Commission are already required to publicly bid school transportation contracts.

Bill Draws Sides

Senate Bill 1298, introduced last year by Democratic Sen. Paul Sarlo and Republican Sen. Anthony R. Bucco would close a perceived loophole and require all ESCs to compete with private contractors for pupil transportation services under Chapter 39 of Title 18A of the New Jersey Statutes.

"Sen. Sarlo believes taxpayer money should not be used to subsidize private ventures," said spokesman Chris Eilert. "The intent of this bill is to ensure school districts stay true to the mission of the education of children and providing them with transportation services."

The Department of Education's Office of Pupil Transportation argues that the legislation would actually eliminate competition rather than promote it. Should HB 1298 pass, the state's pupil transportation director said ESCs would be unable to provide transportation services for school districts utilizing vehicles they own.

"This will diminish their ability to provide cost-effective services when the only option is contracted services," said Linda Wells, director of the Office of Student Transportation. "We've had great success (with ESCs). This bill will prevent agencies from coordinating services because they won't be able to prepare bid specs."

In actuality, the bill would prohibit ESCs from preparing specifications for routes on which they intend to bid, leaving that control to the school district. Dr. William L. Librera, New Jersey commissioner of education, could designate an ESC not bidding on the route to also prepare the specifications. School bus contractors would remain precluded from preparing bid specifications on any route, whether or not they intend bid.

"Contractors never put specs together; we don't have access to the information," said Dave Armitt, vice president of Laidlaw's mid-Atlantic region. "We're not chartered or paid to provide that service."

School districts currently pay ESCs a percentage of their membership fee for the preparation of bid specs.

The problem for the ESCs, said Wells, is that they don't know which ones these are until the specs and routes are developed.

"Furthermore, if they prepare a spec and there are no bidders or the bids are too high, they still can't use their own buses to provide the service because they didn't bid," she said.

The bill passed the Senate by a 39-0 vote and, at press time, an amendment was before the Assembly that would provide certain exclusions for rural school districts that must cross through other districts to transport students. If passed and signed into law, the bill would take effect immediately and apply to the 2004-2005 school year.

Disclosure Sought

New Jersey is a "low-bid" state that opens each route to the competitive process, theoretically meaning that school districts could have as many contractors as buses. NJSA 18A:38-11.1 established the cooperative transportation services agencies (CTSA). Prior to the law, only about 8,000 students were transported by shared arrangements. Wells said that during the 2003-04 school year, roughly 66,000 students were transported through these arrangements. This transportation was provided primarily by the CTSAs through contracted services and agency-owned vehicles.

Eilert alleged that some ESCs use the law to fly below the public radar and bid on only the easiest and most economically efficient routes, preferring to stay away from servicing rural areas special needs students that drive up operating costs. Laidlaw's Armitt added that, amid the Hunterdon scandal, the taxpayers deserve to know exactly how their money is being spent.

"As a matter of public policy, why would anyone be opposed to a public bid to make sure the lowest price is being had?" he asked.

Wells denied the assertion and added that poor service by the contractors led to the formation of ESCs in the first place.

"There is nothing closed door about our process," Wells said. "Bidding is public as are the arrangements with CTSAs. It was outrageous costs, bad service, or no service that caused these agencies to purchase vehicles in the first place."

Regardless, Armitt said the law is "inherently unfair."

"If we're 10 cents over the nearest competitor, we are precluded by state law from getting that contract because this is a low bid state," he said. "We don't even know if their price is competitive in today's market."

Laidlaw, one of 275 school bus contractors statewide, operates about 1,500 routes in 125 New Jersey school districts.

Wells said the bill is designed to "clearly eliminate competition" because ESCs only own about 400 of the state's 21,000 school buses, while the private contractors own between 17,000 and 18,000, and school districts own the rest. She also cited a 1995 study by Deloitte and Touche that found that New Jersey has the highest cost of pupil transportation in the nation.

"And keep in mind contractors do most of that," she said.

Lawsuit Sets Wheels in Motion

The Garden State School Bus Contractors Association brought the 2003 lawsuit against Hunterdon County ESC. It alleged Hunterdon was performing the illegal services outside of its state's school charter for education services, a claim upheld by New Jersey Superior Court Judge Edmund R. Bernhard on Sept. 12of that year

"The idea behind the ESC is very good," said Mike Ely, the association's vice president. "Most do what they're charged with, saving money. (But Hunterdon ESC) found they can actually make money by picking and choosing routes without ever going to bid."

In addition to providing school bus service, Hunterdon was discovered to be selling travel agency services for non-school related travel, limousine service and horse and carriage services for private transportation, vehicle maintenance and engine repairs for privately-owned vehicles, technology services in the private sector, and building maintenance services other than to local schools.

When the ESC failed to comply with the ruling in three months time, Bernhard issued a cease and desist order in January of 2004.

The contractors deemed legislation was necessary to promote fairer competition, and Sarlo and Bucco signed on to sponsor the bill. Assemblywoman Linda R. Greenstein and Assemblyman Frederic Scarlera, both Democrats, sponsored a sister bill, A-3036.

Wells believes it is unfair to force a non-profit ESC to compete with a private, for-profit company.

"What they're trying to with legislation has nothing to do with what Hunterdon did," she said. "This legislation will prevent any agencies that don't own buses from purchasing them. The reason these agencies purchase vehicles to begin with is because of poor contractor services or lack of bidders in the area. School districts that can't afford to buy buses will have no option but to deal with contractors in their area. It's not going to increase competition because the contractors can afford to go into an area and low bid. That will put agencies out of business."

A Question of Fair

As certified school business administrators, the ESCs and other entities do not pay real estate taxes, state fuel taxes, vehicle registration fees, or corporate income tax. The contractors association said ESCs also receive preferential purchase and lease rates and insurance liability over most private contractors.

Said Ely: "They've brought up the argument about being low-balled, it's just the arguments seem ridiculous. Sen. Malone said the ESCs are bureaucracies and need to demonstrate to the taxpayers that they are saving them money."

"(The ESCs) have argued that they are another option for local boards who wish to have transportation services provided for them. If a contractor is a poor performer they have an option to go to a public entity without having to bid, thereby avoiding possibly getting the same poorly performing contractor," he added. "However, this legislation addresses that problem by permitting a disqualification of a poor contractor."

But Wells said the playing field between schools and private sector contractors can never be level. The proposed legislation would only hurt schools amid already low state education funding because it sets precedence for school districts to bid against private contractors in other areas besides transportation.

"The only thing that (HB 1298) changes is the districts' limited ability to seek alternatives to contracted services," she said. "If contracted costs keep rising, limited state aid to districts becomes more an issue. This further limits the purchase of vehicles by local districts in order to keep contractors competitive."