Roads Leading to (or Away From) Contracted Services

Roads Leading to (or Away From) Contracted Services

Dean Transportation's ability to infuse Grand Rapids Public Schools in Michigan with technology is one reason why contracting can be a win-win proposition. Dean Transportation's ability to infuse Grand Rapids Public Schools in Michigan with technology is one reason why contracting can be a win-win proposition.

Long-term relationships can come from a simple school bus ride. Students spend a lot of time with their peers, trading stories about their classes, sports victories and fun field trips. They may not even notice the bus driver, the common denominator to relationships both inside the bus and outside with the district’s administrative office.

While safety bears much weight on running a school bus operation, there are other factors influencing how transportation is structured, whether its in-house or outsourced. Decisions are often shaped by financials, regulation, trust and deep relationships as well as how individual states choose to manage transportation services.

Different States, Different Contract Rates

The Mackinac Center for Public Policy, a conservative, pro-business research organization that champions privatization and Right to Work efforts, found vast differences in the way non-academic services are provided in U.S. school districts. A recent survey not only detected erratic patterns in state-by-state privatization, it claimed that relationships run as deep as concerns for a balanced financial sheet.

The Center studied 2,861 school districts in five states (Georgia, Michigan, Ohio, Pennsylvania and Texas) to quantify the percentages of contracts for custodial, food and transportation services. The research found anomalies in outsourcing, which range from a low of 17 percent of school districts in Ohio to a high of 75 percent of districts in Pennsylvania.

The high concentration in Pennsylvania reflects a tradition of bus contracting dating back to the early 1900s, explained the study’s co-author. It’s a phenomenon also seen in the eastern and Midwestern parts of the country. 

“They have very personal relationships. It’s like family that has been doing it a long time,” said Michael LaFaive, director of fiscal policy at the Center and author of several books on privatization.

On the other end of the spectrum, many states tread lightly on privatization. The lowest overall contracting rate is in Ohio, where the study found that only 7 percent of school districts outsourced transportation services. While nearly all school districts in Georgia outsource their custodial services, only three districts use bus contractors. In Texas, only 4 percent of school districts used private transportation firms last year.

The research identified drastic migration to privatization in Michigan, where the recession hit hard and new Right-to-Work and collective bargaining laws have gone into effect. 

Last year, 71 percent of Michigan school districts contracted at least one of the three major non-instructional services. Notably, there was high conversion to contracting transportation and custodial services. History will soon determine the direction of services within financially struggling Detroit Public Schools, where union frustration and lawsuits escalate in the wake of teacher sick-outs.

“Unions don’t have resources like they did before to hold ground,” said LaFaive. “Vendors are working hard to convince Michigan school districts to save money by converting to contracted transportation.  And research shows that privatization—done right—can save money and improve services.”

Happy Trails in Michigan

Through a transformation plan 10 years ago, Grand Rapids Public Schools near the Lake Michigan shore transitioned to a contracted school bus fleet operated by Dean Transportation, a regional, family-run business for nearly 60 years. The district chose to sell its school buses and received a one-time cash infusion for the sale of the assets. 

On behalf of the district, Dean invested in nearly 100 new school buses equipped with electronic child reminder systems and GPS tracking systems. It implemented training programs that exceeded State of Michigan requirements. And it brought in advanced route planning software to help transport more than 8,000 students.

Within five years, the district claims to have saved more than $19 million through the partnership.

“We proactively work to identify customer efficiencies and develop contract pricing to immediately pass those efficiencies on to the district,” said Patrick S. Dean, director of business development at Dean Transportation. “The relationships with each school district administration, school official and the community are vital to a lasting partnership.”

Taking Another Road

But there are some situations where contract services just don’t add up, and a school district will take another course. Such was the case at Rockwood School District in Missouri. After conducting an RFP, the district found the lowest bid for transportation services to be significantly higher than the how much it was currently spending in-house.

“If we were to continue with outsourcing, our budget would have been significantly impacted in the coming years. As good stewards of public funds, we needed to look at other options,” said Rockwood Superintendent Dr. Eric Knost. 

As a result, the board of education approved a district-owned transportation system last February to serve more than 21,000 students in 31 school locations within a 150-square-mile service area. The district stretched out its investment in its fleet of 175 new buses (equipped with camera systems, radios and GPS) via a 10-year financing plan for lease-to-own with their dealer.

“We would pay for buses either way. With contracted services we pay to borrow the buses. With an in-house operation, we pay to own the buses. This is actually a savings in our budget compared to contracted services,” said Knost.

The district’s next step is to hire a transportation director and bus drivers, who will undergo training over the summer.

“By the end of this school year, we will be in a better position for the new school year,” said Bill Sloan, director of transportation and purchasing at Rockwood. 

Driving Down Concern and Expenses

From family-owned businesses to global corporations, transportation providers must run a tight ship -- from safety to operations to cost efficiencies -- in order to turn a profit.

“We have enormous economies of scale for buying buses, for maintenance parts and for drivers, which typically allows us to save a district 10 to 20 percent, while also providing the basis for a solid return,” according to Todd Steele, vice president of business development and growth at First Student.

First Student’s entire school bus fleet is equipped with technology that allows it to actively manage many aspects of its operation. An information system called FOCUS helps drive down expenses through continuous bus monitoring and preventative maintenance. Fuel expenses also can be managed by a school district or the contractor via hedging on the cost of fuel for a substantial amount of annual energy usage.

Whether reinforcing a long-term relationship or establishing a new one, transportation providers rely on open communication to seal the deal. 

“Our focus on community relationships has alleviated any concerns a district and parents may have about our safety processes and protocols,” said Steele. “We create a public event and invite the community to tour our buses, meet our drivers and ask questions.”

Durham School Services, which will mark a century in business next year, works closely with school administrators and districts through open lines of communication.

During the RFP process, the company asks that the potential customer be as open and honest about its current situation and expectations. Once in a contract, the company surveys its customers twice a year to maintain understanding and meet needs. Results of the last survey indicate that 92 percent of its customers would recommend its services.

The company launched the Durham Bus Tracker app last year, which is provided at no charge to customers, allowing parents and guardians to view their children’s bus location and scheduled arrival. The app can be accessed from a home computer, IPhone or android device.

“We strive for excellence to create a partnership with our school districts. We focus on safety and insure customer satisfaction through open and ongoing dialogue with our operations team and the customer,” said Bob Ramsdell, Durham School Services senior vice president and chief operating officer for the Central Region.