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Who’s to Blame for Skyrocketing Prices?

A microcosm of larger society, the school bus industry has seen price increases over the past few years that are rivaled over the last century only by inflationary spikes of the mid 1970s and early 1980s. Those were driven largely by limited oil supply. The war in the Ukraine ushered in similar pressures last year, adding to existing COVID-19 and related (and unrelated) supply chain constraints.

As a MarketWatch article suggested last month, some companies are seizing opportunities to further inflate prices and add to their margins and executive bonuses. Meanwhile, several school bus manufacturers recently posted record earnings reports. The former comes as little surprise amid the funding frenzy of the five-year, $5 billion Clean School Bus Program. Sellers in all markets traditionally hold most of the power when dictating prices, so old-fashioned capitalism is certainly at play. But Daimler Truck CEO John O’Leary added further nuance in April, when he noted that manufacturers are simply unable to turn off the spigot of price increases despite inflation rates starting to settle. (That is debatable, as the most recent reports have inflation remaining precariously high.) He noted that transportation costs and employee wages have gone up and stayed up, with consumers paying the price. Increasingly stringent diesel after treatment controls required by the U.S. Environmental Protection Agency and the California Air Resources Board, which will only increase costs starting next year, are not helping matters. But there is more to the story.

While the industry has little control over emissions regulations, consultants I spoke to last month said school bus consumer behavior plays a leading role in keeping prices
high, regardless of larger economic reasons. For example, School Transportation News over the years has often cited industry sources suggesting that the litany of different state school bus specifications inflate purchase prices. Requiring 30 different iterations of emergency first aid kits, for example, require OEMs to keep expanding inventories, which invariably drives up costs.

School districts hold much influence over prices based upon the volume of school buses being purchased each year. The collective power of school districts and bus companies represents 35,000 to 40,000 new school buses manufactured and sold. Such figures command a lot of attention from OEMs, dealers and vendors. But as our own Bob Pudlewski has said time and again, school districts need to do more to keep up with fleet replacement and new operational and safety technology.

School districts have an opportunity to harness their buying power by entering cooperatives that include incentives for members. They can tap financing and leasing
programs to obtain increased numbers of newer model vehicles for the same or similar amount being spent to purchase outright. They need to move the needle toward fiscally sound and better managed fleets rather than sinking money into vehicles of depreciating value. Is your school district ensuring training for centralized warranty repair work is included in bulk school bus purchases? Is fuel being purchased in bulk? Might some replacement parts not require added warranties that could further drive down costs? These and others are important questions to ask. Your chief business official would thank you doing so.

Running transportation departments like the businesses they are rather than spending every budgeted dollar lest you lose funding next year the age-old inefficient spending model of school districts could result in an adequate nationwide fleet replacement cycle that both lowers emissions and increases student and driver safety. The consultants I spoke with echoed sentiments that school district fleets need to start implementing lessons learned from municipal agencies.

Could your operation adopt more of an enterprise fund mentality? Perhaps do not start charging for service, per se, though there are examples nationwide. Instead, what can be done to drive efficiencies into the system by incentivizing best practices? How could those efficiencies fund pay increases to school bus drivers, maintenance technicians and other staff? Make the best decisions today with the budget you have, to ensure you can introduce the best buses and equipment possible and that will last the amount of time you need them to, before they start costing more than they are worth to operate. Demonstrate these plans and savings to your school administrators. Make the case for student transportation by being more efficient and cost-effective.

Bring your fleet, operations and business mindset into the 21st Century.

Editor’s Note: As reprinted in the September 2023 issue of School Transportation News.

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