Title

TRANSIT SERVICE CONTRACTING AND COST-EFFICIENCY

Document Type

Journal Article

Publication Date

1998

Subject Area

planning - route design, economics - operating costs, mode - bus, mode - mass transit

Keywords

Variables, Transit services, Transit, Regression analysis, Regression, Public transit, Outsourcing, Operating costs, Mass transit, Local transit, Intracity bus transportation, Fixed routes, Efficiency, Economic efficiency, Cost of operation, Cost effectiveness, Contracting out, Bus transit, Bus services

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.