Take your pick: Either the Regional Transportation District is in the process of paying $15 million too much to buy a bunch of used buses, or the agency just blew $96,000 on a "biased" study that reaches that conclusion.
There doesn't seem to be any middle ground concerning the 82-page management study prepared for RTD by Mundle & Associates of Philadelphia. Released in draft form late last month, the study's results have been embraced by RTD general manager Cal Marsella as "valuable" and challenged by one of the agency's elected board of directors as worthless. At stake are jobs--the study recommends cutting dozens of positions from RTD's administrative staff--and the way the agency structures its contracts with the private firms that operate one fourth of its bus routes.
The management study was controversial even before it was completed, largely because of the involvement of Mundle subcontractor Wendell Cox, an Illinois-based transportation analyst who is considered to be one of the leading advocates of transit privatization. Cox was a key player in drafting legislation in 1988 that required RTD to seek bids from private companies on no fewer than 20 percent of its routes; representatives of the agency's union drivers complained that an evaluation of RTD's privatization program by Cox could hardly be considered objective ("A Private Affair," January 24).
Although competitively bidding the private routes initially saved RTD more than 40 percent in operating costs compared with the public bus system, over the past six years the cost has risen precipitously. Union officials say that's because privatization is not the panacea it's made out to be and that union routes are now almost identical in cost. But the study claims that RTD made several mistakes in the way it structured its deals with private contractors that hiked operating costs by nearly 50 percent.
"It's almost as if they were doing everything in their power to make this as expensive as possible," says RTD boardmember Dave Bishop, a privatization backer. "We're talking a lot of money that went up in smoke."
By requiring the contractors to purchase 170 new buses for the routes, the study claims, RTD ended up paying a whopping $20 an hour more in costs that were passed on by the contractor, including depreciation and vehicle license fees and taxes. If RTD ends up exercising its option to purchase the buses at the end of the contracts, it will end up paying $51.3 million for three- to five-year-old buses--$15.8 million more than if RTD had paid cash for the buses at the outset. That works out to a total price tag of more than $300,000 per bus, $93,000 more than the cash price of a new bus.
The study notes that RTD took the pay-as-you-go approach to bus acquisition "because capital funds for routine bus replacement were not available." None of the RTD staff involved in issuing the contracts are still at the agency, but spokesman Scott Reed says that there was no pot of money available in-house to buy the buses--and any suggestion that the agency could have tapped into federal funds, which would have reduced the cost even more, would be a "huge assumption."
"At that point in time, we were also building light rail in the central corridor," Reed says. "There was a strain on our funds."
General manager Marsella, who arrived at RTD last year with a mandate to cut costs, agrees with the study's finding that there was "inadequate analysis" of the financial impact of the plan--and that the board of directors didn't receive enough information about what the arrangement would ultimately cost.
"What was perceived at the time as a good deal turned out not to be a good deal at all," Marsella says. "We're clearly not going to employ that contracting methodology in the future. You do end up with buses at the end, but at a great price."
But boardmember Karen Benker, a privatization skeptic, disputes the $300,000 price tag and defends previous management as "trying to save every dollar they could."
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"From the start, this was not an objective study," Benker says. "We know Wendell Cox is an advocate of privatization, and there are many ways to work the numbers to say what you want them to say."
Benker, who characterizes the Mundle study as "a waste of taxpayers' money," also takes issue with the study's recommendation of cutting 74 full-time employees. "I find that number very arbitrary," she says. "We're supposed to have 469 nonunion staff. In actuality, since so many people have left since last summer, we're down to 423 people. So this recommendation of cutting 74 people is meaningless; we're almost there by attrition. All of our top senior managers have left, along with a lot of our professional and technical people. We've had a real brain-drain of the operation."
Benker, who heads a committee reviewing the Mundle report, says she's uncertain what actions the board might take in response to the study. Marsella says his staff will have to do additional research before a decision is made about exercising the option to purchase the buses. In the meantime, the agency has had to issue a correction to a previous report to the state legislature indicating that the "true" costs of buses operated in-house were comparable to the costs of buses operated by private firms.
"Clearly, the legislature was left with the wrong impression," Marsella says. "There was an oversight there that won't be repeated in the future.