PUBLIC TRANSIT

Transit Agencies’ Use 

of Contracting to 

Provide Service

Report to Congressional Committees

September 2013

GAO-13-782

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-782, a report to 

congressional committees

September 2013

PUBLIC TRANSIT

Transit Agencies’ Use of Contracting to Provide 

Service 

Why GAO Did This Study

Some transit agencies have found that 

they can save money by contracting 

out some or all of their services with 

private providers, while others have 

found it more beneficial to use their 

own staff to provide services. The 

Moving Ahead for Progress in the 21st 

Century Act mandated that GAO 

review issues related to transit 

contracting. In this report, GAO 

identified: (1) the extent that public 

transit agencies contract operations 

and reasons why agencies decide to 

do so, (2) methods used to select and 

oversee contracted services, and (3) 

potential benefits, challenges, and 

disadvantages of contracting out public 

transit operations and other services. 

GAO conducted a web-based survey 

of 637 transit agencies that submit 

reports to the Department of 

Transportation (DOT) and obtained 

463 responses for a 73 percent 

response rate. The survey and results 

can be found at GAO-13-824SP. In 

addition, GAO interviewed federal 

officials, representatives from industry 

organizations, and national union 

officials. GAO also interviewed officials 

from 10 transit agencies, chosen 

based on a variety of characteristics, 

including geographic diversity, 

population served, use of contracting, 

and modes operated. At each transit 

location, GAO interviewed private 

transit providers, citizens’ advisory 

groups, and local unions. The results 

of the survey and interviews are not 

generalizeable to all transit agencies. 

GAO also reviewed relevant studies 

and literature on transit contracting.

GAO is not making recommendations 

in this report. DOT and Department of 

Labor reviewed a draft of this report 

and had no comments.

What GAO Found

Contracting is a prevalent means of providing transit services. About 61 percent 

of the 463 transit agencies responding to GAO’s survey reported they contract 

out some or all operations and services, while the rest reported that they do not 

contract out at all. According to GAO’s survey, paratransit (services for the 

disabled), demand response (also known as dial-a-ride), and commuter rail 

service are most often contracted out, and fixed-route bus, heavy rail, and light 

rail service are most often operated by the transit agency. Operations are most 

frequently contracted out, followed by maintenance services. Transit agencies 

most consistently cite reducing costs as a factor influencing their decision to 

contract. Contracting can reduce costs because contractors’ workforces are more 

flexible, with more employees working in part-time positions, and lower insurance 

costs, among other things. Transit agencies also frequently cited starting new 

service, improving efficiency, and allowing for more flexible service as reasons 

for contracting. State laws are generally not a reason for contracting, according 

to GAO’s survey. Transit agencies that do not contract most often cited one of 

these three reasons: desire to maintain control over operations, no reason to 

change from the transit agency’s providing service, or contracting was 

determined not to be cost effective. 

Transit agencies GAO surveyed use various methods to select contractors and 

oversee contractor performance. To select contractors, most agencies used 

competition with a request for proposals. For oversight, transit agencies most 

commonly used periodic reports or meetings, on-site inspections, performance 

metrics, and real time monitoring, according to GAO’s survey and interviews. 

About 84 percent of surveyed transit agencies that contract out services reported 

having a specific oversight unit. Of the nine transit agencies GAO interviewed 

that use contracting, seven used transit agency staff for monitoring, while two 

used contractors to perform this function. Seven of these agencies used 

performance metrics to establish incentives and/or penalties in contracts.

Transit agencies and contractors cited benefits and challenges to contracting, 

while labor unions primarily noted disadvantages—most notably, reduced wages 

and benefits and a potential decline in safety and service, among other issues. 

Specifically, transit agencies GAO interviewed and the literature cited benefits to 

contracting, which vary based on the individual needs and circumstances of 

transit agencies. For example, transit agencies that use contractors view 

contracting as advantageous when starting or expanding services in order to 

avoid start-up costs—such as the large capital cost of acquiring new vehicles and 

hiring new staff. Contractors reported they could improve transit agencies’ 

operational efficiency by providing the latest technologies, such as routing 

systems and lower costs by providing more affordable insurance on vehicles. 

Transit agencies also cited some challenges to contracting, such as the agency’s 

loss of direct control over operations. Officials from national and local unions 

GAO spoke with said that while contracting may provide some short-term cost 

savings to transit agencies, in their view the savings are almost entirely from 

lower wages and benefits paid by the private companies to employees. View GAO-13-782. For more information, 

contact David J.Wise at (202) 512-2834 or 

wised@gao.gov.
Page i GAO-13-782 Transit Contracting

Letter 1 

Background 3

Contracting Is a Prevalent Means of Providing Transit Services 5

Transit Agencies Use Many Methods to Select and Oversee 

Contractors 13

Transit Agencies and Contractors Cite a Mix of Benefits and 

Challenges of Contracting; Unions Primarily Note Disadvantages 17

Concluding Observations 25

Agency Comments 25

Appendix I Objectives, Scope, and Methodology 27

Appendix II GAO Contact and Staff Acknowledgments 31

Tables

Table 1: Of Transit Agencies That Contract, Percentage That 

Contract Out Different Aspects of Operations, by Mode 7

Table 2: Top Factors Considered by Transit Agencies when 

Deciding to Contract Service, by Mode 8

Table 3: Of Transit Agencies That Do Not Contract Some or All 

Operations, Percentage That Reported Reasons for Not 

Contracting 12

Table 4: Transit Agencies, Contractors, Local Unions, and Citizens’ 

Advisory Groups Interviewed, by Location 28

Figures

Figure 1: Number of Surveyed Transit Agencies That Do and Do 

Not Contract Services, by Mode 6

Figure 2: Of Transit Agencies That Contract, Number That Use 

Each Method for Selecting Contractors 14

Figure 3: Of Transit Agencies That Contract, Number That Use 

Each Method for Assessing Quality of Contracted Services 16

Contents 
Page ii GAO-13-782 Transit Contracting

Abbreviations

ADA Americans with Disabilities Act of 1990 

ATU Amalgamated Transit Union

DART Dallas Area Rapid Transit

FTA Federal Transit Administration 

MAP-21 Moving Ahead for Progress in the 21st Century Act

METRA Chicago Metropolitan Rail Authority 

RLA Railway Labor Act

RTA Nashville Regional Transportation Authority

RTD Denver Regional Transportation District

TWU Transport Workers Union

WMATA Washington Metropolitan Area Transit Authority

View GAO-13-824SP Key Components

Public Transit: Survey of Public Transit Agency Officials on Contracting 

Out Public Transit Operations and Other Services (GAO-13-824SP), an 

e-supplement to GAO-13-782. 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-13-782 Transit Contracting

441 G St. N.W.

Washington, DC 20548

September 26, 2013

The Honorable Tim Johnson

Chairman

The Honorable Mike Crapo

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable Bill Shuster

Chairman

The Honorable Nick J. Rahall, II

Ranking Member

Committee on Transportation and Infrastructure

House of Representatives

Millions of passengers use transit services on a daily basis in the United 

States, and many of the local transit agencies that provide these services 

receive federal funding. To meet the needs of these passengers in a 

challenging economy, transit agencies need to use federal and other 

resources wisely, while also ensuring quality and safe service. Some 

transit agencies have found that they can save money by contracting out 

some or all of their services with private contractors, while others have 

found it more beneficial to use their own staff to provide services.

The Moving Ahead for Progress in the 21st Century Act (MAP-21) 

mandated that GAO report on a number of issues related to transit 

contracting to the House Committee on Transportation and Infrastructure 

and the Senate Committee on Banking, Housing, and Urban Affairs.1

To determine the extent transit agencies contract public transit operations 

and other services, the factors they consider when deciding to contract, 

In 

this report, we identify (1) the extent that transit agencies contract public 

transit operations and services and reasons for doing so, (2) methods 

transit agencies use to select and oversee contracted services, and (3) 

potential benefits, challenges, and disadvantages of contracting out public 

transit operations and other services.

 

1

Pub. L. No. 112-141, § 20013, 126 Stat. 405, 693-694 (July 6, 2012).

 
 

Page 2 GAO-13-782 Transit Contracting

and the methods used to select contractors, we surveyed all 637 transit 

agencies that reported to the Federal Transit Administration’s (FTA) 

National Transit Database in 2011 and that operate fixed-route bus; 

demand response; the Americans with Disabilities Act of 1990 (ADA) 

paratransit; and/or heavy, light, or commuter rail service. We received 

responses from 463 transit agencies for a response rate of 73 percent.2

Estimates and responses to survey questions in this report refer only to 

the views of the respondents. The survey was a census and we did not 

try to extrapolate the findings to the agencies that chose not to respond. 

For further information on our survey, see appendix I. We also 

interviewed FTA officials responsible for maintaining the National Transit 

Database to gather information about the type of information collected 

about transit contracting. To provide additional insight on the reasons 

transit agencies decide to contract, methods they use to select and 

oversee contracted services, and potential benefits, challenges, and 

disadvantages of contracting out public transit operations and other 

services, we interviewed officials from 10 transit agencies. We 

judgmentally selected these transit agencies to provide a range of 

geographic locations, populations served, transit modes, agency sizes, 

and contracting practices. At each location, we interviewed private transit 

contractors, citizens’ advisory groups, and local unions.3

We conducted this performance audit from October 2012 to September 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

The interviews 

from these locations are not generalizable to all transit agencies. In 

addition, we interviewed officials from the American Public Transportation 

Association, Community Transportation Association of America, and 

national labor unions representing operators and maintenance workers, 

as well as Federal Railroad Administration officials regarding their 

oversight role for commuter rail services. We also performed a literature 

review of transit contracting studies and articles. Further details on our 

scope and methodology can be found in appendix I.

 

2

Responses to that survey are found in GAO-13-824SP (e-supplement).

3

Some locations did not have an active citizens’ advisory group, so we could not interview 

its members. In some cases, the same private provider served more than one of the 

transit agencies that we selected for interviews. In these cases, we interviewed each 

private transit provider once and obtained their views related to their contracts nationwide.
 

Page 3 GAO-13-782 Transit Contracting

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

Transit agencies provide transportation services in a variety of ways. For 

purposes of this report, we used the following descriptions of 

transportation modes:

• Fixed-route bus service: rubber-tired passenger vehicles operate on 

fixed routes and schedules over roadways. Diesel, gasoline, battery, 

or alternative fuel engines power vehicles. This category also includes 

bus rapid transit, commuter bus, and trolley bus.

• ADA paratransit: vehicles operate in response to calls or requests 

from passengers. It uses buses, vans, or taxis to provide 

complementary ADA paratransit service for individuals with disabilities 

who are unable to use a fixed-route system. These services are 

associated with or attributed to ADA compliance requirements.4

• Demand response (also referred to as dial-a-ride): vehicles 

operate in response to calls or requests from passengers. Demand 

response uses small buses, vans, or taxis to provide transportation 

service that is not on a fixed route or schedule. For example, 

transportation may be provided for individuals whose access may be 

limited, or whose disability or health condition prevents them from 

using the regular fixed-route bus service. For purposes of this report, 

we have defined these services as unrelated to ADA requirements.

• Commuter rail: vehicles operate along electric or diesel-propelled 

railways and provide train service for local, short distance trips 

between a central city and adjacent suburbs.5

 

4

Paratransit service is defined in Department of Transportation regulations as 

“comparable transportation service required by the ADA for individuals with disabilities 

who are unable to use fixed route transportation systems.” 49 C.F.R § 37.3.

5

Commuter rail operations are covered under the Railway Labor Act (RLA). Special 

bargaining dispute resolution procedures applicable to publicly owned and operated rail 

commuter carriers were added in 1981. 45 U.S.C. § 159a. The RLA is administered by the 

National Mediation Board, an independent federal agency.

Background 
 

Page 4 GAO-13-782 Transit Contracting

• Heavy rail: vehicles operate on electric railways with high-volume 

traffic capacity. This mode has separated rights-of-way, sophisticated 

signaling, high platform loading and high-speed rapid-acceleration rail 

cars operating singly or in multi-car trains on fixed rails.

• Light rail: vehicles operate on electric railways with light-volume 

traffic capacity. The mode may have either shared or exclusive rightsof-way, low or high platform loading, or single or double car trains.

The transit contracting industry in the United States is characterized by a 

few large providers that operate nationwide, some mid-size regional 

providers, and numerous small, local providers that primarily operate bus, 

demand response, and ADA paratransit service. Transit agencies can 

contract out various aspects of their operations with contractors, such as 

operating the service, vehicles, maintenance, security, and administrative 

services. Contracting arrangements can range from the transit agency’s 

contracting out all aspects of its operations, as is the case for a delegated 

management contract, to contracting out only one component of 

operations, such as maintenance.

The federal government has a limited role in overseeing transit 

contracting. FTA tracks transit agencies’ contracting practices through 

reports submitted by transit agencies to the National Transit Database. 

Additionally, FTA oversees transit contracting, along with other aspects of 

transit agencies’ operations, through procurement reviews and triennial 

reviews that focus on whether transit agencies have followed federal 

regulations and have appropriate systems in place for contracting, among 

other things. The Federal Railroad Administration oversees commuter rail 

operations but does not conduct any reviews of contracting practices. The 

Department of Labor is responsible for issuing what is commonly referred 

to as “Section 13(c)” certifications, which certify that fair and equitable 

labor protection arrangements are in place for employees who may be 

affected by certain grants of federal financial assistance.6

 

6

When federal funds are used to acquire, improve, or operate a transit system, federal law 

requires arrangements to protect the rights of affected transit employees. 49 U.S.C. § 

5333(b). These arrangements must be approved by the Department of Labor before FTA 

can release funds to grantees. The terms and conditions of the protective arrangements 

are included in the grantee’s agreement with FTA.

When existing 

transit service is contracted out, Section 13(c) protections may be 

triggered, including assurances of employment and priority of 

reemployment. According to officials at the Department of Labor, after a 
 

Page 5 GAO-13-782 Transit Contracting

search of their records and to the best of their knowledge, there has 

never been an instance where a transit agency has been unable to 

contract out public transit operations and other services because doing so 

would jeopardize Section 13(c) certification from the Department of Labor.

Contracting is a prevalent means of providing transit services, with about 

61 percent of the 463 transit agencies that responded to our survey 

reporting they contract out some aspect of their operations. By size of 

agency, 52 percent of small agencies, 69 percent of medium agencies, 

and 92 percent of large agencies had at least one service that they 

contracted out.7

According to our survey, among the agencies providing such services, 

paratransit, demand response, and commuter rail are more likely to be 

contracted out, and fixed-route bus, heavy rail, and light rail are most 

often operated by the transit agency. Among the approximately 61 

percent of surveyed agencies that reported contracting, more agencies 

reported contracting for ADA paratransit than for any other service.

Results from our survey shows that of 359 respondents that provide ADA 

paratransit services, 204, or 57 percent, contract out this service. Seven 

of the 10 transit agencies we interviewed also contract out ADA 

paratransit services. (See fig. 1.)

 

7

We defined small agencies as those serving a population less than or equal to 200,000, 

medium agencies as those serving a population between 200,001 and 1,000,000, and 

large agencies as those serving a population greater than 1,000,000. 

Contracting Is a 

Prevalent Means of 

Providing Transit 

Services 

Extent of Contracting
 

Page 6 GAO-13-782 Transit Contracting

Figure 1: Number of Surveyed Transit Agencies That Do and Do Not Contract 

Services, by Mode 

Note: The numbers in this figure and the rest of the tables and figures throughout the report refer to 

the number of transit agencies that responded to a particular question and may not be consistent 

throughout the report. For example, 396 transit agencies indicated that they provide fixed-route bus 

service, but only 395 responded to the question about whether or not they contract out service.

Interviewees report that contracting ADA paratransit occurs for various 

reasons, including the following:

• ADA paratransit requires specialized training and equipment that can 

be difficult to provide because agencies may lack staff, expertise, or 

resources needed to train workers, according to a transit agency 

official we interviewed.
 

Page 7 GAO-13-782 Transit Contracting

• Contracting for this service can be more cost effective than providing 

the service in-house. According to an industry group we spoke with, 

ADA paratransit operations are very expensive and for agencies, 

contracting this service is viewed as a way to potentially save money.

• Contracting ADA paratransit allows agencies to remove themselves 

from the day-to-day operations and reduces the risk and liability 

associated with operational responsibility, according to another transit 

agency official we interviewed.

We found the extent that surveyed transit agencies contract varies by 

type of service, but among transit agencies that contract out, operations 

are most often contracted across all modes, followed by maintenance 

services. (See table 1.)

Table 1: Of Transit Agencies That Contract, Percentage That Contract Out Different Aspects of Operations, by Mode

Heavy and light 

rail (N=7)

Fixed-route 

bus (N=167)

Demand response 

(N=133)

ADA paratransit 

(N=204) 

Commuter rail 

(N=19)

Operations 71% 96% 97% 97% 95%

Maintenance 71 83 78 75 89

Security 57 31 24 26 58

Administrative services 43 72 72 73 63

Vehicles 29 26 47 40 37

Other 14 11 9 11 21

Source: GAO survey, April 2013.

Note: Responses do not add to one hundred percent because agencies were able to select more 

than one category. The other category includes scheduling, dispatching, reservations, ticketing, grant 

management services, and training. Heavy and light rail are combined due to the small number of 

agencies providing this service and similarities between the modes.

As shown in table 1, in each of the modes, less than half of the agencies 

that contract out include vehicles in their contracts. In our interviews with 

transit agencies and contractors, officials told us that transit agencies 

generally provide their own vehicles for several reasons:

• Owning vehicles gives the agency more flexibility to terminate a 

contract if needed, because it can be very difficult for an agency to 

quickly find another contractor with vehicles to provide continuous 

service.

• Purchasing and owning vehicles used in the transit service can attract 

bidders who would otherwise be hesitant to buy expensive vehicles 
 

Page 8 GAO-13-782 Transit Contracting

without the assurance that they would be used beyond the initial 

length of the contract.

• Owning the vehicles gives the agency more control in making 

decisions about vehicle replacement or major repairs, such as 

replacing engines or transmissions. This can lower costs because the 

contractor may anticipate and budget for these costs in a contract 

without knowing for certain if they will be needed, in order to minimize 

their own risk.

According to our survey, the factors that transit agencies considered 

when deciding to contract a particular mode of service vary based on the 

mode and by needs of individual transit agencies. (See table 2.)

• For fixed-route bus, demand response, and paratransit service, the 

factors that were considered most often were reducing costs and 

improving efficiency.

• For commuter rail, the factors that were considered most often were 

starting new service and improving efficiency.

• For heavy and light rail, the factors that were considered most often 

were starting new service and being directed to contract by the Board 

of Directors.

Table 2: Top Factors Considered by Transit Agencies when Deciding to Contract Service, by Mode

Heavy and 

light rail (N=6)

Fixed-route 

bus (N=160)

Demand response 

(N=122)

ADA paratransit 

(N=200)

Commuter rail 

(N=18)

To reduce costs 33% 68% 70% 74% 39%

Starting new service 67 43 41 33 83

To improve efficiency 33 61 58 59 56

To allow for more flexible service 33 41 54 46 44

Directed to contract by Board of 

Directors 50 23 20 23 44

To provide higher quality service 33 36 44 38 44

Source: GAO survey, April 2013.

Note: This table lists the categories with the highest percent of responses. Other potential responses 

with lower percentage of responses included expanding existing services; lack of availability of 

funding, equipment, or facilities to expand or start service; federal funds were available for 

contracting; and to meet state mandate or law. The table includes the responses of agencies that 

decided to contract out. Below we will discuss the top three reasons for contracting out service. 

Heavy and light rail are combined due to the small number of agencies providing this service and 

similarities between the modes.

Reasons for Contracting 

Decisions
 

Page 9 GAO-13-782 Transit Contracting

Our literature review indicated these factors vary because needs and 

costs vary by mode, as well as the individual needs of transit agencies. 

Thus, for one transit agency, the cost of procuring vehicles and building 

facilities and expertise needed to operate the service may be a 

paramount concern, whereas it may be less of a concern for others. For 

example, commuter, heavy, and light rail services have high start-up 

costs because of the infrastructure and vehicles needed to operate the 

service, and, as supported by our survey results, starting new service is a 

primary factor in their decision to contract out for service. For fixed-route 

bus, demand response, and paratransit services, the start up costs are 

typically much lower. As a result, transit agencies may place more 

importance on reducing costs or providing more efficient service when 

making the decision to contract out for service.

Reducing costs. Although the factors that affect the decision to contract 

vary across modes, reducing costs is consistently taken into account, 

according to our survey, interviews, and literature review. The previous 

table shows that among our survey respondents that contract out, 

reducing cost was the most often cited factor. This finding was supported 

by our interviews with transit agency officials and the literature, which 

indicated that wage rates are lower for contracted drivers and operators, 

in part because:

• Contractors can “reset” wage rates to the market rate by hiring new 

operators at entry-level wage rates, according to some contractors we 

interviewed.

• Contractors may not always provide pensions and other benefits for 

contract workers.

• Contractors may have lower health insurance rates for their 

employees because of the large number of employees under their 

coverage.

As we will describe later in this report, unions have concerns regarding 

the lower wages and benefits for contract workers.

Some agencies, such as the Washington Metropolitan Area Transit 

Authority (Washington, D.C.) and the Metropolitan Rail Authority (Metra) 

(Chicago, Illinois), have found it more cost effective to contract out a 

portion of their services. Officials from the Washington Metropolitan Area 

Transit Authority told us that it is more cost effective for contractors to 

provide ADA paratransit service because of their reduced labor costs. 
 

Page 10 GAO-13-782 Transit Contracting

Officials at Metra said they would not achieve cost savings by directly 

operating two of their commuter rail services currently contracted out to 

the Burlington Northern/Santa Fe and Union Pacific Railroads. Officials 

stated that first, the freight railroads own the track and they would not be 

able to negotiate new track agreements with the railroads that would 

produce any more cost savings than what is in their present agreement.

Second, they gain efficiencies from sharing certain overheads such as 

management personnel and facilities. If Metra had to create separate 

standalone facilities and staffing, this would be more expensive. Third, if 

Metra directly operated the service, then both Burlington Northern/Santa 

Fe and Union Pacific Railroad employees would be brought under Metra’s 

collective bargaining agreements, which pay a higher wage rate than the 

freight railroads.

Starting new service. According to survey respondents as well as transit 

agency officials and contractors that we interviewed, transit agencies may 

contract out in order to avoid high start-up costs, including the cost of new 

services, procuring new vehicles, hiring staff, and obtaining facilities. For 

example, officials from the Nashville Regional Transportation Authority 

(Nashville, Tennessee) told us that they contract their commuter rail 

service because they lacked facilities to house or maintain their vehicles. 

Also, contracting out services can enable agencies to offer services they 

would otherwise not be able to provide—such as service that is located 

away from their main service area—because it is not cost effective. For 

example, while New Jersey Transit directly operates some of its services 

including fixed-route bus service, officials said when they create new 

services or expand other services it makes more sense for them to 

contract out, particularly in areas that lack a service garage or where 

there would be long travel times to where drivers store their vehicles at 

the end of the day.

In addition, from our interviews, we found that some transit agencies 

contract out when starting new service because they do not have the 

capability to perform transit services in-house. For example:

• New Orleans Regional Transit Authority (New Orleans, Louisiana) 

entered into a 10-year delegated management contract with a 

contractor that covers all planning, operations, and maintenance to 

quickly restore and rebuild the transit services and infrastructure that 

hurricane Katrina destroyed.

• Yuma County Intergovernmental Public Transportation Authority 

(Yuma, Arizona) contracts out all operations and maintenance for both 
 

Page 11 GAO-13-782 Transit Contracting

its fixed-route bus and ADA paratransit services because it has only 

been in existence a short time and has not developed the capability to 

perform these services in house.

Improved efficiency and flexibility: According to our survey, improved 

efficiency and flexibility are two other primary considerations for 

contracting out service. Contractors and transit agency officials that we 

interviewed said that in some cases, contractors can operate more 

efficiently by having operators split their time between transit during the 

peak hours and other services, such as charter services—which are not 

typically provided by transit agencies—during other times of the day.

Also, contractors may be able to provide service at a lower cost because 

their workforce is more flexible, with a greater number of employees 

working in part-time positions, resulting in decreased wage and benefit 

costs. According to one contractor we interviewed, offering part-time 

employment or flexible schedules may be also preferable for some 

employees.

Other factors. Legislative requirements that mandate or limit a transit 

agency from using a certain level of contracting, is another reason that 

can influence certain agencies’ decisions to contract out service.

However, state laws were not a leading factor in contracting decisionmaking, according to our survey respondents and seven transit agency 

officials that we interviewed.8

 

8

This was not cited as one of the top factors in our survey because only a limited number 

of states have such mandates, and only transit agencies in those states would cite this as 

a factor.

For example, the state of Colorado limits 

the amount of contracting used by the Denver Regional Transit District 

(Denver, Colorado) to 58 percent. According to agency officials whom we 

interviewed, the cap on contracting has not had much impact on the 

agency’s contracted services, which are currently about 56 percent of 

their bus and ADA paratransit operations. At the federal level, as 

described previously, when existing transit service is contracted out, 

Section 13(c) protections may be triggered, including assurances of 

employment and priority of reemployment. At all nine of the transit 

agencies we interviewed that use contracting, transit agency officials said 

that provisions of Section 13(c) have not been a deterrent to contracting; 

however, some transit agencies that responded to our survey reported 

that challenges presented by Section 13(c) are a reason for not 

contracting out service.
 

Page 12 GAO-13-782 Transit Contracting

Agencies that do not contract out any transit services or that contract out 

some, but not all aspects of their operations, also do so for reasons that 

vary by mode. As shown in table 3, for all modes except commuter rail, 

the top three reasons to not contract are that the agency desired to 

maintain control over operations, found no reason to change from the 

transit agency providing service, or found contracting was not cost 

effective. For commuter rail services, cost effectiveness was not among 

the primary reasons transit agencies reported for not contracting out 

service.

Table 3: Of Transit Agencies That Do Not Contract Some or All Operations, Percentage That Reported Reasons for Not 

Contracting

Heavy and light 

rail (N=26)

Fixed-route bus 

(N=272)

Demand response 

(N=100)

Paratransit 

(N=182)

Commuter rail 

(N=4)

Want to maintain control over 

operations 62% 67% 66% 61% 50%

No reason to change to 

contracting 31 56 50 46 50

Contracting was not found to be 

cost effective 27 28 26 33 0 

Challenges presented by Section 

13(c) 19 19 9 14 25

Contracting is not allowed in union 

contract 15 20 4 11 25

Source: GAO survey, April 2013.

Note: The transit agencies whose responses are represented in the table are the survey respondents 

that did not contract out for any services or that do not contract out for some portion of their services. 

The responses do not add to 100 percent because agencies had the option of selecting more than 

one reason. Heavy and light rail are combined due to the small number of agencies providing this 

service and similarities between the modes.

Of the transit agencies that we interviewed, one transit agency does not 

contract out for any service and five transit agencies only contract out 

some modes, and they cited similar reasons as our survey respondents 

for their decisions not to contract out service. One transit agency that we 

interviewed that did not contract out any service—Western Maine 

Transportation Service (Auburn, Maine)—said that they never considered 

contracting. Transit agency officials stated that this was due in part to

difficulty in finding a contractor willing to implement a costly drug and 

alcohol program that met FTA standards and also because the cost to 

contract out maintenance services would have been more expensive than 

directly operating it themselves, according to a comparative analysis 

performed by the transit agency of the cost to contract out versus the cost 

of operating it themselves. In addition, one transit agency contracted out 
 

Page 13 GAO-13-782 Transit Contracting

service in the past and decided to bring the service back in-house. Dallas 

Area Rapid Transit (Dallas, Texas) used to use a contractor for its fixedroute bus service and later decided to provide the service using transit 

agency staff because, according to officials, in addition to local economic 

conditions and declining sales tax revenues, the contractor was not 

meeting service requirements and key performance indicators for 

maintenance of transit agency-owned vehicles. More recently, beginning 

in fiscal year 2012, the agency decided to keep operation of certain bus 

routes in-house after an analysis determined that the agency’s costs to 

operate the service were lower than the privately contracted options.

According to our survey responses, transit agencies use several methods 

to select contractors. (See fig. 2.) The most common method (used by 

200 transit agencies that responded to our question) is competition 

through a request for proposals, wherein the transit agency solicits offers 

for the service to be provided. 

Fewer than 50 transit agencies that responded to our survey that use 

contracting use each of the following methods:

• orders under pre-existing contracts, 9

• sole source or preferred vendors, 

• exercising a contract option,10 and

• selection from a list of preferred vendors.

 

9

Some contracts permit customer agencies to place orders for goods and services when 

specific needs arise.

10To exercise an option means to use a provision in an existing contract to extend the 

term of that contract.

Transit Agencies Use 

Many Methods to 

Select and Oversee 

Contractors 

Contractor Selection
 

Page 14 GAO-13-782 Transit Contracting

Figure 2: Of Transit Agencies That Contract, Number That Use Each Method for 

Selecting Contractors

Note: “Exercise of contract options” was not listed as a potential survey response. “Other” was listed 

as a survey response with the option to write in a response, and 38 respondents indicated that they 

exercised a contract option.

Officials we interviewed at eight of the nine transit agencies that use 

contracting said that they had at least three offers in response to their 

most recent solicitations for each mode operated, except when obtaining 

offers for the operation of their commuter rail services. Officials noted that 

it might not be cost effective for other contractors to make an offer on 

some commuter rail contracts because of specific circumstances, such as 

one contractor owning the tracks.

In selecting a contractor, transit agencies may be required to consider 

potential conflicts of interest. Nearly all (99 percent) of the agencies that 

we surveyed that use contracting have an ethics policy or standards in 

place that prohibit conflicts of interest. Furthermore, nearly all (99 

percent) consider federal law, regulations, and guidance prohibiting 

conflicts of interest for contractor employees and businesses when 

contracting out.

Once the transit agency makes the decision to contract and selects a 

contractor, the two parties enter into a contract. Among other things, the 

contract specifies compensation, which can be structured in several 

ways. It may specify fixed-price compensation, which is based on a set 
 

Page 15 GAO-13-782 Transit Contracting

price. For example, the payment may be a fixed amount per month. 

Compensation can also be hourly, so that the contractor pays based on 

the number of hours that the service is provided, which can be for the 

number of hours when the transit service is collecting fares or from the 

time the vehicles leave the facility until they return. Finally, the contractor 

can be compensated on a per-trip or per-mile basis, wherein the transit 

agency pays based on the number of trips provided or miles travelled. 

According to our survey, transit agencies structure compensation in their 

contract in various ways, including fixed price, price per revenue service 

based on hours or miles, price per vehicle miles or hours, and number of 

passenger trips provided. Contracts also specify the terms of service. For 

transit agencies that we interviewed, the most common contract term—

used by six of the nine transit agencies that use contracting—was a 5-

year initial contract period, sometimes including the option to extend into 

additional years. With respect to public access to contracts, federal 

regulations require transit agencies that enter into contracts using FTA 

grants to use their own procurement procedures that reflect applicable 

state and local laws and regulations.11 Of the transit agencies that 

responded to our survey that contract out, 92 percent allow public access 

to all of their contract documents, 6 percent allow public access to some 

of their contract documents, and 1 percent do not allow public access to 

any of their documents.12

Transit agencies reported undertaking a variety of activities to assess the 

quality of contracted services. Among our survey respondents that 

contract out services, the most commonly used methods are periodic 

reports or meetings, on-site inspections, the use of performance metrics, 

and real time monitoring. (See fig. 3.) About 84 percent of the surveyed 

transit agencies that contract out services reported having a specific unit 

or department to conduct oversight.

 

1149 C.F.R. § 18.36(b)(1).

12Percentages do not add to 100 due to rounding.

Contractor Oversight
 

Page 16 GAO-13-782 Transit Contracting

Figure 3: Of Transit Agencies That Contract, Number That Use Each Method for 

Assessing Quality of Contracted Services

Note: Agencies could select more than one category.

Transit agency officials whom we interviewed described how they use 

various methods, arrangements, and metrics they use to oversee 

contractor performance. For example:

• Officials at all of the nine agencies that use contractors told us that 

they oversee contractors’ performance through activities such as 

routinely communicating with their contractors, either through periodic 

meetings or on as needed basis; inspecting contractors’ facilities or 

vehicles; and/or using real-time monitoring devices installed on 

vehicles.

• Seven of the nine agencies use in-house staff to monitor the 

contractor’s performance, while two use third-party contractors to 

perform this function. For example, in March 2013, the Washington 

Metropolitan Area Transit Authority signed a contract with a company 

to oversee the performance of the three transit contractors that 

operate its ADA paratransit services. Officials told us that using 

contractors to oversee the day-to-day performance of the contractors 
 

Page 17 GAO-13-782 Transit Contracting

frees up in-house staff for more high-level oversight and 

management.

• Seven of the nine agencies that contract out for some or all of their 

transit services use metrics to establish performance incentives 

and/or penalties in contracts. For example, the Denver Regional 

Transit District uses a set of performance metrics, such as on-time 

performance and the number of complaints received from customers 

to measure the contractor’s performance for its fixed-route bus 

service. The performance metrics are used to determine performance 

incentives or penalties. Likewise, officials from the New Orleans 

Regional Transit Authority said that they include performance 

incentives and penalties in their delegated management contract. 

Among the contract’s provisions is a requirement for the contractor to 

reduce costs by 25 percent (adjusted for inflation) within 5 years in 

order to receive an automatic extension. The contractor said that it 

has already met this goal by focusing on safety throughout the 

organization, a focus that has reduced claim costs and related 

expenditures. Also, the contractor has changed the maintenance 

procedures and fleet operations and better managed the inventory of 

parts, which have also enhanced cost efficiencies. According to the 

contractor, during this 5-year period it has experienced increased 

service and ridership levels while meeting its cost-reduction goals. 

Conversely, officials from Yuma County Intergovernmental Public 

Transportation Authority do not include performance incentives in their 

contracts because they expect the contractor to always perform at a 

high level of service; however, they do have penalties for certain 

violations such as accidents.

Transit agency officials whom we interviewed and the literature we 

reviewed cite potential benefits to contracting for transit agencies, which 

Transit Agencies and 

Contractors Cite a 

Mix of Benefits and 

Challenges of 

Contracting; Unions 

Primarily Note 

Disadvantages 

Transit Agencies’ Views
 

Page 18 GAO-13-782 Transit Contracting

may vary based on the needs and circumstances of individual transit 

agencies.

• Contracting can be used to start or expand service. According to our 

literature review, transit agencies view contracting as advantageous 

when new services need to be established quickly, based on the 

assumption that private firms can mobilize faster than a public 

agency.13 Also, we have previously mentioned that starting new 

service is a primary consideration for contracting out service, 

according to our survey respondents (see table 2). Transit agencies 

contract out for new services in order to avoid the high start-up costs, 

including the cost of new services, procuring new vehicles, hiring staff, 

and obtaining facilities, according to transit agency officials that we 

interviewed. In addition, a 2005 study found that transit agencies use 

contracting to try out new service, as one agency did to provide new

lines in outlying areas, because managers suspected that those new 

lines would have very low ridership and would not be cost effective. 

That study indicated that, according to the manager, contracting was 

more efficient because the contractor used smaller vehicles and had 

lower labor costs than the transit agency.14

• Contracting can be used to maintain service levels. According to our 

survey respondents’ write-in answers on how transit service 

contracting has met their expectations, three transit agencies reported 

that contracting for certain services has allowed the transit agency to 

maintain service that would have been discontinued due to budget 

reductions. For example, one transit agency that contracts out its 

paratransit service with a ridership of about 52,000 per month 

reported that this service would have been cut due to cost constraints 

were it not for contracting.

• Provides access to contractor’s expertise and resources. Two of the 

10 transit agency officials whom we interviewed contract to gain the

expertise and the resources that a contractor can bring to their transit 

 

13Martin Wachs, Karen Trapenberg Frick, and Brian Taylor, Contracting for Public Transit 

Services in the US: Evaluating the Tradeoffs, in OECD/ITF, Privatisation and Regulation 

of Urban Transit Systems, OECD Publishing (2008).

14Hiroyuki Iseki, Amy Ford, and Rachel J. Factor, “Contracting Practice in Fixed-Route 

Transit Service: Case Studies in California,” Transportation Research Record: Journal of 

the Transportation Research Board, 1927 (2005).
 

Page 19 GAO-13-782 Transit Contracting

operation. For example, according to New Orleans Regional Transit 

Authority officials, the agency used a contractor because the officials 

felt that the contractor had the expertise and experience to lead the 

agency back to full recovery after Hurricane Katrina.

• Shifts risk of providing service to contractor. According to a 2007 

study, when contracting for operation of services requiring buses, the 

transit industry has moved toward providing the vehicles and even the 

maintenance facility to a contractor.15

In addition to these reported benefits and their associated cost savings, 

transit agencies and literature cite the following challenges to contracting 

out transit services, which may, in some cases, outweigh the benefits or 

cost savings:

As a result, the contractor 

assumes greater financial risk in terms of providing the insurance that 

is required for the vehicles. Transit agency officials we spoke with 

cited this transfer of risk as a benefit. For example, an official at Yuma 

County Intergovernmental Public Transportation Authority told us that 

contracting reduced the transit agency’s insurance costs by 45 

percent or more. Additionally, according to this official, insurance 

costs are typically higher for new transit authorities than for 

contractors, because they often do not have the same degree of 

experience operating transit services.

• Diminishes an agency’s direct control over operations. Based on 

studies of contracting, some transit agencies have not accepted 

contracting because it does not provide an economic benefit equal to 

the risks associated with delegating service control to a contractor.16

 

15Jeffrey C. Arndt and Linda K. Cherrington, The Role of Private-for-Hire Vehicles in 

Texas Public Transit, Texas Transportation Institute, The Texas A&M University System 

(2007). 

Specifically, according to this 2008 study, absent a compelling 

economic return that includes discounted future savings, in-house 

delivery of transit services is preferable because it provides managers 

with a direct line of authority to adjust services to meet a community’s 

demand for services or deal with unforeseen service events.

16See for example, Roland Zullo, “Transit contracting reexamined: determinants of cost 

efficiency and resource allocation,” Journal of Public Administration Research and Theory, 

(2008).
 

Page 20 GAO-13-782 Transit Contracting

• Requires a complex request for proposal and contract-monitoring 

process. Officials at two transit agencies told us that the contracting 

process is complex, long, and arduous. For example, officials from the 

Denver Regional Transportation District told us that they start the 

contract solicitation process approximately one year prior to the 

expiration of the existing contract. The process includes writing the 

scope of work, updating requirements (which includes getting input 

from various departments within the agency), issuing the request for 

proposal, evaluating the responses, negotiating with the selected 

contractor, and monitoring any start-up activities, thus costing the 

agency time and money. In addition, studies suggest that the costs of 

monitoring the contractor’s performance may, in some cases, 

outweigh the benefits. In particular, a recent study found that transit 

agencies may need to keep in-house staff to evaluate and monitor 

contracts, which can reduce efficiency gains and related cost 

savings.17 Another study suggests that the transaction costs that 

transit agencies incur when they draw up requests for proposals, 

evaluate offers, negotiate contracts, and monitor contracts with private 

providers could offset or even exceed cost savings from contracting 

transit service operation and management functions.18

• Requires transit agency to address labor issues. According to one 

study, transit agencies that are unionized must consider how 

organized labor would react to a contracting decision.19

 

17Suzanne Leland and Olga Smirnova, “Understanding Local Government’s Decision to 

Contract Out for Transit,” paper prepared for the Association for Budgeting and Financial 

Management Meeting, Washington, D.C. (2009). 

This study 

suggests that transit agencies face opposition to contracting from 

unions representing their employees. While a union may concede to 

contracting out new services, it tends to show much stronger 

opposition to contracting out existing services, which threatens union 

members’ current jobs. However, according to the study, while most 

agencies with some in-house service are sensitive to union resistance 

to contracting, they may also face financial distress and must find 

ways to increase cost efficiency. Under such conditions, agencies 

need to maintain a good relationship and open communication with 

the union. This situation enables both parties to work together to 

18Hiroyuki Iseki, “Effects of contracting on cost efficiency in U.S. fixed-route bus transit 

service,” Transportation Research Part A: Policy and Practice, 44 (2010).

19Iseki, Ford, and Factor, “Contracting Practice,” 88.
 

Page 21 GAO-13-782 Transit Contracting

simultaneously increase the cost efficiency of the in-house service 

while avoiding significant job losses due to contracting. Even when 

transit managers are aware of other strategies for increasing cost 

efficiency, they need cooperation and concessions from the union to 

implement them.

Contractors we interviewed cited the following benefits to contracting.

• Provides cost savings. Contractors told us that they are able to 

increase efficiencies while reducing costs to transit agencies. For 

example, one contractor told us that his company includes in its 

contracts with transit agencies technology for routing and scheduling 

that is proprietary and, therefore, not available to transit agencies 

outside of a contract. Another contractor told us that its contracts 

provide access to specialized routing technology, which transit 

agencies would otherwise have to spend a great deal of money to 

purchase. Also, according to another contractor, providing the 

insurance on the vehicles that it uses can be a significant savings 

depending on the size of the transit agency. As previously mentioned 

in this report, contracting can also be a way for transit agencies to 

potentially lower their health insurance costs. For example, 

contractors with large numbers of employees may have lower health 

insurance rates and be able to offer lower rates to their employees. As 

a result of these and other efficiencies, one contractor told us that if it 

were to exclude the cost of capital assets (vehicles and facilities) the 

operating costs for the contractor would be significantly lower, usually 

in the range of 15 percent to 35 percent. However, expected cost 

savings do not always come to fruition. For example, based on 

anecdotal evidence from our literature review, one transit agency 

brought transit services back in house after it found that its 

arrangement with its contractor was too expensive. The contractor 

had a 5-year contract that was terminated in less than 3 years.

• Provides access to contractor’s expertise and resources. Contractors 

also cited the expertise and resources that they can bring to a transit 

agency as a benefit to contracting. One contractor we interviewed told 

us that it brings specific knowledge and expertise in areas such as 

training, and resources, such as customer call centers, and thus 

allows the transit agency to focus on its own or management 

strengths. Additionally, another contractor told us that contracting 

allows a private company to provide resources that the transit agency 

does not have. For example, transit agencies might receive access to 

expertise for technical issues and labor negotiations, as well as 

Contractors’ Views
 

Page 22 GAO-13-782 Transit Contracting

discounted purchasing rates for fuel, vehicle parts, and other 

equipment, because of the large amount purchased by the contractor 

to cover several transit agencies’ operations.

• Increases labor flexibility. Contractors cited labor flexibility as a benefit 

to contracting. For example, according to one contractor, contracting 

offers the transit agency more labor flexibility, in that, if additional staff 

is needed to perform a particular service the contractor generally has 

greater flexibility to quickly bring in the needed staff, because it has 

the resources of the entire company, whereas the transit agency may 

be limited in that regard. Another contractor said that its company’s 

labor agreements are not very restrictive in terms of how the 

workforce is deployed or scheduled. For example, the contractor can 

cross-train staff, and if a dispatcher is needed to drive or a driver is 

needed to perform dispatching functions, its labor agreements 

generally allow those things to happen, which increases efficiencies.

The contractors we interviewed cited few challenges to contracting. Three 

of the six contractors we spoke to said that the capital investment that is 

required for a contract might prevent them from bidding. Also, according 

to one contractor, the biggest barrier that exists to contracting is transit 

agency funds. Transit agencies are sometimes forced into a contracting 

arrangement based on price rather than value because of funding 

constraints.

Officials at national and local unions we spoke with said that whereas 

contracting may provide some short-term cost savings to transit agencies, 

the savings are almost entirely from lower wages and benefits paid by the 

private companies to their employees. This statement is consistent with 

what we heard from some transit agencies regarding the source of cost 

savings associated with contracting. Recent studies we reviewed also 

suggest that this is the case. For example, one study of 12 transit 

agencies found that cost savings accrue primarily as a result of private 

transit labor consistently earning lower wages and fewer benefits 

compared to similar public sector employees.20

 

20Wachs, Trapenberg, and Taylor, Contracting for Public, 57-58.

Moreover, one local union 

official that we spoke with told us that the wages for the transit-agency 

bus operators it represents are generally higher than the contractors’ bus 

operators’ wages. A new bus driver starts at about $12-13 per hour for 

Union Views
 

Page 23 GAO-13-782 Transit Contracting

the contractors and $15 per hour for that transit agency, according to that 

union official. Additionally, this union official told us that while wages for 

contractor employees and transit agency employees tend to be at the 

same level at the top of the pay scale, it takes contractor employees 

longer to reach the top levels. However, according to national union 

officials, commuter rail employees covered under the Railway Labor Act 

receive comparable wages and benefits whether employed by transit 

agencies or contractors.

The national and local union officials we interviewed stated that 

contracting might lead to decreased level of safety, poor service quality, 

and hidden costs.

• Decreased level of safety. Local union officials we spoke with said 

that contracting decreases the level of safety, possibly because, in 

their view, contracted employees receive less training than transit 

agency employees. For example, one local union official told us that 

the local transit agency provides 8 weeks of classroom and on-theroad training whereas the contractors provide 5 weeks of training. 

Another local union official told us that the contractor reduced its 

training course to 2 weeks from 3 (the amount provided by the transit 

agency). In addition, one union official told us that privatized buses 

are not as safe as agency buses. For example, the official said that he 

had seen private buses on the road with side view mirrors held in 

place with duct tape. Two studies published since 2002 discussed the 

quality of contracted services, and one noted that contracted service 

had higher rates (by 70 percent) of vehicle collisions and the other 

reported that service quality may be lower among low cost contracted 

operators.21

 

21Wachs, Trapenberg, and Taylor, Contracting for Public, 57. Collision data are from a 

sample of approximately 320 transit agencies. 

However, as previously mentioned in this report, officials 

at all of the nine agencies we interviewed that use contractors told us 

that they oversee contractors’ performance through various activities, 

including inspecting contractors’ facilities or vehicles, and none of the 

officials that we interviewed raised concerns about safety. 

Additionally, one transit agency told us that officials inspect the 

contractors’ buses on a daily basis to determine their condition or 

whether preventive maintenance or repairs have been performed. The 

agency also reviews performance data related to customer 

complaints, on-time performance, accidents, and maintenance, which 

it compiles in a monthly performance report.
 

Page 24 GAO-13-782 Transit Contracting

• Poor service quality. Union officials we spoke with generally agreed 

that because contractors are profit driven, they may not have 

incentives to provide the same level and quality of service as the 

transit agencies. According to one union official, the contractor will 

only provide the level of effort mandated by the contract, whereas the 

agency will go above and beyond to ensure high-quality service.

Recent literature has discussed the quality of contracted services, 

with one study finding that contracted service had more vehicle 

breakdowns (by 36 percent).22

• Hidden costs. Union officials cited hidden costs incurred by transit 

agencies related to activities such as proposal evaluation and contract 

monitoring as a disadvantage to contracting. As previously mentioned 

in this report, transaction costs that public agencies incur when they 

draw up requests for proposals, evaluate offers, negotiate contracts, 

and, monitor contracts with private providers could offset or even 

exceed cost savings from contracting transit service operation and 

management functions. Moreover, one local union official we spoke 

with told us that privatization adds a level of management, which can 

create inefficiencies and duplication of effort. For example, he told us 

that one transit agency that he represents has two sets of street 

supervisors—one for the contractor and another for the transit 

agency—each doing the same work. Also, if a private contractor fails 

Anecdotal evidence from the literature 

shows that some contractors are having difficulties in providing quality 

service. For example, a contractor took over paratransit operations in 

a Florida county in the summer of 2012, and by May 2013, due to 

performance failures, such as vehicle breakdowns, accidents, 

maintenance requirements, and other problems; the county fined the 

contractor $2.2 million. The county has since directed the transit 

agency to find a second service provider by November 2013, to help 

provide paratransit services. Also, as discussed earlier, one transit 

agency that we interviewed ceased using a contractor for its fixedroute bus service because of concerns about service quality, among 

other issues. However, one union representative we spoke with 

thought that the quality of service may actually be better under a 

contractor, because contractors are penalized for not meeting 

performance measures, such as on-time performance, as discussed 

earlier in this report.

 

22Wachs, Trapenberg, and Taylor, Contracting for Public, 57. 
 

Page 25 GAO-13-782 Transit Contracting

to provide service on a route, the transit agency is ultimately 

responsible and must find other means to operate the route. 

According to our interviews with five of the six citizens’ advisory groups 

that are affiliated with transit agencies, the quality of service was 

generally viewed as being comparable whether provided by the transit 

agency or a contractor. The Denver Regional Transit District conducted a 

customer satisfaction survey and found no measurable difference in 

customer satisfaction between in-house and contracted services. In 

addition, Dallas Area Rapid Transit citizens’ advisory group said that the 

level of service has been good with contracting. Lastly, the advisory board 

for Metropolitan Rail Authority told us that the public generally does not 

know whether a contractor or the transit agency operates services.

Contracting is not a one-size-fits-all approach for providing transit 

services. For some transit agencies, contracting may be the most costeffective way to provide service, because transit agencies can benefit 

from access to certain technologies or reduced labor, fuel, and insurance 

costs. For other transit agencies, contracting may be impractical because 

of additional costs incurred from the bidding process and contractor 

oversight. Given our challenging economy, it is important that transit 

agencies are able to make decisions that allow them to use federal funds 

in the most efficient manner while also considering factors such as 

providing high quality service, regardless of whether these services are 

provided by transit agency employees or contractors.

We provided a copy of this report to the Department of Transportation 

and the Department of Labor for review. The agencies had no comment 

on the report.

We are sending copies of this report to interested congressional 

committees, the Secretary of the Department of Transportation, and the 

Secretary of the Department of Labor. In addition, this report will be 

available at no charge on GAO’s web site at http://www.gao.gov. 

Riders’ Views

Concluding 

Observations 

Agency Comments
 

Page 26 GAO-13-782 Transit Contracting

If you or your staff have any questions or would like to discuss this work, 

please contact me at (202) 512-2834 or wised@gao.gov. Contact points 

for our Offices of Congressional Relations and Public Affairs may be 

found on the last page of this report. Individuals making key contributions 

to this report are listed in appendix II.

David J. Wise

Director, Physical Infrastructure Issues
Appendix I: Objectives, Scope, and 

Methodology

Page 27 GAO-13-782 Transit Contracting

To comply with the Moving Ahead for Progress in the 21st Century Act 

(MAP-21) mandate we addressed the following questions: (1) What is the 

extent that transit agencies contract public transit operations and services 

and identify reasons for doing so? (2) What methods do transit agencies 

use to select and oversee contracted services? (3) What are the potential 

benefits, challenges, and disadvantages of contracting out public transit 

operations and other services?

To address our questions, we conducted a web-based survey of all 637 

transit agencies that reported to the Federal Transit Administration’s 

(FTA) National Transit Database in 2011 and operate fixed-route bus; 

demand response; ADA (Americans with Disability Act) paratransit; and 

heavy, light, or commuter rail services and asked about their contracting 

practices in 2011. We excluded transit agencies that received a reporting 

waiver. The survey was conducted from March 4, 2013, to April 23, 2013. 

To prepare the questionnaire, we pretested potential questions with 

transit agencies of different sizes and that operate all of the modes to 

ensure that (1) the questions and possible responses were clear and 

thorough, (2) terminology was used correctly, (3) questions did not place 

an undue burden on the respondents, (4) the information was feasible to 

obtain, and (5) the questionnaire was comprehensive and unbiased. On 

the basis of feedback from the four pretests we conducted, we made 

changes to the content and format of some survey questions. The results 

of our survey can be found at GAO-13-824SP. 

To identify transit agencies to survey, we conducted interviews with the 

appropriate FTA officials responsible for the National Transit Database to 

learn about information collected from transit agencies regarding transit 

contracting and obtain contact information. We contacted all of the transit 

agencies in advance, by e-mail, to ensure that we had identified the 

correct respondents and to request their completion of the questionnaire. 

After the survey had been available for 1 week, and again after 2 and 4 

weeks, we used e-mail and telephone calls to contact transit agencies 

who had not completed their questionnaires. Using these procedures, we 

received responses from 463 transit agencies for a response rate of 73 

percent. The results of our survey are not generalizeable to all transit 

agencies. Estimates and responses to survey questions in this report 

refer only to the views of the respondents. The survey was a census 

survey, and we did not try to extrapolate the findings to the agencies that 

chose not to respond. Because this was not a sample survey, there are 

no sampling errors. However, the practical difficulties of conducting any 

survey may introduce errors, commonly referred to as nonsampling 

errors. For example, difficulties in how a particular question is interpreted, 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 28 GAO-13-782 Transit Contracting

in the sources of information that are available to respondents, or in how 

the data are entered into a database or were analyzed can introduce 

unwanted variability into the survey results. We took steps in the 

development of the questionnaire, the data collection, and the data 

analysis to minimize these nonsampling errors. For instance, a survey 

specialist designed the questionnaire in collaboration with GAO staff who 

have subject-matter expertise. Further, the draft questionnaire was 

pretested with four transit agencies to ensure that the questions were 

relevant, clearly stated, and easy to comprehend. When the data were 

analyzed, a second, independent analyst checked all computer programs. 

Finally, we analyzed nonresponding transit agencies for evidence of bias. 

We found that transit agencies that provide heavy rail were less likely to 

respond to our survey than other transit agencies.1

To obtain in-depth information and contracting experiences from local 

jurisdictions, we interviewed transit agencies at ten sites across the 

country. (See table 4.) At each location, we attempted to interview private 

transit contractors, citizens’ advisory groups, and a local union. We 

judgmentally selected these locations based on geographic location, 

population served, transit modes, agency sizes, and contracting 

practices. The interviews from these locations are not generalizable to all 

transit agencies.

Table 4: Transit Agencies, Contractors, Local Unions, and Citizens’ Advisory Groups Interviewed, by Location

Location Transit agency Contractor Local union a Citizens’ advisory group b

Auburn, Maine

c

Western Maine 

Transportation Service

None None None

Bourbonnais, Illinois River Valley Metro Mass 

Transit District

First Transit Amalgamated Transit 

Union (ATU) Local 1745

None

Chicago, Illinois Chicago Metropolitan Rail 

Authority (METRA)

None None Citizens Advisory Board

Dallas, Texas Dallas Area Rapid Transit 

(DART)

MV Transportation ATU Local 1338 DART Citizens Advisory 

Committee

 

1

Among other things, MAP-21 required us to report on the size of populations served by 

contracted services and the extent of unionization among contracted employees, We 

included questions in our survey; however, we found the responses to these questions to 

be unreliable due to the large number of transit agencies that did not provide this 

information or selected “don’t know” as a response. 
Appendix I: Objectives, Scope, and 

Methodology

Page 29 GAO-13-782 Transit Contracting

Location Transit agency Contractor Local union a Citizens’ advisory group b

Denver, Colorado

c

Denver Regional 

Transportation District (RTD)

First Transit ATU Local 1001 RTD Customer Panel

Nashville, Tennessee Nashville Regional 

Transportation Authority 

(RTA) 

Transit Solutions 

Group

ATU Local 1235 None

Newark, New Jersey New Jersey Transit Twenty-First Century 

Rail Corporation

Transport Workers Union 

(TWU) International 

Representative on behalf 

of TWU Local 229

North Jersey Transit 

Advisory Committee, South 

Jersey Transit Advisory 

Committee, and Senior 

Citizens & Disabled 

Resident Transportation 

Advisory Committee

New Orleans, 

Louisiana

New Orleans Regional Transit 

Authority

Veolia None Special Transit Services 

Committee

Washington, D.C. Washington Metropolitan 

Area Transit Authority 

(WMATA) 

Diamond Transport None WMATA Accessibility 

Advisory Committee

Yuma, Arizona Yuma County 

Intergovernmental 

Transportation Authority

First Transit ATU Local 1433 None

Source: GAO.

a

If we obtained a national perspective on contracting from a contractor in one location, we did not 

interview officials affiliated with the same contractor at other sites we visited. In one location, we did 

not interview the contractor because the transit agency contracts with freight railroads to operate and 

maintain the service.

b

In some locations, the local union representative did not return our phone calls to set up interviews or 

did not wish to be interviewed. In one location, we did not interview the local union because the transit 

agency does not contract and in another location we did not interview the local union because we 

gathered commuter rail union perspectives at the national level.

c

We also interviewed the American Public Transportation Association, 

Community Transportation Association of America, and national labor 

unions representing operators and maintenance workers including the 

American Federation of Labor and Congress of Industrial Organizations, 

the Amalgamated Transit Union and the Transport Workers Union, 

International Brotherhood of Teamsters, and representatives of the 

following unions for commuter rail operators and maintenance workers—

International Brotherhood of Electrical Workers, Brotherhood of Railroad 

Signalmen, National Conference of Firemen & Oilers, Brotherhood of 

Maintenance of Way Employees Division, Sheet Metal Air, Rail and 

Transportation - Sheet Metal Workers’ International Association, 

Transport Workers Union, Transportation Trades Department, 

International Association of Machinists, Sheet Metal Air, Rail and 

Transportation-United Transportation Union, and the Brotherhood of 

Locomotive Engineers and Trainmen. We also interviewed Federal 

Some locations did not have an active citizens’ advisory group.
Appendix I: Objectives, Scope, and 

Methodology

Page 30 GAO-13-782 Transit Contracting

Railroad Administration officials regarding contracting of commuter 

services and Department of Labor officials to understand their role when 

transit agencies decide to contract out services.

We also reviewed and synthesized information from our body of work and 

relevant literature on contracting out transit services in the United States. 

We reviewed citations identified through a search of databases containing 

peer-reviewed articles, government reports, and “gray literature,” 

including Transport Research International Documentation, Social 

SciSearch, and PROQUEST.2

We conducted this performance audit from October 2012 to September 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

Publications were limited to the years after 

2001. After an initial review of citations, 37 articles were selected for 

further review. To collect information on the articles, we developed a data 

collection instrument to gather information on the articles’ scope and 

purpose, methods, findings and their limitations, and additional areas for 

follow-up, including a review of the bibliography to determine the 

completeness of our literature search. To apply this data collection 

instrument, one analyst reviewed each article and recorded information in 

the data collection instrument. A second analyst then reviewed each 

completed data collection instrument to verify the accuracy of the 

information recorded. We summarized the findings and limitations of the 

articles based on the completed data collection instruments, as well as 

areas for additional research identified in the articles.

 

2

“Gray literature” publications may include, but are not limited to, the following types of 

materials: reports (pre-prints, preliminary progress and advanced reports, technical 

reports, statistical reports, memoranda, state-of-the art reports, market research reports, 

etc.), theses, conference proceedings, technical specifications and standards, 

noncommercial translations, bibliographies, technical and commercial documentation, and 

official documents not published commercially (primarily government reports and 

documents).
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 31 GAO-13-782 Transit Contracting

David J. Wise, (202) 512-2834 or wised@gao.gov

In addition to the contact named above, Teresa Spisak (Assistant 

Director), Stephanie Purcell, Carl Barden, Dwayne Curry, Leia Dickerson, 

Lorraine Ettaro, Kathy Gilhooly, Cathy Hurley, Stu Kaufman, Alex 

Lawrence, and Amy Rosewarne made key contributions to this report.

Appendix II: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(542209)
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