Public Transit: Updated Guidance and Expanded Federal Authority Could Facilitate Bus Procurement
Released: 2015-09-24T00:00:00

Letter

Background

According to data from the NTD, there were about 2,200 transit agencies in the U.S. in 2013, most of which used buses. The bus fleets ranged in size from large agencies operating more than a thousand buses to small agencies with a single bus. For example, MTA New York City Transit reported that it had more than 3,300 buses and the city of Goodland, Kansas, reported that it had one. Although bus fleets of transit agencies in most major cities number in the hundreds, 85 percent of all transit agencies operated fewer than 50 buses.

Bus transit services from these agencies include: fixed routes, in which buses operate according to a set route and schedule; demand response, including paratransit service required under the Americans with Disabilities Act 1990, as amended (ADA), in which buses are scheduled in response to calls from passengers; and, deviated-fixed routes, which are fixed routes that allow for minor route deviations in response to passenger calls.

To provide these services, transit agencies reported that they used a total of nearly 92,000 buses, representing a wide range of types and sizes. For the purposes of this report, we categorized buses as follows:

Heavy-duty buses—the largest buses used for public transportation, typically used for fixed-route service (see fig. 1). Almost all heavy-duty buses are made specifically for the transit market, although many major components—including the engine, transmission, axles, and brakes—are also used in heavy-duty trucks.

Cutaway buses—predominately used for demand response (see fig. 1). On cutaways, a bus body is manufactured and mounted on a chassis built by another manufacturer. Virtually all are equipped to accommodate wheelchairs.

Buses most commonly use diesel as a fuel source, but alternative fuel options are used, including compressed natural gas, biodiesel, and hybrid electric.

Table 1 compares various characteristics of the types of buses used by transit agencies.

Transit agencies procure new buses to replace aging existing fleets or when expanding service and FTA policies specify how agencies manage, use, and dispose of buses acquired with federal funds. For example, FTA has established a minimum useful life for buses, in terms of years in service or accumulation of miles, and requires that buses are maintained and remain in use for at least their minimum life. To avoid the purchase of unnecessary vehicles, FTA policy limits the size of each agency’s bus fleet to those the agency needs to provide its services. Thus, for each new replacement bus purchased, FTA requires agencies to provide plans for disposition of the vehicle to be replaced.

While some transit agencies purchase buses frequently, most do not make purchases every year and some go years between purchases. When transit agencies purchase buses using federal funds, there are four procurement methods recognized by FTA that they typically use, depending on their needs:

Stand-alone procurement—conducted by a single agency and resulting in a contract between it and a bus manufacturer or vendor.

Joint procurement—conducted by two or more agencies where each is a party from the outset to a single contract with a bus manufacturer or vendor.

Assignment of options (also referred to as “piggybacking”)— conducted by two or more agencies where one agency with an existing bus procurement contract determines that it inadvertently contracted to purchase more buses than it needs. The agency may assign the rights to purchase some or all of its unneeded buses to other transit agencies.

Purchasing from a state schedule—many states create purchasing schedules by which the state and its subsidiaries may acquire goods, including buses. Some subsidiaries—including cities and counties— are also transit agencies and purchase buses from the state’s purchasing schedule. FTA approves of this procurement method as long as the state ensures that procurement contracts include any clauses required by federal law.

Recipients of FTA assistance are required to conduct procurements in accordance with FTA procurement rules including, for example, that all procurement transactions, such as stand-alone, joint, and assignment of options, be conducted in a manner that provides full and open competition and that recipients agree to purchase a finite number of vehicles based on the agency’s needs. Purchases from a state schedule also must follow FTA procurement rules such as the inclusion of FTA- required clauses and certifications but are typically completed by the state and not a transit agency.

The Number of Bus Manufacturers Has Declined, but Bus Production Has Remained Constant

The Number of Heavy- duty Manufacturers Has Declined

Over the last decade, the number of heavy-duty transit bus manufacturers in the U.S. has declined due to business failures and consolidation. The final assembly of heavy-duty buses purchased by transit agencies using funds from FTA generally takes place in the U.S., in order to meet Buy America requirements. In 2013, four companies produced virtually all heavy-duty buses used in the U.S.

Transit agencies that receive federal funds are required to report operational data at least annually to the NTD, including information on the agencies’ bus fleets. Using these data, we identified the year and manufacturer of buses that transit agencies reported they owned or used in 2004 and 2013 and compared the two time periods. Our analysis of this data shows: The number of heavy-duty manufacturers declined—in 2004, 10 manufacturers produced almost all of the reported buses; by 2013, four manufacturers produced almost all of the buses.

Smaller manufacturers stopped bus production—most manufacturers that stopped producing heavy-duty buses between 2004 and 2013 were relatively small, with each making 4 percent or fewer of the 2004 reported buses, although one manufacturer made 11 percent.

The market share for the largest manufacturers increased —in 2004, the largest three manufactures produced 68 percent of the reported heavy-duty buses; in 2013, the same three manufacturers produced 81 percent of the buses.

The Number of Cutaway Manufacturers Has Remained Consistent

In contrast with heavy-duty manufacturers, the number of manufacturers of cutaway transit buses has remained about the same. As with heavy- duty buses, final assembly of cutaway buses purchased by transit agencies using funds from FTA generally takes place in the U.S., to meet Buy America requirements. According to FTA, transit agencies generally procure cutaways through dealers representing the manufacturers; each bus is to be produced to an agency’s specifications. There is also a substantial private market for cutaway buses. Specifically, hotels, rental car agencies, and universities also purchase cutaway buses. In 2007, FTA estimated that sales to these entities surpassed transit-related sales. Our analysis of bus information reported by transit agencies in 2004 and 2013 shows that:

Almost all cutaway bus manufacturers continued to produce buses— of the 13 largest manufacturers in 2004, all continued to produce transit buses in 2013.

At least two companies started producing buses—two companies not identified in 2004 each produced about 4 percent of the cutaway buses in 2013.

Market share is more evenly distributed—in 2004, the three largest manufacturers made 64 percent of the cutaway buses; in 2013, the three largest manufacturers made 47 percent. In general, because the market share of the largest manufacturers declined, other manufacturers had larger shares.

Production of Transit Buses Has Remained Constant

The decline in the number of heavy-duty bus manufacturers has not affected the number of buses produced. Excluding buses purchased with funds from the Recovery Act, the number of buses procured by transit agencies annually varied slightly from 2009 through 2013 (see table 2). Approximately half of the bus purchases were for heavy-duty buses and half were for cutaway buses, although the percentages vary from year to year. The Recovery Act provided additional funds for capital projects, including bus procurement, in 2009 and 2010. Specifically, transit agencies and others purchased 7,544 buses using Recovery Act funds over those 2 years.

The number of transit buses produced annually is relatively small compared to heavy-duty trucks. Specifically, there are approximately 2,500 heavy-duty buses produced each year and approximately 300,000 heavy-duty trucks. Similarly, of the 370,000 cutaway chassis sold annually, 2,500 are purchased and modified for transit use. According to a 2007 FTA report, this situation is both beneficial and problematic for the transit industry. Components shared by multiple industries likely make their costs lower than if they were used only for transit. Conversely, the transit industry as a whole exerts little influence on availability of components or their design.

FTA Funds Bus Procurements through Grant Programs and Provides Oversight and Guidance to Transit Agencies

FTA provides support for public transportation by awarding federal funding—about $11 billion in 2013—to transit agencies in the form of grants. Grant recipients have specific responsibilities associated with the use of this funding. For example, transit agencies are required to conduct procurements involving federal funds in compliance with applicable federal requirements. FTA is responsible for ensuring compliance with these requirements and for ensuring that these agencies use the funding prudently. In addition, FTA describes its role as one where, in general, FTA does not substitute its judgement for that of its recipients by making contract decisions for recipient transit agencies entering into procurement contracts with third parties, such as bus manufacturers or vendors.

Federal Funding Used for Bus Procurement Increased from 2009 through 2013

There were at least 11 federal grant programs in fiscal year 2013 that allowed funds to be used for bus procurement. The rules associated with use of grant money vary by program, but generally transit agencies have flexibility in deciding how to use these funds. For example, an agency may use most of its grant funding one year on a commuter rail project and use most of its funding for bus procurement in the next year. Transit providers may, and often do, receive funding from more than one program. Further, in each year, FTA may obligate funds—that is, enter into a grant agreement with a transit agency to, for example, procure buses—that were appropriated in that year or in prior years. As a result, the amount obligated by FTA in any given year is not the same as is appropriated. Four federal grant programs provide 95 percent of the funding awarded to transit agencies for bus procurement:

Urbanized Area Formula Program (49 U.S.C. §5307)—provides funds to urban areas, defined as those with a population of at least 50,000 based on census information. Funds provided under this program may be used for capital projects, such as purchasing buses, planning, job access and reverse commute projects, and operating and other expenses.

Bus and Bus Facilities Formula Program (49 U.S.C. §5339)—provides funds to allow transit agencies to overhaul and retrofit their buses as well as purchase new buses and construct bus-related facilities, such as bus maintenance facilities.

Enhanced Mobility of Seniors and Individuals with Disabilities Program (49 U.S.C. §5310)—provides funds to transit agencies and other organizations for transportation programs for seniors and individuals with disabilities that go beyond the scope of public transportation fixed-route service as well as providing funds for ADA complementary paratransit services. At least 55 percent of these funds must be used on capital expenses, such as bus procurement.

Rural Area Formula Program (49 U.S.C. §5311)—provides funds to states and tribal areas for use in areas with populations of less than 50,000. States distribute these funds to non-urban and rural areas. Funds can be used to support public transportation in rural areas in order to support the needs of rural areas such as access to healthcare, education, employment, public services, and recreation. Funds can also be directed towards capital, operating, and other expenses.

Transit agencies have recently used increasing amounts from their grant funds to purchase buses. Specifically, from fiscal years 2009 to 2013, the most recent year data are available, obligations made by FTA to transit agencies for bus procurement increased (see table 3). These figures represent only the money that transit agencies have decided to use towards bus purchases and do not represent all other forms of transit spending. In addition, transit agencies have used funds from other sources to procure buses. For example, transit agencies and others used approximately $1.7 billion provided by the Recovery Act for procuring 7,544 buses from 2009 to 2010.

Some of these grant programs changed over this 5-year period. For example, the Bus and Bus Facilities program was a discretionary program through fiscal year 2012, after which it became a formula program pursuant to changes made by the Moving Ahead for Progress in the 21st Century Act (MAP-21).

Transit Agencies Are Responsible for Complying with FTA’s Bus Procurement Requirements

When using federal funds from FTA to procure buses, transit agencies must comply with a range of federal requirements that include government-wide requirements, such as complying with the ADA, as well as FTA-specific requirements, such as providing a local funding match for federal grants. FTA includes federal requirements in the FTA Master Agreement, which contains the terms and conditions applicable to each grant. Some of the relevant clauses that apply to bus procurements are shown in table 4.

FTA Oversees Transit Agencies’ Procurement Process through Agency Self-Certification and Various Reviews

FTA is responsible for ensuring that grant recipients comply with federal bus procurement requirements. According to FTA, it relies on transit agencies to annually certify, for each grant, that its procurement system meets all federal requirements and that those requirements are also met by third party contractors.

FTA conducts periodic reviews to assess transit agencies’ performance and adherence to FTA requirements and policies. For example, FTA conducts triennial reviews of transit agencies receiving Urbanized Area grant funds. According to FTA officials, about 600 transit agencies receive Urbanized Area funds and approximately one-third of these agencies (200) undergo a triennial review each year. These triennial reviews include a review of an agency’s procurement system but may also include an Enhanced Review Module (ERM) with a specific focus on procurement. ERMs can be triggered by factors including high funding levels, open or repeated findings from previous reviews, unusual or complex procurements, a large number of change orders, bid protests, or Buy America issues. Based on its own risk assessment findings, FTA may also conduct a Procurement System Review (PSR). According to FTA officials, these PSRs examine at least 56 different elements of a transit agency’s procurement system plus its Buy America certifications to determine if it meets FTA procurement requirements and to identify needed corrective actions.

FTA has found errors in the way transit agencies procure buses. For example, in 2013, FTA found that several bus procurement contracts did not comply with federal procurement requirements that limit the number of buses an agency may purchase to those needed for its public transportation services. According to FTA, these contracts, in which the parties contracted to buy more buses than they currently or could reasonably be expected to need, were apparently specifically designed for piggybacking—or assigning contract rights to other transit agencies— at a later date. Under FTA rules, piggybacking is allowed only when an agency inadvertently contracts for more buses than it needs. FTA also found that agencies procured buses from a Minnesota state contract even though the agencies were located outside that state, in violation of FTA rules. FTA noted that under this contract, to purchase a bus, a transit agency needed only to submit a simple, one-third page application to the State of Minnesota, receive a membership permit number, and send a purchase order to the vendor of its choosing listed in the contract. While some states have established purchasing schedules for use by state agencies and other authorized entities, FTA prohibits transit agencies using federal funds from FTA to procure buses from out-of-state contracts. Despite that, at the time of the FTA review, at least 13 transit agencies located outside of Minnesota had pending orders to procure buses through the Minnesota state contract with a single bus manufacturer, according to FTA. In both the piggybacking and Minnesota state contract cases, FTA prohibited future purchases but allowed pending purchases to stand.

FTA Provides Guidance to Transit Agencies on Bus Procurement, but Some Is Outdated

FTA provides guidance and technical assistance to help transit agencies comply with federal bus procurement requirements. Transit agencies access this guidance through FTA’s website or by contacting officials in FTA regional offices. According to FTA, the primary source of procurement guidance from FTA is FTA Circular 4220.1F – Third Party Contracting Guidance, which describes how transit agencies can comply with federal requirements when using federal funds for procurements, such as for buses. FTA issued the current version of the circular in November 2008, and revised it most recently in March 2013. In addition, individual circulars for some of the grant programs used for bus procurement provide guidance related to that program. For example, the circular for the Urbanized Area grant program provides information on the eligible uses of funding, such as for bus replacement, overhaul, or expansion of service. Further, FTA periodically issues Administrator’s Policy Letters to clarify FTA procedures or indicate changes to an existing policy. For example, FTA issued a policy letter in March 2013 to clarify the conditions under which transit agencies could piggyback off another transit agency’s contract.

FTA also provides supplemental guidance through its Best Practices Procurement Manual (BPPM), Third Party Procurement Frequently Asked Questions (FAQ), and an online tool that transit agencies can use to assess their procurement systems. This supplemental guidance is designed to assist transit agency officials throughout the procurement process and facilitate their compliance with FTA regulations. However, this guidance is outdated.

The BPPM addresses each step in the procurement process using a standardized format consisting of requirements, discussion, and best practices. Requirements include relevant sections from FTA circulars, the Master Agreement, federal laws and regulations, and FTA Administrator’s Policy Letters. The discussion sections provide definitions and guidance concerning the meaning or purpose of the topic being presented, and the best practices section describes practices that have proved to be effective in the past, according to FTA. Although FTA states that it envisions the BPPM to be an ongoing and expanding document that will be updated periodically, FTA has not updated sections of the manual in at least 10 years. As a result, the manual includes outdated references to important procurement policy documents. For example, it includes a previous version of FTA Circular 4220.1E, which was replaced by the current version, FTA Circular 4220.1F, in 2008. Moreover, the fiscal year 2015 FTA Master Agreement notes that the BPPM may lack the necessary information for compliance with certain federal requirements. In June 2015, an FTA official told us that FTA made draft revisions to the BPPM but FTA is awaiting internal approval before releasing it and has not set a time frame for approval.

The FAQs on FTA’s website is an online resource for transit agencies to review FTA’s answers to frequently asked procurement-related questions. Visitors to the site can also submit questions to FTA. FTA adds new answers to the website but also retains undated answers with outdated guidance. For example, the bus procurement category includes answers added in 2014 but undated answers refer to the outdated Circular 4220.1E.

FTA’s online Procurement System Self-Assessment Guide can be used by transit agencies to assess whether their own procurement system complies with FTA procurement requirements in 10 common areas of deficiency. However, the guide also includes outdated information. For example, the guide references the BPPM for additional guidance; as discussed previously, the BPPM includes outdated information. Furthermore, the guide does not include instructions for completing the self-assessment or obtaining results, and a user is not able to answer the self-assessment questions online. Although there is an area that allows for electronic submission of the self-assessment form to FTA, any form submitted this way would be blank because the form does not allow a user to enter any text.

It is important to have updated guidance because transit agencies and state departments of transportation rely on the guidance when procuring buses to ensure compliance with federal requirements. Standards for Internal Control in the Federal Government states that management should ensure that there are adequate means of communicating with external stakeholders that may have a significant impact on the agency achieving its goals. Without updated guidance, transit agencies may not be able to purchase buses as efficiently as possible; for example, they may need to spend additional time researching the guidance or they may have to repeat a required step in the procurement process. As discussed in the next section, transit agency officials in four of our six discussion groups identified outdated guidance as a challenge in bus procurement.

FTA also provides technical assistance and training on bus procurement. According to FTA, the National Transit Institute (NTI) developed two-day training on bus procurements in 2011 and held 12 training sessions from 2011 through 2013. The training is now held annually and transit agencies can use FTA grant funds to send personnel to the training. In addition, an FTA headquarters official stated that he provides in-person bus procurement trainings to transit agencies approximately 8 times per year. FTA and APTA developed a standardized format for transit agencies to use for bus procurements. This format is designed to provide a common method of contracting and is intended to save time and effort for the parties to a particular transaction. According to APTA, industry stakeholders such as bus manufacturers and transit agencies contributed to the standard’s development. Use of the standardized format is not required but FTA and APTA encourage its use.

Finally, the National Rural Transit Assistance Program (RTAP) offers technical assistance and training, including for procurement, to transit agencies in rural areas. For example, RTAP developed and made available a free web-based application that is designed to guide agencies through FTA procurement procedures as well as provide required federal clauses and certifications.

Selected Transit Agencies Identified an Array of Bus Procurement Challenges and Potential Strategies to Address Them

Transit Agencies Identified a Wide Range of Procurement Challenges

Transit agency officials we spoke to told us that they face an array of challenges in procuring buses. A 2006 FTA report concluded that “the greatest challenges cited by both transit agencies and bus manufacturers were related to bus procurement and contracting.” As discussed previously, to identify and understand procurement challenges faced by transit agencies, we conducted six discussion groups with officials of 36 rural and urban transit agencies. We recruited discussion group participants through mass e-mail solicitation and allocated participants into homogeneous groups based on their location and size of the transit agency. Our six discussion groups included the following: two groups of officials from small, rural transit agencies; two groups of officials from small, urban transit agencies; one group of officials from medium, urban transit agencies; and one group of officials from large, urban transit agencies.

Compliance with Federal Procurement Requirements

Participants in all six discussion groups identified some aspect of FTA’s guidance, as well as some federal legal and regulatory requirements, as posing challenges to procuring new buses. For example: FTA guidance: Participants from four groups noted that some FTA guidance is outdated, as discussed in the previous section. Participants in three groups also cited that getting technical assistance from FTA was challenging. For example, a participant said that they contacted FTA officials about the applicability of a particular requirement but FTA officials would not provide a specific answer, leaving it to the transit agency to interpret. Participants in two rural groups said that they do not have the resources or experience to interpret these FTA requirements. While some participants appreciated the assistance from FTA regional staff, other participants in the large and small urban groups reported variation in the assistance received from FTA; some participants stated that FTA staff gave inconsistent advice or showed a lack of technical expertise. Participants in one group mentioned that FTA could be more proactive and provide more assistance to agencies during the procurement process.

Requirements: Participants from two groups described instances where procurement requirements are seemingly unnecessary or not relevant. For example, participants in the discussion groups representing large and medium urban-transit agencies said that some FTA requirements do not reflect the reality of the transit bus market. According to these participants, FTA requires transit agencies to conduct a price analysis to ensure the price is reasonable, but this requirement seems unnecessary when there is only a single manufacturer that builds a specific type of bus. However, FTA does not require a price analysis when there is only a single manufacturer of a bus but does require a different type of analysis. This discrepancy illustrates that some transit agency officials are confused about FTA requirements. Participants in the medium urban group said they find a lack of potential bidders when they attempt to procure buses, and also have difficulty demonstrating that pricing is fair and reasonable, which is required by federal regulations.

Buy America: Participants from four groups told us that the Buy America certification requirements can be burdensome, complex, and costly. FTA requires transit agencies procuring buses with federal funds from FTA to certify compliance with Buy America requirements through pre-award and post-delivery reviews of bus manufacturers.Participants in two discussion groups from rural and medium urban transit agencies explained that their agencies needed consultants’ help with required pre- and post-award audits for the Buy America certification.

Contract Length: Participants in one small urban group told us that a federal requirement intended to encourage competition among manufacturers creates challenges. Specifically, the federal statutory provision prohibits transit agencies from entering into multiyear rolling- stock contracts with options to buy additional rolling stock or replacement parts for longer than 5 years if federal funds are used. Although FTA officials told us that the requirement is in place to ensure that the market is fair and open, participants told us that the restriction is burdensome; if they decide to procure new buses after the 5th year, they must initiate the procurement process all over again, which can be lengthy and costly.

Joint Procurement and “Piggybacking:” While participants in some of the groups we spoke with said piggybacking in particular is a useful procurement tool, other participants cited challenges and limitations associated with piggybacking. For example, one small urban agency said that piggybacking was the only way they could procure a small quantity of buses—such as one or two—because they did not receive any bids in response to a request for proposal. Participants in three groups from rural, small, and medium urban-transit agencies said that the opportunities for joint procurement and piggybacking may be limited because there is no formal mechanism to identify mutually beneficial opportunities for joint procurement or piggybacking and the regulations regarding piggybacking are confusing. As a result, some participants who had previously used piggybacking began to handle their own procurements. Participants in two groups told us that transit agencies are not generally aware of other transit agencies’ procurement plans, and there is no entity to formally help facilitate joint purchases. Some participants said they have learned of these types of procurements through informal means, such as existing relationships with other agencies or at industry conferences, and through representatives of bus manufacturers. In addition, even if agencies identify piggybacking opportunities, some participants found the rules confusing. For example, officials in three discussion groups (rural, small, and medium urban) were confused about whether FTA allows agencies to participate in piggybacking options. FTA officials told us that piggybacking options are allowed as long as an agency unintentionally orders more buses than it requires. Transit agency officials in two groups stated that piggybacking rules limit agencies’ options related to the buses to be procured. These rules allow some changes to the buses originally ordered that are within the general scope of the contract—such as seat fabric or exterior paint color—but prohibit changes outside the scope of the contract. One small urban participant said these rules effectively prevent them from piggybacking because the features his agency prefers to include in their buses—such as an extra wheel-chair securement location—are not features most other agencies include in contracts. Instead, the participant said his agency prefers to conduct its own procurement so it can get the features it needs.

In addition to the challenges above, some transit agency officials in our discussion groups cited challenges that specifically affect rural, urban small and medium-sized agencies:

Participants in four groups noted that the procurement process is difficult and resource intensive. Participants in four groups (rural, small, and medium urban) noted that smaller agencies tend to have few or no dedicated procurement staff and lack technical, engineering, or specification-writing expertise needed for bus procurement. Several participants noted that the procurement process can take from 6 months to a year. Further, small agencies said that they procure buses infrequently, such as every few years, so it is difficult for them to become familiar with the process. In addition, these procurements are often for 1–3 buses and sometimes generate few bids from manufacturers.

Participants in three groups stated that procurement training opportunities through the NTI are not always designed to meet the needs of smaller agencies. Some participants told us that the material in the training courses is targeted to larger agencies, for example by assuming a level of support staff similar to what a larger transit agency would have. When these participants asked questions specific to their situations, they said the course instructors were not able to answer them. Additionally, participants in the rural group explained that with their limited staff resources, it was difficult to spare anyone to attend off-site training for multiple days.

Challenges Related to Transit Bus Industry Changes

Participants in all six discussion groups cited the following challenges stemming from changes in the transit bus industry:

Participants in all six discussion groups said there is limited competition to produce heavy-duty buses. Specifically, participants told us that there are currently three heavy-duty bus manufacturers and one that makes 60 foot buses. According to participants in one small urban group, the limited number of heavy-duty bus manufacturers has led to a longer delivery time (18 months) and the price of new buses has increased faster than inflation.

Furthermore, participants also noted a lack of vendors for vehicle components. Specifically, participants told us that there is currently only one engine manufacturer for heavy-duty buses that complies with Buy America requirements. Participants in four discussion groups stated that Buy America and DBE requirements and consolidation of the industry have contributed to the lack of available vehicle component vendors.

Funding Challenges

Participants in four discussion groups stated that it was a challenge to secure funding for transit buses. Transit agencies may use federal, state, and local funds to purchase or replace buses but must weigh these purchases against other capital and operating needs. Transit agencies also told us that the federal surface transportation authorizations and appropriations process creates year-to-year uncertainty that can be a challenge for long-term planning. Obtaining state or local funding to meet federal local match requirements was identified as a challenge by participants in three discussion groups. Constrained state and local budgets can make securing these funds difficult. We have previously found that some states provide limited or no state funds for rural transit, a process that increases the pressure on rural transit agencies to secure local funds.

Transit Agencies’ Access to Federal Sources of Supply Could Address Many Challenges

Participants in all six discussion groups offered ideas about possible ways that the federal government could address some of the procurement challenges they identified (see table 5).

Participants in four discussion groups from rural, urban-medium, and urban small-transit agencies suggested that FTA develop a national procurement schedule similar to that of the GSA’s. GSA establishes long-term government-wide contracts for millions of products with commercial firms and provides federal agencies and others with access to these sources of supply. According to GSA officials, GSA negotiates volume discounted prices and its policies and procedures are designed to ensure that vendors comply with federal procurement requirements. Transit agencies are not permitted to purchase through GSA because they are not federal agencies or other authorized users. In the past, entities other than federal agencies have been authorized to purchase items through GSA. For example, states and units of local government have been authorized pursuant to statute to purchase equipment, including vehicles, in support of counter-drug, homeland security, and emergency response activities. Purchasing through GSA could allow for more streamlined procurement for transit agencies and potentially cost savings because GSA would be responsible for ensuring that any bus procured through GSA complies with federal and FTA requirements. As a result, transit agency officials would not need to develop their own specifications or procurement requirements and would not be required to ensure the buses comply with the Buy America certification. In addition, GSA officials noted that they are usually able to secure very good pricing because the purchasing power of the federal government results in volume discounts. For example, they said the price of vehicles they procure averages 17 percent below the dealer invoice price. Officials said these prices compare favorably to prices paid by other large capacity vehicle purchasers, such as rental car companies. According to FTA and GSA officials, both agencies have explored the feasibility of establishing a process to allow transit agencies to procure buses through GSA and both agencies support the concept. GSA officials said they have the capability to provide a streamlined procurement process to transit agencies that complies with federal and FTA requirements. However, GSA officials told us that Congress would have to authorize transit agencies to purchase through GSA. Neither agency has submitted a legislative proposal to Congress.

Conclusions

Buses are an important part of public transit. Transit agencies maintain a fleet of buses to provide transit service. In order to do so, transit agencies purchase buses to either replace their existing fleet or expand service. In 2013, transit agencies used over $1 billion of federal funding to purchase buses. While some large agencies purchase buses each year and have a dedicated procurement staff for doing so, other transit agencies purchase buses only occasionally. Moreover, participants in our discussion groups explained that smaller agencies tend to have few or no dedicated procurement staff and lack expertise needed for bus procurement. Thus, they are challenged to knowledgably and efficiently complete all of the steps required to procure buses with FTA funds. Therefore, FTA guidance and assistance in helping transit agencies procure buses is important. While this guidance is widely available on-line, some FTA guidance is out of date and refers to incorrect regulations and information. As a result, transit agencies may not be able to purchase buses as efficiently as possible, as they may need to spend additional time researching the guidance or they may have to repeat a required step in the procurement process.

While transit agencies face several challenges in procuring buses, many of these challenges could be alleviated if agencies were allowed to purchase buses through GSA. By purchasing through GSA, agencies would know that they are getting a bus that complies with federal procurement requirements. In addition, transit agency staff—particularly those at smaller agencies who may lack procurement expertise—would be able purchase buses more easily and efficiently. Specified non-federal entities have been authorized to purchase through GSA in the past. Specifically, states and local governments have been authorized under federal statute to purchase through GSA for emergency equipment and homeland security-related items, among other things. Transit agencies could experience cost savings if they were able to purchase buses through GSA, as agencies will not need to spend as much time on the procurement process. Allowing transit agencies to make such purchases could also lead to cost savings because GSA staff have expertise in price negotiation and they have procured vehicles that, given the volume of purchases, are on average 17 percent below the invoice price. Ultimately, the efficient purchasing of buses may also save money for the federal government, as transit agencies may require fewer federal funds to operate their transit programs.

Recommendations for Executive Action

To ensure that transit agencies have appropriate and current guidance to assist them when procuring transit buses, we recommend that the Administrator of FTA update its Best Practices Procurement Manual and assess its other related guidance identified in this report and update that guidance as needed.

To provide a more efficient and cost-effective way for transit agencies to procure transit buses while complying with federal procurement requirements, we recommend that the Administrator of FTA, in conjunction with the Administrator of the General Services Administration, submit a legislative proposal to Congress that would authorize transit agencies that are recipients of FTA grants to access GSA sources of supply for the purchase of transit buses.

Agency Comments

We provided a draft of this report to the Department of Transportation and the General Services Administration for review and comment prior to finalizing the report. The Department of Transportation provided written comments, which are reprinted in appendix II, and agreed with our recommendations. The General Services Administration provided written comments, which are reprinted in appendix III, and agreed with our recommendations. GSA also provided technical comments on the draft that we incorporated as appropriate.

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Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to examine (1) the characteristics of the U.S. transit bus market, including manufacturing capacity and the production of new buses; (2) the federal role in transit bus procurement, including funding, procurement requirements, and oversight and guidance; and, (3) the views of selected transit agencies on challenges, if any, that they face when procuring new buses and any federal actions that could address those challenges.

To address all three of our objectives, we reviewed relevant literature from the Federal Transit Administration (FTA), industry, and academia and interviewed officials representing FTA; General Services Administration (GSA); American Public Transportation Association (APTA); Community Transportation Association of America (CTAA); transit agencies; and bus manufacturers.

To determine the characteristics of the U.S. transit bus market, we reviewed FTA’s Annual Statistical Summaries from fiscal years 2009 to 2013, the latest year data are available, and American Recovery and Reinvestment Act (Recovery Act) Statistical Summaries. We reviewed data from the National Transit Database (NTD) for the years 2004 and 2013 to evaluate changes to transit agencies’ bus fleets over time. We chose those years because 2013 was the latest data available and 2004 represented data 10 years earlier, which we believe to be sufficient to show any changes in the industry. We included vehicles used for fixed- route, demand-response, and deviated-fixed route services and excluded vehicles used for other services—commuter buses, inter-city buses, trolley or specialty buses, vanpool vans, and automobiles—because these vehicles represent a small portion of all vehicles used. To assess the reliability of data from NTD, we interviewed officials about data quality control procedures and reviewed relevant documentation and determined that the data were sufficiently reliable for the purposes of this report.

We categorized buses generally and for the purposes of this report as heavy-duty or cutaway. FTA also uses these categories as well as three others, which we did not include for ease of reporting and because the heavy-duty and cutaway categories encompassed over 95 percent of transit buses, according to FTA in 2006.

To identify bus manufacturers, the number of buses produced, and any changes over time, we reviewed NTD urban vehicle inventory reports from 2004 and 2013, the most recent year data are available. Transit agencies receiving federal grant funding from FTA are required to report operating information to NTD, including detailed information on their bus fleet. For each year, we limited the data to reported vehicles that are 1) used to provide bus or demand response transportation services; 2) shown as bus and articulated bus vehicle types; and 3) within a 5-year model range of the year of the data report (2004 to 2000 model years for the 2004 data and 2013 to 2009 for the 2013 data). We further grouped the data set by vehicle length: generally, vehicles 30 feet in length or greater (heavy-duty buses) and vehicles less than 30 feet (cutaway buses). For each group, we identified the number of vehicles from each manufacturer and calculated an approximate market share by dividing that number by the total number of vehicles.

Within the data set, some records included missing data, particularly for manufacturer’s name and for model year. We excluded these records from our analysis. The number of vehicles associated with missing data records represented 11 percent of the total number of vehicles in the 2004 data and 10 percent in the 2013 data. We also manually reviewed all records and identified some information that appeared to be incorrect based on other data in the record. Most commonly, vehicles were categorized as a vehicle type van when other evidence, such as the manufacturer name, indicated they should be categorized as a bus. We included these vehicles in our analysis. In more limited cases, vehicles were categorized as a bus when other evidence indicated they should be categorized as a van. We excluded these vehicles from our analysis. The net change in vehicles because of these changes represented less than 3 percent of the total number of vehicles in the 2004 and 2013 analyses.

To determine the federal government’s role in procurement of transit buses—including funding, oversight and guidance, and procurement requirements—we reviewed applicable federal law, regulations, guidance, and FTA documentations on federal grant programs including FTA’s Master Agreement; Circular 4220.1E; Circular 4220.1F; Administrator’s Policy Letters; Best Practices Procurement Manual; Triennial, State Management, and Procurement Systems reviews; and APTA’s Standard Bus Procurement Guidelines.

To identify any challenges transit agencies face when procuring transit buses and federal actions that could address those challenges, we conducted six discussion groups with 36 rural and urban transit agencies. We recruited discussion group participants through mass e-mail solicitation to approximately 1,900 transit agencies that report to the NTD. In our email, we requested participation from transit agencies that had received funding from FTA since 2009 and that were interested in speaking with us on challenges they faced regarding transit bus procurement. We also solicited the help of three national transit industry groups to send our solicitation e-mail to rural transit agencies— APTA, CTAA, and American Association of State Highway and Transportation Officials (AASHTO) —that work closely with transit and state transportation agencies.

For each volunteer received, we identified whether it was an urban or rural recipient, the number of buses each reported, and their NTD identification number to identify the FTA region. From our pool of volunteers, we recruited participants based on a range of criteria, including: agencies that purchase and operate buses; a mix of urban and rural FTA grantees; a mix of the size of bus fleet and type of bus used; and geographic diversity of various FTA regions. In order to include a wide geographical distribution of participating agencies, we conducted all six discussion groups remotely via WebEX. We established three size categories to ensure we received input from a range of sizes of urban agencies: large (more than 100 buses); medium (50–100 buses), and small (less than 50 buses). We did not group rural agencies into size categories because 97 percent of these agencies have less than 50 buses. After grouping the full list of volunteers, we allocated transit agency participants into six homogeneous groups. Our six discussion groups included the following: two groups of rural transit agencies (total of 9 agencies); two groups of small, urban transit agencies (total of 13 agencies); one group of medium, urban transit agencies (total of 6 agencies); one group of large, urban transit agencies (total of 8 agencies).

In order to ensure the appropriateness of the questions for the discussions, we pretested our moderator guide with three transit agencies and modified the guide based on those pretest results as needed. We conducted four of the six groups with rural and small urban transit agencies due to the proportion of rural and small agencies in the total population of transit agencies. As we were unable to accommodate all volunteers with our discussion groups, we gave the non-selected volunteers the opportunity to send us written responses to the discussion questions; nine transit agencies provided written responses about the challenges they faced procuring transit buses. Based on our findings from the discussion groups, written responses and a review of literature, we summarized the challenges related to bus procurement into general categories. While these challenges were consistently identified across agencies we spoke with, our findings are based on a self-selecting, non- representative sample of transit agencies, and thus the results are not generalizable to all transit agencies.

We conducted this performance audit from October 2014 to September 2015 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.

Appendix II: Comments from the Department of Transportation

Appendix III: Comments from the General Services Administration

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, John W. Shumann (Assistant Director), Melissa Bodeau, Timothy Guinane, Geoffrey Hamilton, Rosa Leung, Erik Shive, Travis Thomson, Elizabeth Wood and William T. Woods made key contributions to this report.