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. 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. 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. 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 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. 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.