Hempfield Area School District Transportation Outsource

Success! On October 1, 2010, the Hempfield Area SD for the first time in its history, outsourced bus transportation services 71 full-time union employees were released from the Districts payroll The majority had been offered employment with the new contractor. The process was attempted 10 years prior and was unsuccessful.

Hempfield Area Background $80m annual expenditure budget 6 elementary, 3 middle and 1 high school spread out over 80 square miles Average enrollment ~ 6,200 students 70 dedicated routes + additional special Ed Dedicated routes and activity/field and athletic trips handled in-house Special Ed previously contracted as needed

Hempfield Area Background Transportation part of “Support Union” Support union included custodians and food service Union contract expired June 2009/talks began Jan 2009 Started process September 2008 70 dedicated routes + additional special Ed RFP’s for all three groups Special Ed previously contracted as needed

Financial Analysis Started by showing a side by side comparison of transportation department prior 3 yrs actual Showed also current yr budget and YTD vs. budget Then forecasted out the next 4 years

Financial Analysis Also showed the future cost of bus leases to refresh a fleet of 8 years old on average Broke down our current financials into a “Price per route” value. Discussed per route rates at other Districts and compared them to our rate X #routes Showed the results to the School Board

Hempfield Area increased by 1% Example of Comparison HASD Comparison at 1 % First Student Hempfield 2009-10 Budget Adjusted based on reduced routes Conventional Mini Other activity Total Bus Operations 4YR Contract Based on 61 routes daily Based on 9 routes daily Based on 650 trips @$220 per Driver Wages 1,243,313.62 Yr1 -Initial year $2,662,650.00 $399,600.00 $143,000.00 $3,205,250.00 Driver Benefits 921,296.77 Yr2 1% increase $2,689,276.50 $403,596.00 $144,430.00 $3,237,302.50 Medical benefits co-pays (21,704.07) Yr3 1% increase $2,716,169.27 $407,632.00 $145,874.50 $3,269,675.77 Vehicle Insurance 68,000.00 Yr4 1% increase $2,743,330.96 $411,708.28 $147,333.04 $3,302,372.28 General bus supplies 210,000.00 Total 4 yr cost $10,811,426.72 $1,622,536.28 $580,637.54 $13,014,600.54 Engine/Trans/Tire repairs 140,000.00 Fuel 400,000.00 Radio Lease payments 15,000.00 Four Year Contract Price $ 13,014,601 Bus Lease payments 267,565.69 Discount in Lieu of rental $ (480,000) Equipment Purchases 13,500.00 Savings before sale of fleet $ 12,534,601 Other Miscellaneous 15,050.00 Sale of Fleet $ (1,885,000) Subtotal Bus Operations 3,272,022.01 Total Cost 4 yrs Contract $ 10,649,601 A. Mechanical Repairs Mechanic Wages 173,870.46 Hempfield Area increased by 1% Mechanic Benefits 66,105.25 $ 3,710,771 (2,175.57) $ 3,747,879 Mechanics uniform service 3,700.00 $ 3,785,358 Subtotal Mechanics 241,500.14 $ 3,823,212 Admin and Management $ 15,067,220 B. Admin/Mgmt wages 126,480.00 Admin Benefits 52,939.64 Savings First Student vs. HASD 4,417,619.48 B-A (1,620.36) Copier Lease 1,000.00 Postage Administrative other 17,450.00 197,249.28 TOTAL EXPENDITURES 3,710,771.43

Additional Info Needs # routes Min-busses vs. conventional Inventory of busses/supplies/tools Identify costs to maintain facility If you can –Performance statistics Number of complaints Number of accidents Number of call-offs Number of WC cases Number of grievances

Hidden Costs to Consider (not complete list) Hidden costs (as listed in the Outsourcing Tool Kit) Copier lease/depreciation costs Office supplies Drug testing Opportunity costs of land/facility Impact on WC modifier Impact on Med insurance (higher risk group)

An Exceptional Reference and Tool

A Summary of the Manual Convincing Analysis Board Advocacy Community Support Driver Cooperation Media Relations Proposal Development

Important Considerations before Finalizing your RFP Spec Fuel costs Employee treatment Grading the submissions

Grading the Submissions CATEGORY POINTS Board's direct experience with Proposer 10 Proposer's direct experience in school transportation 10 Proposer's staff experience 30 Proposer's references 10 Proposer's maintenance program 35 Proposer's hiring and retention programs 35 Proposer's driver safety and training programs 40 Proposer's student safety programs 35 Proposer's routing plan and process 35 Proposer's proactivity in offering counsel, new ideas 50 Proposer's financial standing 20 Proposer's ability to handle additional work 25 Proposer's insurance coverage and bonding 15 Proposer's price 150 Total 500

Summary of Responses We had 17 companies request the specification. We had 11 companies visit us for the pre-bid meeting. We had 6 eligible responses. First Student STA AJ Meyers Matthews DMJ PA Coach Lines

Decision Making Process Financial Analysis laid groundwork Decision to be handled as part of contract negotiations Initially union dragged feet We agreed to drag feet—part of strategy Eventually majority of group grew tired of no contract/no raises/too much uncertainty Union voted to allow outsource without appeal Award to First Student based on grades above

Pricing

Savings vs. In-House (SAVINGS) / COST First Student STA AJ Meyers Conventional Rate $ (51) $ (24) $ (33) Mini-Rate $ (108) $ (39) $ (93) Athletic , Field and Activity Rate $ (73) $ (53) 1st Year Cost (Savings include WC/Gas/Legal/Facility Rental) $ (956,990) $ (477,751) $ (690,690) 4 Yr Total Cost Savings (over contract life) $ (4,473,878) $ (1,948,427) $ (2,706,057) Add in: Sale of the Fleet $ (1,885,000) $ (1,800,000) $ (1,500,000) Total 4 year value to district of outsourcing Transportation $ (6,358,878) $ (3,748,427) $ (4,206,057)

Final Outcome Accomplished the outsource but had complications due to August vote by board Contractor had to bring in reinforcements because District driver call-offs caused disruptions Much of contractor due diligence compacted into part of August and September for Oct 1 hand-off date

Critical factors to consider Sick and vacation day accumulations – impact on services just prior to outsource Try to make official at the conclusion of school year –if not consider some time other than official first week. Make sure contractor has the ability to on- board employees quickly Make sure contractor can provide reinforcements

Pros / Cons Save Money More Control Updated Fleet Improved insurance ratings (Med/WC) Delay in seeing FULL savings due to unemployment claims Be careful of route time studies before preparing bid spec. Be sure to understand overage charges