The Van Buren Public Schools in Wayne County recently decided to end a 26-year relationship with a private, for-profit school busing service in favor of managing its own staff bus drivers and mechanics.
The district’s most recent four-year contract with National School Bus, acquired by Laidlaw Transit on August 6, 1996, expired on June 30, 1998. The new contract would have been the first between Laidlaw and the Van Buren school district, but the district’s skewed contracting process may have ensured that the local public employee union, V-BEST, was awarded the job.
Early this year, the Van Buren school district solicited proposals from Laidlaw and another private school transportation vendor, Atlantic Express. The vendors were required to submit three different proposals. The first was for a complete conversion of the district’s transportation system, whereby a vendor would own, manage, and perform maintenance on the buses. The second included district-provided bus drivers and attendants with all other services, including vehicle purchasing, to be provided by the vendor. The third proposal was for vendor-provided management and maintenance alone.
At the urging of Don Wertz, a member of the V-BEST union (an affiliate of the Michigan Education Association) and district maintenance worker, the school board also considered an in-house proposal to manage transportation staff and maintenance.
Van Buren's competitive contracting process for school busing was favorably tilted toward the union in a number of ways.
But Van Buren’s competitive contracting process for school busing was favorably tilted toward the union in a number of ways:
Conflict of Interest. Wertz, the school employee and union member pushing for in-house busing services, was part of the open committee that reviewed the proposals of private vendors. Insider Wertz was thereby in a position to influence the entire contracting process;
Unfair Advantages. The deadline for submitting contract proposals, April 16, 1998, was met by the private vendors, but V-BEST did not submit a proposal until May 4, nearly three weeks after the due date. This gave Wertz and others time to review competing proposals and design an in-house proposal that would beat them.
Incomplete Figures. The V-BEST proposal did not include costs that the district would need to incur as a normal cost of doing business: payroll processing, administration, and labor negotiation and legal expenses, for instance. These charges are an implicit part of private vendor bids. Also, the benefit to the district’s cash flow as a result of selling district buses to Laidlaw was not fully accounted for. This made the V-BEST proposal appear more attractive than it really was. Lastly, the in-house proposal extended the working life (and cost of replacement) of the buses out farther than the Laidlaw proposal. Laidlaw was not allowed to rework its bid to mirror V-BEST, thus denying the opportunity for an apples-to-apples financial comparison.
Unexpected Rule Changes. The school district issued a request for proposals (RFPs) to private vendors to run its busing services, not formal bids. The difference between an RFP and a bid is that an RFP allows for negotiation between the parties after a proposal has been submitted, while a bid is typically considered final. Van Buren Super-intendent James Richendollar never asked Laidlaw to rework its proposal, despite the fact that the district took the liberty of making unilateral financial changes (such as insisting on more insurance) to the Laidlaw proposal.
The Van Buren school district rejected Laidlaw’s "partnering of best practices" proposition, but accepted similar proposals from V-BEST. Partnering of best practices is a routine method of marrying school district and vendor operating practices for the most efficient use of resources.
For example, Laidlaw assumed that it would be able to purchase its bus fuel tax-free—as it does elsewhere—by using the school district’s tax-exempt identification number. This is a perfectly legal practice common in the industry. The district, however, refused to accept this arrangement, insisting instead that Laidlaw include in its proposal fuel purchase figures with sales tax, while allowing V-BEST’s proposal to reflect tax-free fuel purchases. This also gave a competitive advantage to V-BEST.
When asked about this unequal treatment of proposals, Superintendent Richendollar stated that the Van Buren school district’s insurance carrier "informed us that the tax-free status may not continue because a bad driver safety and accident record may negate the opportunity for its use. That goes for the district, too." Yet the V-BEST union was allowed to use the tax-free fuel option for the sake of its proposal. More importantly, there is no reason why an insurance carrier would make decisions regarding whether or not Laidlaw or any private contractor should have access to tax-free fuel.
Shared insurance coverage is another example of partnering of best practices. Van Buren schools already carry $5 million in insurance; Laidlaw was asked to carry $25 million. Laidlaw wanted to partner with the district by purchasing a $20 million insurance umbrella and adding it to the school district’s existing coverage, but the district refused. However, in its proposal, V-BEST was allowed to rely on only the $5 million in coverage, which again made its proposal appear to be more cost-effective than Laidlaw’s.
By rigging the school transportation competition against private vendors, the Van Buren school district created the perception that V-BEST's proposal was the best of the three.
The V-BEST and Michigan Education Association (MEA) unions have worked hard to bury the Laidlaw-Van Buren Public Schools agreement. The MEA’s Web site notes in its "Privatization Update" that "[o]ur in-house staff has been working hard to come in with better numbers than Laidlaw can provide. So far our staff has been successful and seems to have the support of the superintendent."
By rigging the school transportation competition against private vendors, the Van Buren school district created the perception that V-BEST’s proposal was the best of the three. It almost appears that the school district had no intention of taking a private bidder seriously; instead, it put Laidlaw and Atlantic Express through its contracting paces and then manipulated the proposals in order to make the union proposal appear competitive when it was not. Indeed, Tom Bowles, one of two Van Buren school district board members to champion a fairer comparison of financial data, deemed the in-house proposal a "gross misrepresentation."
While union leaders may trumpet a victory against privatization in Van Buren, the real losers are not private vendors of school transportation services, but the students and taxpayers who must live with a smoke-and-mirrors agreement that inaccurately presents the V-BEST union as the most cost-effective provider of transportation services.