A number of barriers impede competitive contracting of transit services: These include legal, bureaucratic, political, and perceptual barriers. Legal barriers can be surmounted by passage of well-designed competitive-contracting legislation and the amendment of existing laws.[23]

A. Legal Barriers

Local labor contracts may explicitly prohibit or restrict contracting, or they may constrain contracting through "exclusive rights to provide service" clauses. Moreover, where contracts are silent on the issue, arbitrators may construe competitive contracting to be prohibited. Prohibitions and restrictions to contracting can be eliminated by passing "public prerogative" legislation (separately or as part of a competitive contracting bill), which forbids restrictions on competitive contracting and specifies that the right of the citizenry to obtain public services for no more than the market rate cannot be a subject of labor bargaining.[24]

Public transit agencies also frequently cite as a barrier the labor-protective provisions of the federal Urban Mass Transportation Act of 1964, and as amended. One provision of Section 13(c) requires that an employee whose job is eliminated due to economies or efficiencies be provided up to six years' severance pay. While Section 13(c) can cause difficulties, it does not create a barrier where local labor contracts or state laws permit competitive contracting. Section 13(c) generally has not been a barrier even where labor contracts do not authorize competitive contracting if:

  1. Contracting has been implemented within the employee turnover rate so that no employees are laid-off; or

  2. As in Denver, transit employees were paid although idle. (The Denver transit agency still saved through competitive contracting.)

B. Political Barriers

Transit management and organized labor have opposed competitive contracting programs even where present employees were protected, and they have opposed commercial operation even when these operations do not infringe upon public transit routes and services. These groups have fostered political opposition to competitive contracting and commercial operation. Political opposition declines, however, in response to other circumstances such as when:

  1. Local governments are unable or unwilling to fund large and rising transit deficits;

  2. Transit funding is insufficient to cover the increase in operating costs, and riders are confronted with cuts in service, higher fares, or both; or

  3. The public becomes aware of the high cost of public transit. Local political opposition can be surmounted when states legislate competitive contracting or deregulation of public transit.

C. Bureaucratic Barriers

While not always the case, many public transit agencies often have not fairly evaluated, awarded, and administered the competitive-contracting process when the agency itself also is a proposer (bidder). In most foreign nations that convert to competitive contracting and in states with a high percentage of contracting, such as California, governments create separate bodies to determine transit policy. This separation of policy from operations helps to ensure that the policy agency is unencumbered by self-interested operating concerns and is focused upon obtaining the most (safe, quality) service for the public money expended.

D. Perceived Barriers to Competitive Contracting

In addition to political and legal barriers to competitive contracting, perceived barriers, usually in the form of arguments advanced to impede conversion to competitive contracting, restrict contracting opportunities.[25] Perceived barriers include the widely held belief that the public sector provides cheaper service, because it is not required to pay taxes or earn a profit; the fear that competitive contracting will result in chaotic service; or the belief that public employees provide better service than private employees because they are more committed to the public good. None of these contentions is systematically supported by experience, but they command media attention, and they are advanced by opponents to competitive contracting and commercial services. A simple examination of competitive contracting and commercial experience in the United States and abroad can overcome these barriers.