Changes in circumstances and supplier markets may require alterations in competitive-contracting processes and practices. Despite modifications in design, circumstances, and markets, the success of competitive contracting rests on three fundamental principles: public control, cost effectiveness, and open access and process (see Figure 2). First, the public authority has a responsibility to the riders and taxpayers to ensure that public services meet quantity and quality standards that are set by government—this requires public control. Second, competitive contracting programs must foster the development and maintenance of a truly competitive market so that costs are kept under control. Third, these two principles are best served when all interested parties have access to the procurement process and records. The implications of these three principles are described below:

PRINCIPLES OF COMPETITIVE CONTRACTING FOR TRANSIT SERVICES

Public Control þ Service design
þ Service monitoring
þ Contract to lowest responsive and responsible bidder
Competitive Market þ Request for proposals (RFPs) to all potential proposers
þ RFPs clearly specify service requirements
þ Contracts for small increments of service
þ Contracts and extensions total no longer than 5 years
þ Contract expiration dates staggered (multiple contracts)
þ Limited market share
þ Fixed-price contracts
þ Fair participation by public agency
Fully Open Process þ Open pre-proposal conference
þ Wide advertisement of RFP
þ RFPs and copies of contracts to all interested parties

PRINCIPLE #1:

Public control should be retained over services.

A. Public authorities should design the service consistent with schedules, standards, and performance criteria that it has established, and at the fares it has established.

B. Public authorities should closely monitor service-contract compliance as a routine activity, whether the contract has been awarded to a public authority or a private company. Public authorities should be prepared to invoke the contract provisions required to ensure public service of specified quality and quantity.

C. Contracts should be awarded to the lowest responsible and responsive proposer: the public authority should ensure that it is obtaining service from a company that is capable of providing the service having proven its financial and management responsibility in similar services. Further, the public authority should ensure that it awards the contract to a company that understands the service package, having submitted a proposal that is sufficiently responsive to the public request for proposals that was issued for the service.

PRINCIPLE #2:

A competitive supplier market should be fostered to ensure the most cost-effective service.

A. Requests for proposals should be provided to all potential proposers in sufficient time to pen-nit well-considered responses.

B. Each request for proposals should cover the smallest increment of service practical so that the maximum number of qualified proposers may respond.

C. Requests for proposals should clearly specify all service requirements and contain clear and concise information on the required format of proposals.

D. Service contracts should be subject to new requests for proposals at least every five years, whether the incumbent operator is a private company or a public authority.

E. Contract expiration dates should be rotated to minimize the increment of service being competitively contracted at a particular time.

F. No single private company should be permitted to contract for an excessive percentage of public-transit service.

G. Contract prices should be subject to negotiation after contract award only in extreme cases: No payment adjustment should be permitted except as specified in the contract according to the provisions of the request for proposals, or where extremely unusual circumstances have resulted in cost increases that are both outside the control of the contractor and have similarly impacted all potential contractors in the supplier market.

H. Public authorities should participate fairly in the procurement process:

  1. Individuals and departments involved in preparing a public-authority proposal should not take part in the evaluation of proposals.

  2. Public authorities should submit sealed proposals subject to the request-for-proposals deadline.

  3. Public authorities should be subject to the same proposal and contract terms, conditions, and performance criteria as would apply to a private company including termination provisions.

  4. Public-authority proposals should include the attributable fully allocated operating and capital costs for the functions proposed for purchase through the request for proposals.[31]

  5. Public authorities should include cost-saving innovations in their proposals only to the extent that such innovations are used in other services provided by the public authority. (To permit otherwise encourages public authorities to reduce proposal costs for the purpose of winning contracts without reducing overall public costs.)

I. Where there are public capital facilities, they should be made available to the successful public or private proposer to provide the specified service. This will minimize capital and financing costs.

J. Public authorities should impose no contractor employee requirements beyond compliance with applicable labor laws.

PRINCIPLE #3:

Requests for proposals and final contracts and prices should be disseminated to any and all parties that solicit the information. Pre-proposal conferences should be open to all private operators and their designees. Public authorities should formally adopt, advertise, and abide by this principle of "open process" to assure the integrity of the procurement system and to encourage healthy, fair competition.