Milwaukee County issued a request for proposals (RFP) in 2013 seeking an organization that would manage the County’s transit system, including paratransit service. The Milwaukee County Transit System has seen more than a decade of route cuts and fare increases. The goal of issuing the RFP was to increase value, accountability, and, ultimately service to the 151,000 people who ride the bus every day.
Upon completion of the RFP process, the Milwaukee County Department of Transportation (MCDOT) announced its intention to award the contract for transit management services based on a professional panel’s review of the bids to MV Transportation. Two vendors that were not awarded the Contract, Milwaukee Transport Services, Inc. (MTS) and Veolia Transport, appealed the award. An Administrative Review Panel made up of County Board Supervisors was created by the County Board of Supervisors to consider the appeal. On February 20, the panel of Supervisors voted to not consider the negotiated contract. The outcome of this process is yet to be determined.
Summary of Contract with MV
The proposed contract with MV would have included a $15 million annual reduction in management and administrative overhead costs from what is included in the 2014 Adopted Budget. The $15 million reduction in management and administrative overhead costs could have been reinvested into the Milwaukee County Transit System and would have accomplished the following:
- Increased annual hours of bus services by approximately 140,000. This would be the equivalent of restoring all service cuts to the system that have taken place since 2003 (Additional information on service data and fare increases implemented since 2003 is located here).
- Restored service frequency on routes where service has been reduced over time.
- Expanded or restored service to business parks and job centers.
- Expanded service to improve educational opportunities to area colleges and universities.
Assuming transit services were restored to the 2003 levels, an additional $11.5 million in increased revenue to the transit system would have resulted, which could have led to additional service expansion or fare reductions.
Options to Move Forward
In-Sourcing Transit
One possible outcome is that the transit system would come under direct County management and operation (“in-source”). This recommendation was proposed by the County Board and would make all positions that operate the system, including executive leadership, administrative and planning staff, bus drivers and mechanics, etc. County employees. As required by State and Federal law, current transit employees represented by a collective bargaining agreement would maintain representation and negotiations over labor agreements would be subject to binding arbitration.
The 2014 Adopted Budget required the Office of the Comptroller to convene a workgroup to examine the “the advantages and challenges of in-sourcing versus outsourcing transit management and operations.” The workgroup is tasked with issuing a report that “…shall examine employee ramifications, unfunded liabilities, taxpayer impacts and other issues related to in-sourcing”. This workgroup has since met and issued its report; however, the complexity of this move meant that in the short time-frame, the group was not able to fully detail the short and long-term impact to taxpayers, and thus the full implications have not been laid out for the decision-makers.
Re-Issuing the RFP
The Department could, instead, re-issue a RFP. It is not clear whether the County has time to create, issue, and evaluate another RFP if federal law prevents the County from extending the existing contract. In addition, the County must decide whether the current appeals process should continue as is, or whether the County should create a new process that is based on best practices, or utilize the administrative appeals process in State statute.
Issues to Consider
If the results of the re-issued RFP or the in-sourcing of the system do not reduce administrative overhead costs as envisioned in the proposed contract with MV, the fiscal impact will largely be the opportunity cost of lost resources that could have been re-directed from administration to operations.
It is difficult to analyze the fiscal impact to the County of either option that is currently available, because the terms of an outsourced option would be available only after re-issuance of the RFP, while the transition costs and ongoing needs of an in-sourced option are not known. However, the following issues deserve consideration:
- Could a contract be structured so that County taxpayers are protected in the case of operating deficits? Under the in-sourcing option, operating deficits are covered by the taxpayers of Milwaukee County.
- Could a contract establish performance standards and require that the vendor be fined if they were not met? Performance standards could be created for an in-sourced system, but under an in-house model no financial penalties could be realized if standards are not met.
- A contract could require the vendor to provide detailed, line-item budget and financial information to the County. In-sourcing would also provide this.
- In either option, the real estate, buildings, buses, motor vehicles and other tools, machinery and equipment required for the operation of the Milwaukee County Transit System would continue to remain the property of Milwaukee County.
- Could the contract limit the vendor’s ability to enter into emergency contracts that last longer than one year? The current contract allowed the incumbent vendor to enter into a three-year emergency contract for paratransit services that resulted in an unnecessary cost of $7.9 million to taxpayers. An in-sourced option would also provide oversight in this area.
- Whether provided through a contract or in-sourced, collective bargaining would continue as required by federal law.
- Does the County have the administrative capacity to bring nearly 1,000 transit employees in-house? For instance, what are the costs and risks of merging the payroll, information technology and human resources functions with the County’s systems? Does the County have the capacity to hold employees’ accountable in a timely manner to ensure good transit service?
Milwaukee County Office of Performance, Strategy & Budget 