Hawaii’s school bus business may be attracting new interest from transportation companies as the state continues to award lucrative contracts. But two mainland companies say the state’s bidding process and the way it organizes contracts could be improved.
Last month, under scrutiny by state officials, the Legislature and the FBI, Hawaii school bus companies competed against each other for state contracts for the first time in five years. Two mainland companies also signaled their intent to bid — one did and one decided not to bid — and a new Hawaii company formed just in time to submit offers.
The 18 contracts up for grabs in December still haven’t been officially awarded but appear to total about $9.6 million, still high considering lawmakers have threatened to cut the Hawaii Department of Education‘s transportation budget if officials don’t rein in runaway bus costs.
As Civil Beat has been reporting in its Taken for a Ride series, the 12 school bus companies currently active in Hawaii had not bid against each other for hundreds of regular school bus routes since 2007. Since then, the state has been paying the companies whatever they ask to transport kids to and from school.
Civil Beat analyzed hundreds of bid documents spanning a decade and found that when there was no competition the bid amounts rose sharply year after year. The state’s 2007 $41 million student transportation budget mushroomed to $72 million this year — a 75-percent jump over five years.
New competitors in the market are seen as a way to bring costs down by prompting new business practices and getting local bidders to drop their prices.
Another mainland company that had [asked for bid documents]((https://www.civilbeat.org/articles/14006/) from the Hawaii Department of Education — Illinois-based Durham School Services, the second-largest school bus firm in the United States — decided not to bid in the most recent round because the contract sizes were relatively small, a Durham executive said.
“We felt that we needed a larger contract to justify the investment of entering the market,” said Rick Klaus, vice resident of sales for Durham.
Klaus had hoped to get into the Hawaii market, especially after reading Civil Beat’s coverage of runaway bus costs.
“We felt the prices being charged by other companies were higher than they need to be,” Klaus told Civil Beat. “We felt we could do the work that was out for contract for less than the current rates.”
Klaus noted that the way the state combines routes together in a relatively small contract could be working against efforts to bring in bigger companies like his that need larger jobs to make it cost effective.
He hopes the department considers lumping routes into larger contracts that would make it more feasible for a big company like his to operate in the islands. That would also provide the state with greater options, he said.
A Utah firm, Wasatch Transportation, did make offers, though, on every contract up for grabs this year, and was the lowest bidder on four of them. While not all of the newcomer’s prices were lower than those offered by established Hawaii contractors, some were significantly lower than the local bids.
One special education route in West Hawaii, for example, received bids of $619,000 and $630,000 per year from two Hawaii companies. Wasatch’s bid was $493,000 per year.
Wasatch CEO Ryan Fuller said he has not heard yet whether his company will actually receive the awards. Still, he thinks the school district could take notes from other mainland districts that contract out for bus services.
Hawaii’s procurement process for school bus services is different from that of other school districts, he said, noting that usually the invitation for bids will include a point system used in determining which bidder will receive the contract. Other states award points for things like equipment quality and the company’s safety record. The winner is the one who ends up with the most points, which allows the state to select the best bidder, instead of simply the lowest bidder.
“Price is usually worth about 30 percent in a point system,” he said.
Hawaii’s bid documents, however, did not have any place for companies to discuss competitive advantages in equipment or company track records — at least not up front.
But he received a letter from the Department of Education after the bid opening, asking him to do essentially that, by outlining how he plans to perform the responsibilities laid out in the contract.
“I can’t say how the process is going to end,” he said. “I’m hoping to find out shortly.”
Sign up for our FREE morning newsletter and face each day more informed.