Lawmakers were frustrated that Hawaii Department of Education officials couldn’t tell them at a hearing Friday how to get school bus companies to compete for contracts.

Senate Education Chairwoman Jill Tokuda said that issue is critical in getting Hawaii’s runaway student transportation costs under control. Lawmakers have threatened to cut funding for regular school bus service next year if the school district doesn’t offer some satisfactory solutions this legislative session for why prices went up so sharply, and how to get them back down.

“You yourselves have said that a robust, competitive market is the key to reducing costs,” Tokuda told Randy Moore, the school district’s assistant superintendent of school services.

A Civil Beat analysis of 11 years of bids revealed that competition among school bus companies suddenly stopped in 2007, and that school bus contract prices have risen sharply since then, from $47 million per year to about $75 million this year.

The lack of competition and steep price hikes were so conspicuous that the FBI launched an investigation into Hawaii school bus companies for possible collusion in setting prices. (Read more in our Taken For A Ride Series.)

Tokuda was perplexed, then, that district officials didn’t have an answer for why competition suddenly returned in bids for contracts late last year, along with two newcomers to the Hawaii market, one from the mainland. By then, Civil Beat had been writing about the issue for months, lawmakers were openly questioning why costs were skyrocketing and news of the federal investigation had leaked out.

“Part of that has been simply the publicity we’ve gotten,” said Moore. “Folks have inquired that had never inquired before.”

Tokuda said that’s not a satisfactory answer.

“I’m still befuddled as to what the difference was this year as opposed to years past,” she said. “If the pressure’s off next year, we don’t want it to go back to single-bid awards on these contracts. I encourage you to figure out what it is that increased competition.

“I sure would hate it to be a situation where we have to keep threatening every year to cut the budget in order to get competition — or do it, as (Senate Ways and Means Chairman David Ige) mentioned.”

Ige, who was also at the hearing, said the Legislature has been asking since 2007 how the the department can get a grip on rising costs, and the Department of Education to date has failed to deliver a satisfactory answer.

“What would compel me to feel that the way bus contracts are handled will change at this point?” he asked. “Because if it doesn’t, we might as well just blow it up.”

Barriers To Entry

Moore said the department has been tinkering with the contracts in an effort to make them more inviting to bidders other than the dozen contractors who make up the school bus industry, but the changes haven’t had the results he had hoped.

Transportation Services Manager James Kauhi added that during the last 12 months, vendors from all over the country have expressed interest in entering Hawaii’s market. Each of them had different reasons for their interest, he said, and each had different — often contrary — suggestions for ways to make the market more friendly to new competition.

One of the biggest barriers for potential new bidders is that a strategically located base yard for new operations is hard to find and expensive to pay for, district officials said.

Ige suggested the Department of Education work with the state to identify state and school district land that could eliminate that roadblock.

Tokuda echoed the sentiment.

“If base yards are a hurdle that really drives costs up because it keeps people out of the competitive market, perhaps that’s something we should look more deeply into,” she said.

She told Civil Beat after the meeting that she was pleased with the amount of detail the district officials provided in their cost-cutting scenarios, but she believes they need to be more aggressive in their pursuit of solutions.

“One of the fundamental things we asked was, ‘What made the difference in getting us competition this year?'” Tokuda said. “I don’t know if the (Department of Education) will be able to answer that, but we need to figure out how we can make it happen again in the future.”

Read testimony from the Department of Education.

View a short video from the hearing below:

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