School bus contractors are under enormous pressure to deliver quality service at a reasonable price. This is no different than it has been for decades. However, some of the landscape has changed in the past 10 years, with continued consolidation of the contractor business, school boards placing a greater emphasis on cost and rising student discipline problems. To discuss some of these issues, SBF held a roundtable with three contractors with varying perspectives of the industry. Denis Gallagher is chairman and CEO of Student Transportation of America Inc. in Howell, N.J. The company was started last year and has since grown its marketshare to more than 850 buses. Floyd Palmer is president of Palmer Bus Service, a 210-bus operation headquartered in St. Clair, Minn. His operation spans rural areas of Minnesota and Wisconsin. Pete Settle is the vice president of marketing for Laidlaw Transit Inc., the largest contractor in North America with approximately 38,300 school buses.
SBF: Funding pressures have forced school boards to consider cost-cutting alternatives. Do you think school bus contractors are benefitting from this emphasis on the bottom line?
Pete Settle: Certainly, funding pressures force school districts to look at alternatives, including contracting the bus service. But the tighter school budgets are a problem for all school transportation operations, not just in-house operations. There's a fear that not only will school districts look at contracting as an alternative, but they may look at their local transit authority as an alternative or they may look at the alternative, as they have in California, of eliminating transportation.
Denis Gallagher: From our point of view we have found that there is a direct relationship between state funding and school districts' interest in contracting. When budgets are tight, school districts do look for alternatives. When budget problems arise, their interest does go up. However, we've also found in California, where we run a considerable amount of our fleet, that when school funding is increasing, there's a lot less interest in contracting. In states like Pennsylvania and New Jersey, where there are tight budgets, it's affording the opportunity for new bids and some privatization efforts.
Floyd Palmer: We contract in very rural Minnesota and Wisconsin. In the last couple of years, we've had two or three of our contracts put out for quotations, which we never had happen before. Doing a good job doesn't seem to matter anymore. These districts are just trying to save a buck. They're only looking at the bottom line. I've been in the business for 25 years. Twenty years ago we'd walk in and say, "We need a 3 or 4 percent increase." They'd say, "No problem, Floyd, you're doing a great job. See you next year." Now we're spending so much more time negotiating. The competition level is so much higher.
SBF: Do you all agree that school districts are looking at the bottom line rather than quality of service?
Gallagher: They're looking for both. Service is a given, and it's expected that it's going to be good. To Floyd's point, just because you've been there a long time doesn't hold a lot of water anymore. School boards are changing. There may have been a lot of longevity on the boards before, but that's changing. You get people on these boards now with diverse backgrounds, and they have no loyalty to a contractor. They have loyalty to their constituents. They're looking for service, which is expected, and price, which is their demand.