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June 01, 1998  |   Comments (0)   |   Post a comment

SBF Roundtable: Contractors dissent on safety measures, impact of tight school budgets

Other hot topics include effects of consolidation, the driver shortage and fears of industry domination by mega-contractors.

by Dale MacDiarmid, Senior Editor

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Gallagher: Pete, I think it's hard to say that seat belts are helpful in New Jersey and New York, where they're required, and they're not helpful in other states. Those initiatives in New York and New Jersey were customer-driven. The first school districts to put them on buses in New Jersey were prepared to run their own buses if a contractor wouldn't do it. I think it is a customer-driven issue because the industry can't settle on what it wants.

Settle: Our position has been that we encourage the government to look at additional safety restraints. Compartmentalization was designed 20 years ago and a lot of advances have been made. We encourage the feds to go back and take a look at alternative restraint mechanisms so that we can be sure that we're providing the most up-to-date technology available.

SBF: I'd like to talk about the future of school bus contracting. In terms of market share, how much privatization will this industry see in the next several years?

Settle: We're very optimistic about conversion growth. We've had some signficant successes with some large school districts. Most recently, of course, we converted the district in Savannah, Georgia, with over 400 vehicles in that fleet. But what you'll find is that each district's reasons for converting are different. So it's very difficult to sit back and forecast a broad trend. We feel very confident that the trend is going to continue toward contracting.

Palmer: I think if we can prove to school districts that we can offer quality service at a fair price, then we can be successful.

Gallagher: We're optimistic about contracting. Obviously, that's why we started this company. We see a good opportunity in the ABCs of school buses, which is acquisitions, bids and conversions. I think as long as there's competition in the marketplace, districts will look to privatize. When competition ceases and there are fewer alternatives, then they are a little reluctant to do that. In regard to the numbers, we see over the next 10 years that the school bus contracting pie will get bigger. If we can get the contracted pie to grow from 33 to 35 percent of the overall market to about 50 percent, it would be a tremendous feat for all contractors. We see pricing and capital replacement as factors. More districts are going to be considering year-round schools, which will require more air-conditioned facilities. This is going to create some opportunities for all contractors because districts are going to have to make a decision about where they want to best spend their capital dollars. We think it's going to be in the infrastructure of the buildings and also in educational initiatives. Hopefully, transportation will be left to contractors, providing that there is competition and reasonable alternatives.

Settle: To that point, even if there is just one vendor who would be interested in a particular school district, that is a 100 percent increase in competition over just keeping it in-house. Any competition is good. It allows in-house operations to set up performance and cost measures for themselves.

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