The funk created by the still-stalled U.S. economy, the dangerous quagmire in Iraq and the continuing threat of terrorism on American soil is being felt by many businesses. School bus contractors are no exception.

The combination of these pervasive wide-scale factors with more direct concerns — skyrocketing insurance costs, heightened competition for market share and tight school budgets — has created an environment that is testing the resolve of many contractors.

In addition, private operators who don’t have fuel escalator clauses in their contracts are also challenged by some of the highest fuel prices in history.

It has been a rocky ride for many contractors and could get rockier yet.

Uncertainty runs high
“It’s fair to say that the state of the economy is still one of the most critical issues to our members,” says Robin Leeds, legislative liaison for the National School Transportation Association (NSTA). Especially in regard to its impact on local, state and federal funding levels, NSTA members are keeping a weather eye on reports on the health of the economy.

Of course, day-to-day concerns like fuel prices, insurance premiums and labor costs also figure strongly into contractor concerns. Leeds says unfunded mandates such as transportation required through the federal No Child Left Behind Act also spark some anxiety, even as they create new opportunities.

“No Child Left Behind, school choice and magnet schools require more transportation services, which is an opportunity, but there’s no money behind them to pay for that transportation, which becomes problematic,” Leeds says.

Opportunity would seem to be the operative word for contractors. In the face of budget shortfalls and the need to control costs, school districts that run their own transportation services are looking more closely at privatization. But like many window shoppers, school boards often are “just looking.”

“One of our board members says he’s gotten more inquiries than ever before,” says Leeds. But what contractors well know is that convincing a school district to outsource its transportation program requires more than a promise of significant cost savings.

“What they find is that labor contracts and community opposition often make it almost impossible [to convert the school district],” Leeds says. “It’s easy to convince the business managers that they’re going to save money; the hard sell is convincing the drivers, their families and the community that they’re not going to suffer from a conversion.”

Leeds says NSTA members are encouraged to take advantage of the opportunities that are presenting themselves, even if the “human element” continues to present barriers.

Demanding parents
Another human element that both contractors and publicly operated fleets face is the growing number of demanding parents.

“Parents have become very aggressive,” says Leeds. “They’re much more demanding than they used to be.”

That translates into requests that bus stops be located in front of their homes, or at least close enough that parents can watch from their kitchen window as their children board the bus. “This puts a lot of pressure on people who design the routes and stops,” Leeds says.

This parental push for more bus stops makes it hard for bus operators to keep to their schedule and sometimes requires an additional bus or two. “And nobody has the money for more buses,” Leeds adds.

One of the negative consequences of this attitudinal shift is that more parents are driving their children to school these days. This creates additional traffic around school zones and greater hazards for students who walk, bike or ride in a car with their parents or friends.

Dog-eat-dog competition
Meanwhile, the fight for market share continues unabated among contractors. “We’re seeing the most competitive market in our history,” says Eric Jones, vice president of Jones School Bus Service in Elkhorn, Wis.

The company operates 450 buses for 21 school districts in Wisconsin and northern Illinois. Jones focuses on smaller contracts, trying to spread his risk. If he loses a couple of contracts, he’s not seriously harmed. And the way things are going, it’s difficult to predict how the bidding process will shake out.

“Because of the tight financial constraints of the districts, they’re willing to change contractors on a $1 million contract over $15,000 in price,” Jones says. “Whereas five or 10 years ago, loyalty and service meant something, it’s become much more of a bottom-line business.”

Jones says he’s now facing competition from the national companies — Laidlaw Education Services, Durham School Services and First Student. Because of their economies of scale and focus on market share, these larger players are tough to compete against. “They’re coming in at prices I ran 10 years ago,” Jones says in amazement.

And it’s not just the larger contracts that are drawing interest. “There were nine vendors at the pre-bid meeting for a two-bus contract,” Jones says. “There were five national companies and four locals.”

This frenzy for contracts is forcing down the pricing and harming the contractor industry, Jones says. “It’s not allowing any of the contractors, including the nationals, to make a decent profit. It’s not promoting a better environment by any stretch of the imagination.”

In addition to the heightened competition, Jones says premiums for health insurance and liability are the “biggest wildcard” in running a school bus company. “We’ve seen double-digit increases lately and those affect the pricing structure. The margins have definitely shrunk the past couple of years.”

Despite these challenges, Jones says his company is considering expansion. “To become more regional, we’re talking with other contractors about merging,” he says.

Although his operation spans two states, Jones says the company’s headquarters in Elkhorn are no more than 70 miles from the most distant terminal. “I log about 70,000 miles a year in my car traveling between the terminals,” he says. “But it’s important to communicate with our assistant superintendents and general managers on a weekly basis.”

{+PAGEBREAK+} Change in perspective
The skyrocketing rise in insurance premiums has changed the way some contractors view their chosen profession.

Bob Belyea, president of North River Bus Co. in Norwell, Mass., says his insurance premiums on a $4 million liability policy have surged more than 300 percent since the terrorist attacks of Sept. 11, 2001.

As you might expect, these higher premiums have cut into Belyea’s bottom line. “It’s the difference between making a living and making money,” he says. Belyea, who operates 16 school buses for two school agencies, including a charter school, isn’t deterred, however. “We’re able to make it because we don’t live extravagantly,” he says.

To keep the operation financially sound, Belyea has used attrition to cut back on overhead. A mechanic who previously worked full time now helps out on a part-time basis, occasionally stopping by in the evenings to lend a hand. Belyea also has some of his drivers doubling up on certain routes. “One bus can do two jobs in some cases,” he says. “It’s a matter of streamlining the routes.”

The driver shortage
As the economy slowly picks up steam, some contractors are discovering that the driver shortage is growing worse accordingly. What used to be a moderate shortage has become a severe shortage.

“They’re not easy to find anymore,” says Paul Bogart, president of Bogart’s Buses Inc. in Danville, Pa. Bogart, who also farms, operates 10 buses and has been in the business for 40 years.

“We’ve been pretty fortunate with drivers, but I spend some time knocking on doors,” Bogart says. To keep the assembly line moving, Bogart does the behind-the-wheel training and a part-time assistant does the classroom work. “It works pretty well,” he says. “We have an excellent safety record.”

Another Pennsylvania contractor, Richard Quigley, affirms Bogart’s contention that drivers are difficult to find these days. But he adds that state CDL regulations slow down the application process. “It takes forever to get a new driver on board,” he says.

Quigley, president of Quigley Bus Service in Bally, Pa., says he relies on word-of-mouth and classified advertising to recruit drivers and focuses on housewives and retirees. To retain them, “we try to pay as much as possible,” he says.

Expansion in mind
“We’re always looking for more drivers,” says Stephen Miller, transportation director at Truckland Transportation LLC in Kingsford, Mich. He maintains this aggressive recruiting mentality even though local unemployment is high.

“One of the reasons we’re always actively recruiting is that we’re looking for more conversions,” Miller says. “There are a few districts right on the edge of privatizing because they can’t afford to buy new buses.”

Truckland operates 24 buses, and Miller says he looks inside the company for new drivers. He targets bus monitors. “They make about half of what our drivers make, and they already know the routes,” he says. So far, he’s converted four monitors into drivers.

To keep drivers happy, Miller spends a lot of time with them, holding impromptu meetings almost every day. “I’m not just trying to be a nice guy,” he says. “I’m there when they arrive in the morning and when they leave in the evening. I encourage them to come up with two solutions to a problem and then to bring them both to me. We solve our problems together.”

Competing for drivers
Dianne Moore, contract manager at First Student Inc.’s terminal in Crete, Neb., also has a good working relationship with the driver corps. The operation services two school districts with 18 buses.

Recruiting drivers can be difficult because there are relatively large towns in the surrounding area that can offer higher wages and more hours. While other companies can offer 40-hour-per-week jobs, Moore can only offer about 20 hours a week to her drivers.

Because it’s so difficult finding drivers, Moore concentrates on keeping her existing employees content.

“We have a 10 percent turnover rate, which is pretty good,” says Moore. She attributes the low turnover to the supportive atmosphere that exists at the facility.

“Families have to come first,” Moore says. “That’s why we work around people’s schedules.”

In fact, Moore has to cut the conversation short to rush out to the bus yard and substitute for one of her drivers. “I have a driver who works for the election commission,” she explains. “And today’s election day!”