UC Irvine Institute of Transportation Studies

The recent fiscal problems of public transit in many large metropolitan areas have stimulated interest in alternative service delivery systems for public transportation. One strategy. that of contracting with private providers for public transportation services. has received particular attention. Private sector contracting is viewed as attractive due to its cost and subsidy savings potential--savings of 25 to 50 percent of public agency transit operator costs have been cited.(1.2.3) The reality. however. is that relatively little transit service contracting currently takes place and that substantial political, organizational, and legal obstacles confront plans to increase the use of this strategy. In addition, little detailed information is available on the extent of service contracting. its economic benefits. and the institutional factors which affect its feasibility. 

The purpose of this paper is to contribute to remedying this information deficiency by providing a review of selected experiences and issues of transit service contracting. The paper focuses on five major topics. (1) How widespread is transit service contracting. who practices it. and what services are involved? (2) Why do public agencies engage in private sector contracting, and what are typical situations in which they do so? (3) What is the magnitude of the estimated cost and subsidy savings which have been realized from contracting? (4) What are the major obstacles to service contracting and when are they able to be overcome? (5) What issues involving service contracting require additional research?