Title
Contract Amendment for Market Rate Adjustment to Transdev Services, Inc. Fixed Route Transit Services Agreement (Ordinance S-49269)
Description
Request to authorize the City Manager, or his designee, to execute an amendment to Agreement 152502 with Transdev Services, Inc. to address wage rate challenges in the regional labor market for bus operators, mechanics, and utility workers. The contract amendment will result in $20,856,956 of additional costs. The existing cost savings for the contract will offset this increase, leaving the contract’s total not-to-exceed amount of $790,191,716 unchanged.
Report
Summary
Ongoing challenges in the labor market have made it difficult for many industries to hire and retain workers. The workforce shortage is especially acute for the transit industry. In February 2022, the American Public Transportation Association conducted a survey of its member transit agencies. Key takeaways from that survey include:
- 92 percent stated they are having difficulty hiring new employees, with bus operations positions being the most difficult to fill.
- 66 percent indicated they are having difficulty retaining employees.
- 71 percent said they have either had to cut services or delay service increases because of worker shortage issues.
- 52 percent have increased their starting pay in response to worker shortages.
- 38 percent have implemented sign-on bonuses, 39 percent implemented referral bonuses, and 17 percent have implemented retention bonuses.
In June 2020, Phoenix City Council awarded the North and South Transit Facilities Fixed Route Services contract to Transdev Services, Inc. (Transdev) and provides local and circulator bus service throughout the region. The five-year contract started July 1, 2020, and continues through June 30, 2025, with a two-year option to extend the agreement through June 30, 2027. The City may also extend on a month-to-month basis for up to six months beyond the five-year initial term or two-year option term at its sole discretion. The contractor is responsible for all aspects of transit service provision including personnel administration, operations, and maintenance. Transdev also performs the selection and hiring of personnel qualified for the operations and maintenance of the facility, vehicles, and equipment.
Locally, Phoenix’s fixed route transit operations contractors, including Transdev, have experienced operator, mechanic, and utility worker shortages since July 2020. This labor shortage has resulted in deficiencies in transit performance, including service delays and missed trips, as both contractors are finding it challenging to hire and retain personnel to complete service and maintenance to keep vehicles in a state of good repair. Prior to the pandemic, Transdev’s percentage of missed service was consistently between 0.5 percent to one percent (between 5,000-10,000 miles) of scheduled miles a month. Since the pandemic, missed service has increased to between four percent and eight percent (45,000 to 90,000 miles) a month, with some months as high as eight percent (90,000 miles) missed a month. The resulting delays and missed service have also resulted in increased passenger complaints, climbing from an average of about 4.6 to 6.7 per 10,000 boardings.
Despite increased vacancy rates for bus operators and mechanics, Transdev has demonstrated a commitment to maintaining maximum service levels with an increased level of effort to recruit and retain staff, including instituting recruitment and retention bonuses, and attendance and performance bonuses for existing employees.
The preceding efforts have helped recruiting efforts by Transdev, but the company has a 3 percent vacancy rate for bus operators and 18 percent vacancy rate for their maintenance staff. Because the contract remains under-resourced, and transit performance levels continue to be adversely impacted, the City of Phoenix Public Transit and Valley Metro staffs have been working with the region’s service providers to develop contract amendments to bring the wages into closer alignment with the current labor market.
Operating under similar labor circumstances, and experiencing unprecedented levels of missed service, the Valley Metro/Regional Public Transportation Authority and Valley Metro Rail boards recently approved contract increases for their bus and light rail operating contractors. Phoenix’s review and acceptance of each contractor’s price proposals would serve to help bring parity to transit personnel wage rates across the region.
Financial Impact
The increase in the cost per mile for the service modes (local and RAPID) for the remainder of each year of the contract is shown below.
Contract Year 3
LOCAL
- Original Cost Per Mile: $7.11
- Proposed Cost Per Mile: $7.3988
RAPID
- Original Cost Per Mile: $9.10 (rate for 30.01 percent to 40 percent decreased service)
- Proposed Cost Per Mile: $9.3888
Contract Year 4
LOCAL
- Original Cost Per Mile: $7.38
- Proposed Cost Per Mile: $7.6688
RAPID
- Original Cost Per Mile: $9.34 (rate for 30.01 percent to 40 percent decreased service)
- Proposed Cost Per Mile: $9.6288
Contract Year 5
LOCAL
- Original Cost Per Mile: $7.69
- Proposed Cost Per Mile: $7.9788
RAPID
- Original Cost Per Mile: $8.65
- Proposed Cost Per Mile: $8.9388
Contract Year 6
LOCAL
- Original Cost Per Mile: $7.90
- Proposed Cost Per Mile: $8.2138
RAPID
- Original Cost Per Mile: $8.88
- Proposed Cost Per Mile: $9.1938
Contract Year 7
LOCAL
- Original Cost Per Mile: $8.14
- Proposed Cost Per Mile: $8.4538
RAPID
- Original Cost Per Mile: $9.15
- Proposed Cost Per Mile: $9.4638
The amendment includes revised special event service and bus bridging pricing, should the City require ad hoc services during the term of the contract agreement. Such services vary in duration and are reimbursed at an hourly rate. Special event service and bus bridging cost considerations are already factored into the overall amended pricing.
Transdev operates over 14 million service miles on the City’s behalf. As such, the proposed increase to the cost-per-mile equates to a $20,856,956 increase over the remaining 4.5 years of the contract. However, due to service reductions and service not operated due to the pandemic, there are cost savings in the contract to offset the increase. The original contract value is in an amount not to exceed $790,191,716 for seven years, therefore there is sufficient contract authority to absorb the increased cost. The wage rate and contract amendment would take effect retroactively on Dec. 1, 2022.
Due to budget savings from missed Fixed Route service, the FY 2022-23 budget will be unaffected by this price change.
Concurrence/Previous Council Action
The Citizens Transportation Commission recommended approval of this item on Nov. 17, 2022, by a vote of 9-0.
The City Council previously approved the North/South Transit Facilities Fixed Route Services agreement with Transdev Services, Inc. on May 6, 2020 (Ordinance S-46592).
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Public Transit Department.