Title
Contract Amendment for Market Rate Adjustment to MV Transportation, Inc. Paratransit Services Agreement (Ordinance S-49273)
Description
Request to authorize the City Manager, or his designee, to execute an amendment to Agreement 155931 with MV Transportation, Inc. (MV) to address wage rate challenges in the regional labor market for paratransit operators, mechanics, and utility workers. The contract amendment will result in additional costs of $3,053,666. Further request to authorize the City Controller to disburse all funds related to this item. The contract’s total not-to-exceed amount will increase to $156,508,261.
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 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 March 2022, Phoenix City Council awarded the Paratransit Services contract to MV. The contract term is for a five-year base period starting July 1, 2022 and continuing through June 30, 2027. In addition to the initial term, there is a two-year option to extend the agreement through June 30, 2029.
MV provides paratransit services to the residents of Phoenix. The contractor is responsible for all aspects of paratransit service provision including personnel administration, operations, and vehicle maintenance. MV also performs the selection and hiring of personnel qualified for the operations and maintenance of the facility, vehicles, and equipment.
Locally, Phoenix’s paratransit services contractor, MV, has experienced operator, mechanic, and utility worker shortages since July 2020. This labor shortage has resulted in deficiencies in transit performance, including decreased on-time performance and reduced call center performance during and following the pandemic.
Despite increased vacancy rates for bus operators and mechanics, MV 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 MV, but the company has a 3 percent vacancy rate for operators and 29 percent vacancy rate for 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 historic levels of missed service, Valley Metro/Regional Public Transportation Authority and Valley Metro Rail boards recently approved contract increases (and associated operator wage rate increases) for their bus, rail, and paratransit operating contractors. Phoenix’s consideration and acceptance of MV’s price proposal would serve to bring parity to transit personnel wage rates across the region.
Financial Impact
The increase in the cost per service hour and fixed costs of components for the remainder of each year of the contract is shown below.
Contract Year 1
- Original Cost Per Service Hour: $33.48
- Proposed Cost Per Service Hour: $34.35
- Increase in Fixed Costs of Components: 1.484 percent
Contract Year 2
- Original Cost Per Service Hour: $33.94
- Proposed Cost Per Service Hour: $34.81
- Increase in Fixed Costs of Components: 1.479 percent
Contract Year 3
- Original Cost Per Service Hour: $34.71
- Proposed Cost Per Service Hour: $35.59
- Increase in Fixed Costs of Components: 1.473 percent
Contract Year 4
- Original Cost Per Service Hour: $35.76
- Proposed Cost Per Service Hour: $36.67
- Increase in Fixed Costs of Components: 1.470 percent
Contract Year 5
- Original Cost Per Service Hour: $37.02
- Proposed Cost Per Service Hour: $37.96
- Increase in Fixed Costs of Components: 1.459 percent
Contract Year 6
- Original Cost Per Service Hour: $38.54
- Proposed Cost Per Service Hour: $39.51
- Increase in Fixed Costs of Components: 1.486 percent
Contract Year 7
- Original Cost Per Service Hour: $39.94
- Proposed Cost Per Service Hour: $40.95
- Increase in Fixed Costs of Components: 1.476 percent
MV operates over 320,000 service hours annually on the City’s behalf. As such, the proposed increase to the cost per service hour equates to $3,053,666 over the life of the contract, necessitating a need to increase the contract authority by this amount.
The original contract funding is in an amount not to exceed $153,454,595 for seven years, with the contract amendment bringing the contract total to $156,508,261. 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 City Council previously approved the Paratransit Services (Phoenix Dial-a-Ride) agreement with MV Transportation, Inc. on March 2, 2022 (Ordinance S-48370).
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Public Transit Department.