On Thursday June 25, the Eno Center for Transportation, CALSTART, and the Brookings Institution hosted, “Driving Down the Cost of Buses: Helping Transit Agencies Get More for Their Money.” The event featured a keynote from Paul Wiedefeld (Eno Center Interim President and former head of Maryland Department of Transportation and Washington Metropolitan Area Transit Authority), a conversation with Representative Maxwell Frost (D-FL), and a panel featuring Lisa Jerram (American Public Transportation Association), Holly Arnold (Maryland Transit Administrator), and Michael Dorgan (Center for Transportation and the Environment). The event builds on the release of the Eno Center for Transportation and CALSTART’s report, “Customization, Competition, and Costs: Findings and Recommendations for the U.S. Transit Bus Industry.” During the event, speakers discussed the importance of reducing bus costs to more effectively utilize federal transit dollars. Speakers emphasized the complexities of the issue, including the need for larger and more streamlined procurements, less unnecessary customizations, and more competition within the bus manufacturing market.

Representative Maxwell Frost

During the event, Representative Frost shared how the high cost of purchasing transit buses and transit bus customization became an important topic for him to address and described progress on his ongoing efforts. Coming from Florida, Frost recognized the need for more buses and transit service across the country. Florida’s tourism development tax cannot be utilized for transit, and a potential penny tax for transit narrowly failed in a local referendum. When exploring potentially using Community Project Funding (CPF) grants for transit, Frost was shocked by the high costs of transit buses and realized that this was a wider issue that needed to be addressed.

Frost also emphasized that he soon learned that the cost of buses does not have a single solution but rather results from a confluence of issues including increased customization, a decline in the number of manufacturers, supply chain issues, and a small domestic bus market. He also emphasized the complications of the procurement process and spoke in support of the federal government providing more predictable transit funding to encourage He also emphasized that transit costs are not a local problem but rather a nationwide issue that must be adequately addressed by Congress through federal spending priorities and design.

As a first step, Rep. Frost has proposed legislation, the Transit Bus Affordability Act, which calls for the Government Accountability Office to complete a study on the topic. This study is currently underway. Frost did not yet indicate which organization should set and enforce bus procurement and design standards but emphasized that any standards set must be a funded mandate with “teeth,” indicating the importance of incentives/enforcements to move away from the current status quo. He also identified more standard procurements with a focus on safety and mobility as a point of interest.

Frost emphasized that effective transit is not a partisan issue and at its core is about helping people access school, work, and other opportunities. He said getting where you need to go is at the core of a great American society. He also emphasized that lowering bus costs promotes government efficiency and will enable transit dollars to go further, enabling agencies to provide more service. Frost said his legislative efforts in this area have been bipartisan because he has been able to point to shared interests from members of both parties in support of mobility, safety, and efficiency.

Maryland Transit Administration

Holly Arnold, Maryland Transit Administrator, discussed the potential impact of federal legislative changes to state agencies and existing efforts by Maryland. She spoke in support of stable, long-term funding to enable agencies to make larger procurements of buses. She highlighted Maryland’s existing efforts to reduce customization of buses, citing an estimated $17,000 cost savings per bus due to the efforts. She said the agency hopes to continue these efforts through requiring cross platform integration from technological systems within buses. She spoke in support of federal efforts towards more standardization but said more funding and thought is needed regarding the transitional period from the current status quo towards more standardization. She also spoke in support of the use of federal money to apply to operating costs.

BUILD America 250 Bus Cost Provisions

The event also comes during the current reauthorization cycle for surface transportation. The current bill passed through the House’s Transportation and Infrastructure committee includes provisions to lower bus costs. While the speakers had differing viewpoints on specific proposals in the legislation, there was general sentiment in support of continued efforts to address bus customization costs through both federal and state/local agency actions.

The current provisions in the BUILD America 250 legislation to potentially lower bus costs include:

A federal funding cap for transit buses. This measure, starting in 2029, will require the FTA to create an annual cap for the federal funding dollar amount for transit buses based on average procurement prices (for the designated vehicle length and propulsion type). Initially the cap would be set at 80% of the average and would slide down to 75% by 2030, and 70% by 2031. The bill provides an exemption to the cap for agencies under certain conditions (see below). The policy recommendations in Eno’s report also includes setting a federal cap with tiers and periodic updates.

During the panel discussion, Lisa Jerram noted that APTA is not in favor of a cap-based “stick” as a mechanism to lower costs.

Policymakers must also consider that the average prices of transit buses, as highlighted by the report, continue to increase. The legislation also calls on USDOT to review, at least every five years, applicable policies around procurement of rolling stock including total costs, state schedules, performance specifications, and different vehicle customizations.

Incentivizing use of state schedules and performance specifications. In BUILD 250, agencies purchasing off of state schedules will not fall under the maximum funding cap. The report’s findings and event speakers were in support of the use of state schedules to reduce administrative burden on transit agencies and promote standardizations. However, the report notes that state schedules still leave room for agency customizations. The legislative text does state that use of state schedules must reduce or eliminate vehicle customizations. The legislation says agencies using federal funds should utilize performance specifications “to the maximum extent possible.”

The legislation also calls for USDOT to maintain an updated list of state procurement schedules on the created under the FAST Act. Currently, the joint procurement clearinghouse has not been maintained as an up-to-date resource for transit agencies. The report’s recommendations support the incentivization of state schedules and performance specifications along with additional education around procurement options and pricing. The event panelists were also very supportive of the use of state schedules.

Bus testing. The legislation enables the testing of buses with advanced technologies outside of the traditional testing location (in Altoona, Pennsylvania) if the existing testing facility is not equipped. This may potentially reduce wait times in the future that were seen during the advent of new propulsion systems. This will be particularly pertinent for autonomous driving technologies. The report calls for enhanced transparency around bus testing timelines for all vehicle types.

Advance Payments. The legislation would allow transit agencies to make advance payments using federal funds to manufacturers without a performance bond. Manufacturers have emphasized the importance of advanced payments for their financial viability as bus orders can take around 18 months to complete. Advance payments would be capped at 20% of the vehicle cost.

No More Spare Ratio. The legislation would revoke the ability of the USDOT Secretary to set guidance on the spare ratios (total spare buses divided by vehicles needed for peak service).

There are also provisions in the bill that may increase bus costs including:

Rolling stock ban expansions. Currently, rolling stock cannot be purchased from China’s companies. BUILD 250 would expand this ban to China, North Korea, Russia, and Iran and expands the definition of “covered entities” to include companies with individuals within covered countries in positions of power and companies primarily operating within and/or under the laws of covered countries. For electric vehicles, the bill will also ban incorporation of electric power trains and charging infrastructure from covered entities.

Requirement for barriers to protect drivers. Barriers protecting bus drivers from potential assaults by riders have increased in popularity in the post-pandemic period as there has been an increased focus on both rider and driver safety. The legislation calls for a working group on the topic and then within two years, a requirement for transit buses purchased with federal dollars to have a workstation barrier capable of fully enclosing the operator. During the event, Administrator Arnold recognized that such barriers will likely add to the total costs of buses. However, she said that protecting labor is in the strategic and financial interest of transit agencies. She said losing drivers due to safety concerns limits the ability for transit agencies to provide full service.

Eno Center and CALSTART Policy Recommendations

The BUILD America 250 provisions contain some of the findings and policy recommendations from The Eno Center and CALSTART’s report. However, the report includes additional recommendations that policymakers, advocates, and transit agencies should take into consideration as the reauthorization process continues and as agencies continue to navigate high transit bus costs.

The report’s policy recommendations:

• FTA should help agencies build stronger procurement capacity through education, training, and workforce development.
  1. Fund and deliver agency education on standardization, industry structure, contract risk, state schedules, and the White Book.
  2. National Transit Institute should offer a bus-procurement course.
  3. Convene research, workshops, or webinars to draw lessons from other countries’ approaches to standardization and cooperative purchasing.
  4. Support agency staff as they build expertise.
• FTA should increase transparency in pricing and its programs.
  1. FTA should create a federal repository for bus procurement documents and pricing. If a full clearinghouse is not immediately feasible, FTA should regularly publish pricing information.
  2. Disclose how procurement-related priorities are applied in discretionary grant programs.
  3. Publish information on FTA authorization times and Altoona testing timelines so agencies and manufacturers can better understand schedule risks.
• FTA should require agencies to disclose major departures from standard practice and summarize their cost implications.
  1. When agencies prepare specifications and terms and conditions, they should be required to identify how and why their major elements differ from standard features in the White Book or a state contract.
  2. When a transit agency seeks approval from its governing body (e.g., board of directors), it should be required to provide a high-level summary of major nonstandard elements as well as cost implications, to the extent possible.
• Congress and USDOT should support ongoing industry standardization efforts and advance new initiatives to develop bus, technology, and interface standards.
  1. FTA should continue supporting APTA’s efforts to update the White Book and convene industry participants.
  2. USDOT should advance standards for transit bus technology and interfaces, especially where proprietary systems and poor interoperability add significant cost and complexity.
  3. Congress should establish an advisory committee of transit agencies to build on the White Book, develop additional performance-based specifications, and identify opportunities to reduce unnecessary agency-specific requirements.
• Federal laws and policies should give transit agencies financial incentives to purchase more standard buses.
  1. FTA should offer incentives for agencies that purchase buses through eligible state contracts.
  2. Congress and the FTA should provide stronger incentives for multi-agency joint procurements.
  3. Apply procurement-related priorities used in the Low or No program to other bus purchase grant programs.
  4. Congress and the FTA could set a maximum reimbursement amount per bus, with appropriate flexibility, tiers and periodic updates.
  5. Congress should allow local transit agencies to purchase standard buses through U.S. General Services Administration (GSA) contracts.
• Other promising policy options should be explored in future research.
  1. Assess whether FTA should allocate funds to manage and promote its Joint Procurement Clearinghouse.
  2. Consider allowing limited and temporary exceptions for Buy America requirements.
  3. Evaluate potential of USDOT or GSA by establishing a bus formulary (a list of standard bus models).
  4. Consider FTA providing incentives to agencies that use performance-based specifications.
  5. Determine if and how FTA could reimburse for the cost of “standard bus” with standard terms and conditions.
  6. Consider requiring agencies procuring a small number of buses to use a state contract or joint procurement.

For more information on customization within the U.S. transit bus manufacturing industry, cost increases, and policy recommendations read the full report. The report also includes a dataset with median procurement prices across 1,627 contracts from U.S. transit agencies. The full event can also be viewed through the Brookings Institution.