Cost effective vehicle purchases

Introduction

The decision to purchase a vehicle requires careful consideration of up-front vehicle acquistion costs, and later vehicle operations and maintenance costs. With the increase in the costs of fuel and maintenance labor, fuel efficient, reliable vehicles are now more valuable than in the past. Cost-effective vehicle procurement is an important part of maintaining a reliable fleet that can run efficiently and for long hours. The problem of ‘peaking’ adds to these problems. Peaking refers to the high number of vehicles needed to accommodate the high numbers of passengers that converge on the system during morning and evening rush hours. This means that transit systems have to obtain and maintain more vehicles than are needed during off-peak hours.

State and local governments are eligible to receive funds for capital costs, like vehicles, from the federal Department of Transportation through several programs, like the Surface Transportation Program, the Bus and Bus Facilities Program, and others, though they must follow certain guidelines and meet eligibility requirements. This is important to note because the availability of capital funding is the best predictor of the age at which transit agencies retire vehicles. Another important resource for California's transit providers is the California Transit Association. The Association's mission is to advocate for public transit and share resources, including research and surveys, among member organizations.

A hybrid Los Angeles Metro bus in 2009. Photo by Mike Bottone, via Flickr user Metro Transportation Library and Archive.

Regulations Affecting Procurement

One study by the Federal Transit Administration found that several federal and state policies and regulations affect procurement and service-life length. For example, the Americans with Disabilities Act has had an effect on the technology sought in vehicles, including on-board annunciators and reliable lifts. The FTA’s own minimum requirements for the span of time a vehicle must be in service before it can be retired without a penalty was also found to alter expectations for service-life of vehicles among practitioners - its 12-year minimum for 40-foot buses became the expectation of the service-life, rather than the minimum. Most importantly, though, they found that these regulations have a relatively minor effect on service-life of vehicles, especially when compared with the low-bid procurement process. The low-bid procurement process was found to degrade the lifespan and quality of the vehicles obtained in order to accept the lowest possible price. Accepting a low bid should not be prioritized over obtaining high-quality, long-lasting vehicles.

Emissions Regulations

The SAFETEA-LU transportation legislation specifically names diesel retrofits as a cost-effective method for reducing emissions to meet federal air quality standards, and this method has been studied by the EPA and the Transportation Research Board. New transit vehicle purchases may even be eligible for Congestion Mitigation and Air Quality Improvement funds (CMAQ).

California’s air quality goals also affect the parameters that transit providers have to work within when procuring vehicles. The California Air Resources Board requires that fleets reduce their overall emissions, including particulate matter and nitrous oxide from fleet vehicles. The Air Resources Board also has specific requirements for urban buses, separate from an agency’s average fleet emissions. Additionally, the South Coast Air Quality Management District (SCAQMD) has separate, specific requirements for Southern California transit agencies and other government agencies that manage fleets of 15 or more vehicles. It requires that new vehicle purchases must be lower emission vehicles or vehicles that use alternative fuels.

Buy America Requirements

Agencies receiving funds from the Federal Transit Administration must purchase vehicles that are made up of 60 percent domestic parts and assembled in the United States under the US Department of Transportation’s Buy America requirement. There are three possible reasons for the FTA to waive this requirement: if the requirement is not in the public interest; if the parts or components are not produced in a sufficient enough quantity; and if fulfilling the requirement would add over 25 percent to the cost. Although waivers are available for this requirement, one study found that many small, rural providers had difficulty fulfilling it when procuring paratransit vehicles.

Fuel Considerations

Emissions regulations aside, the rising cost of traditional fuels makes using alternative fuels more attractive. However, it is important to consider the costs of vehicles and the wide variety of alternative fuels, such as ethanol or electricity.

Case Studies

California Transit Finance Corporation

CTFC is a non-profit corporation established to assist California Transit Association members with capital finance and vehicle purchases. See more information at California Transit Finance Corporation.

German Case Study

Professors Buehler and Pucher examined the elements of a successful increase in transit efficiency in Germany. They found that purchasing new vehicles, and sharing them among transit agencies, was a part of improving the financial sustainability of Germany's transit system, along with reducing labor costs and fare reform.

Additional Reading

United States Department of Transportation. Federal Transit Administration. “Best Practices Procurement Manual.” 2003.

The Federal Transit Administration created this manual to assist both grantees and contractors in navigating the process of administering contracts for the purpose of procuring capital investments for transit. The manual includes best practices for meeting federal requirements, as well as for long-term planning for procurement.

Transit Cooperative Research Program. “TCRP Report 61: Analyzing the Costs of Operating Small Transit Vehicles; User’s Guide.” 2000.

Sponsored by the Federal Transit Administration, this link includes both the report and the user-friendly Microsoft Excel tool for evaluating costs. The tool asks the user to input baseline information into an Excel form and it produces a report based on the type of vehicle being purchased and how the transit provider intends to use it.

Transit Cooperative Research Program. "TCRP Report 146: Guidebook for Evaluating Fuel Choices for Post-2010 Bus Procurements." 2011.

Because fuel-efficiency and use of alternative fuels have become so important to obtaining funding and to the missions of transit agencies, this guide is especially useful for comparing the many options of alternative fuels. The link also includes the Microsoft Excel-based tool that was developed for evaluating the life-cycle costs and emissions of the different types of fuels and buses.

National Cooperative Highway Research Program. Transportation Research Board. “NCHRP Report 545: Analytical Tools for Asset Management.” 2005.

This report and accompanying ISO tool offer a framework for analyzing decisions across modes and goals. Because asset management can have a variety of goals - preservation or increasing efficiency, for example - state DOTs and other public agencies may need more complex decision-making tools. This report explains how to use the two tools developed by the authors - AssetManager NT and AssetManager PT, designed to analyze decisions for short- or long-term. The tools developed and this report address concerns beyond the scope of transit planners’ usual work (like pavement management, for example), but the tool is intended to be useful for a variety of uses within state and local DOTs.

National Cooperative Highway Research Program. “Research Results Digest 319: Buy America Issues Associated with the State DOT Procurement of Paratransit Vehicles Using FTA Funds.” 2007.

This report is the result of an investigation into how Buy America requirements affect small, rural transit providers when procuring paratransit vehicles. The report uses a literature review and interviews to make suggestions for changes to the requirements that might make satisfying it easier for a wide range of transit providers.

American Public Transportation Association Standards Development Program. “Technology Terms and Conditions White Paper.” 2011.

This white paper specifically addresses best practices for transit providers when procuring information technology. This can range from basic computers to complex software and mobile data collection systems. This guide is especially useful because it describes each common component of a contract for information technology and the benefits, risks, and common approaches associated with each. Although not about vehicle procurement, this topic is relevant as transit providers rely on intelligent transportation systems to improve service.