School transport overhaul threatens small operators

The Ministry of Education has changed the way it procures transport operators for school bus routes, and industry sources say dozens of small businesses could be at risk. Laura Walters reports.

Small bus and van operators are worried they will be cut out by the new education transport tender system.

Those operating small-to-medium businesses in regional New Zealand say they want a fair shot at securing a contract, which many rely on as their bread and butter, but feel the new system favours large operators.

The Ministry of Education is no longer assigning contracts to school transport suppliers on a route-by-route basis. The routes are now being grouped together, with suppliers having to tender for a whole group.

There are 87 route groups, which contain between three and 74 routes. The three-route group is on Great Barrier Island, and Newsroom understands the majority of the groups include eight or more routes.

Small operators – many of which are in rural and regional New Zealand – say they are at risk of being cut out as they don’t have the capacity or the capital to scale up and service whole groups.

If this happens, dozens could face the closure of their businesses.

The Ministry of Education says the new tender process has been developed in accordance with the current Government Procurement Rules, and the primary objective was to “ensure seamless continuity of service” between the end of the current contracts in December 2020, and the start of the new contracts in 2021.

But an industry source, who did not want to be named due to the current sensitive tender process, said the changes would have significant impacts on the businesses and livelihoods of dozens of transport suppliers.

He estimated between 40 and 60 small-to-medium operators that currently hold contracts, would likely be shut out due to the new configuration of the tender.

For some of those small, and single-vehicle, operators losing the school transport contract would force them to close, the source said.

“They will lose their critical mass.”

If that happened, those areas would lose operators and drivers with experience and knowledge of the roads and the community.

The source said he was also concerned older drivers on their second or third career might decide to retire if their current employer was not successful at tender. This could further exacerbate the country’s bus driver shortage.

“That’s the tricky bit. Then you have to decide: do you carry on, or do you leave?”

The head of one family-run, medium-sized operator with 25 buses said he did not feel like small companies were getting a fair shot.

This man also did not want to be named for fair of hurting his chances at gaining a contract.

“This is my livelihood,” he said.

If his company missed out on the “bread and butter” school bus runs now, there would not be another chance at one of these contracts for 12 years.

“That’s the tricky bit. Then you have to decide: do you carry on, or do you leave?”

Small operators were the backbone of communities, providing runs to sports matches, camps and other community activities at reasonable rates, he said. They were also stepping up in urgent situations, like when natural disasters hit.

But these “local legends” could disappear out of the network.

If small providers were forced to close, prices would go up for all services and communities would miss out, he said.

Ministry of Education acting head of education infrastructure services Sam Fowler said the ministry initially considered pulling all of the routes within a region into a single group.

Following feedback, those in charge decided to tender multiple groups in each region with groups of varying sizes to facilitate access for suppliers of different sizes.

The groupings gave operators of different sizes the opportunity to participate in the tender, and offered higher-value contracts should they choose to scale up operations, Fowler said.

The ministry would also be applying market share restrictions, to keep contracts competitive.

If operators didn’t want to bid for an entire route group, they could consider partnership options such as sub-contracting or joint ventures with other operators to submit a combined bid.

However, those who spoke to Newsroom said practically it was unlikely small operators – who were in competition - would band together to create joint ventures, or partnerships, for bigger group contracts.

Associate Education Minister Jenny Salesa has so far failed to meet with industry to discuss their concerns. Photo: Lynn Grieveson

Industry had asked to meet with Associate Education Minister Jenny Salesa but the meeting had been postponed twice. Now she says it would be inappropriate to meet this far into the process.

One industry source who spoke to Newsroom argued the minister was the best person to meet, as she was not directly involved with the tender but had the power to do something about their concerns. At the moment, some small operators did not feeling like anyone was listening.

National Party education spokesperson Nikki Kaye agreed the major changes were putting smaller providers at risk.

“National supports efficient transport delivery, however there have been numerous instances where the ministry has got it wrong when it comes to transport as it just doesn’t understand the necessary provision in isolated areas,” she said.

In regards to Salesa’s refusal to meet with industry, Kaye said she had failed to communicate adequately with providers on the issue.

“While it is important ministers don’t get involved in the operational detail of a tender, they should still be able to discuss the general impact to services and schools and engage with industry on general policy issues.”

The issues regarding the new route groupings come as the school transport system faces big changes.

The management and administration of school transport was recently brought in-house, after being outsourced to two providers for many years.

Last time these contracts went out for tender was 2008, and the process was managed externally. The number of operators halved from about 120 to 67 at the time. That number is expected to drop again this round.

The contracts are due to go out to tender on October 12, following the Bus & Coach Association’s annual conference next week.

The school transport system

The Ministry of Education is the second largest provider of passenger services in the country.

The school transport system helps about 100,000 students to get to and from school every day.

This includes buses to and from school, travel between schools to access technology facilities, specialised services for students requiring additional assistance to access education, ferries, funding to schools and allowances to caregivers.

This upcoming tender process covers the contracts for around 1500 daily bus routes and 700 technology routes, currently supplied by 67 contracted companies.

Last year, the ministry spent $205 million on school transport services.

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