Effects of Contracting on Cost Efficiency in U.S. Fixed-Route Bus Transit Service

Contracted service comprises a significant proportion of total operating expenses in the provision of fixed-route bus transit service in the U.S. Despite its importance, the literature on the economic effects of transit service contracting has been limited other than a few studies since the mid-1990s, and is inconclusive due to problems with the nature and methodology of the past studies. This paper examines how cost efficiency of providing fixed-route bus transit service varies by the degree of contracting. I make several improvements to previous studies and conduct a regression analysis that: 1) addresses the endogeneity problem between contracting decision and cost efficiency, 2) differentiates agencies that contract out only a portion of service from those that contract out all service, 3) takes into account the moderating effects of several factors on the effect of contracting on cost efficiency, and 4) uses a significantly larger set of cross-sectional time-series data constructed from the National Transit Database from 1992 to 2000. The analysis results show that the combined effects of contracting lower operating costs by $4.09 and $2.89 per vehicle hour for partial and full contracting agencies respectively in the average case. These average cost savings translate into 7.8 percent and 5.5 percent, using the average operating cost per vehicle hour of $53.06. However, this improvement is not universal, because the effects of contracting on cost efficiency vary by factors such as peak-to-base ratio, agency size, the wage gap between bus operators in the public and private sectors, and agency type.


  • English

Media Info

  • Media Type: CD-ROM
  • Features: Figures; References; Tables;
  • Pagination: 24p
  • Monograph Title: TRB 86th Annual Meeting Compendium of Papers CD-ROM

Subject/Index Terms

Filing Info

  • Accession Number: 01049315
  • Record Type: Publication
  • Report/Paper Numbers: 07-0317
  • Files: TRIS, TRB
  • Created Date: Feb 8 2007 4:52PM