As noted above, systematic, nationwide data on school bus contracting are scarce, but some state-level analyses exist. Economists E. Bruce Hutchinson and Leila J. Pratt at the University of Tennessee at Chattanooga have twice acquired state data that allowed for a rigorous statistical analysis of school bus contracting costs.
Their first study, published in 1999 in the Policy Studies Journal, involved a comparative analysis of in-house and contracted services for busing in 19 school systems in Tennessee. They found that savings were indeed possible: 15 of the 19 districts had average costs that were 27 percent lower as a result of privatization. At the same time, costs rose by an average of 21 percent in four of the districts following privatization. The research accounted for variables such as the type of buses used, the price of labor and fuel, and what the authors called a “localization factor.” The latter was designed to account for such things as differences in the individual contracts, labor rates and geography.
The second study, completed in February 2006 and accepted for future publication in the Journal of Private Enterprise, examined district or “parish” contracting in Louisiana. In this case, Hutchinson and Pratt found that privatized school bus transportation was 10 percent more costly on average than in-house systems. The authors suggest that hybrid systems, where school boards contract for some routes but provide others in-house, may generate savings by retaining less costly bus routes in-house while outsourcing more expensive portions to contractors.
Hutchinson and Pratt’s second finding indicates something that will be discussed in more detail later in this primer: Privatization can fail to save money if school districts do not arrange the contracting process to maintain the pressure of monitoring and threat of market competition on the vendor.