If the bidding, awarding and monitoring processes are well-executed, competition between vendors seeking a school district’s business can drive the price down and the quality up. Generally speaking, experts in the field of competitive contracting recommend that to ensure a sufficient level of competition, at least three vendors be encouraged to compete in a bidding process.
Like competitive contracting itself, this concept is nothing new. In his 1940 tome “Pupil Transportation in the United States,” M.C.S. Noble Jr. of the Teachers College at Columbia University published data on the “Relationship Between the Number of Bids Received and the Cost per Pupil per Month” of privatized school transportation. Mr. Noble reported that at the time, more than 63 percent of all school buses in the United States were privately owned. The data in the table from the 1940 study (reproduced in Graphic 7) shows that the greater the number of bids, the lower the ultimate cost of providing the service.
Graphic 7: The Number of Bids and Per Pupil Costs for School Bus Services (Statistics Published in 1940)
Source: “Pupil Transportation in the United States,” M.C.S. Noble Jr.
Competition is the key to successful contracting. Indeed, when recommending privatization, I prefer to use the phrase “competitive contracting.”
Consider the case of an Upper Peninsula district that retains two buses in-house to ensure competitive pressure on the limited number of private busing vendors willing to work north of the Mackinac Bridge. Randall Van Gasse, superintendent of the Norway-Vulcan Area Schools, reports that his district has been contracting for bus services since the 1940s, but when new routes open up, the vendors must compete with the in-house drivers for the business.[lix] The competition the private vendors face, he notes wryly, “keeps them honest.”
Noble’s findings and Van Gasse’s experience underscore the importance of ensuring that there is robust competition for a district’s business. They also drive home that competitive contracting in school districts is a time-tested approach. Indeed, what is intriguing about Noble’s book is its demonstration that “past is prologue.” Districts today are debating subjects wrestled with more than 60 years ago.
[lix] Van Gasse also reports that his district contracts out with a third party for a school principal and substitute teachers.