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August 1, 2011

Private firms changing face of school busing

School buses from New Jersey-based Student Transportation of America, which operates out of seven Connecticut locations.
Denis Gallagher, CEO, Student Transportation of America

The business of transporting children to school is getting competitive.

As Connecticut school budgets tighten, more districts are taking a hard look at the cheapest way to provide ancillary services such as busing, food service and janitorial services.

The 27 private busing companies with Connecticut school district contracts face tougher negotiations with districts when renewing agreements, or are pressured to offer lower prices when districts put out competitive bids for contracts.

“Our state still has as lot of competition,” said Cliff Gibson, chief operating officer for New Britain transportation company DATTCO. “It is very much a competitive environment at this point.”

Nationally, school transportation is a $24 billion industry with 34 percent of school districts outsourcing out their busing to private companies. The remaining 66 percent own bus fleets and operate on public budgets.

In Connecticut, 500,000 students are transported to school via bus every day, and 91 percent are driven by private companies. The spending on school transportation in Connecticut exceeds $360 million annually.

“It certainly has been something school districts have done historically,” said Patrice McCarthy, deputy director of the Connecticut Association of Board of Education. “Obviously with rising costs, school districts are evaluating the most cost effective way of providing busing.”

Private busing in Connecticut is provided by large and small companies such as New Britain-based DATTCO, Unionville-based M&J Bus Co. Inc., Wilton-based ECS Transportation, The New Britain Transportation Co. Ohio-based First Student Inc. is the largest Connecticut student transporter.

But a relatively new player is seeing more Connecticut opportunities arise. New Jersey-based Student Transportation of America — operating in 12 states — has grown its Connecticut operations to seven locations, adding contracts such as the Haddam/Killingworth Regional School District 17 last year.

“We’re in Connecticut, and it is a good business for us,” said Denis Gallagher, CEO of Student Transportation of America. 

With the cost of fuel, driver training and transportation equipment on the rise, smaller operators have greater difficult time providing competitive rates, Gallagher said. STA has grown steadily since founding in 1997 with half of its 15 percent annual growth coming through acquiring smaller companies.

Larger companies such as STA see the opportunity to grow by taking over contracts from competitors; acquiring smaller companies and their routes; or convincing school districts to outsource their busing, Gallagher said.

At Haddam/Killingworth, STA purchased the district’s bus fleet for $830,000, which was fed into the district’s budget.

Beyond receiving cash for their fleets, districts outsourcing busing benefit from operational efficiencies of a private company.

STA says it decreases operational costs by regionalizing, using the same fueling station and management team for multiple districts. STA operates in Danbury, Greenwich, Groton, New London, Griswold and Haddam.

The average operational savings for an STA client is 12-15 percent, Gallagher said.

Haddam/Killingworth Superintendent Howard Thiery said privatizing busing may or may not result in a cost savings for the district; but that’s not the main reason for outsourcing.

The effective management of school transportation is a daily miracle, given its complexity, Thiery said. The administration takes time away from school officials who should be focused on education.

“It is definitely a resource drain when you operate it from within,” Thiery said.

Frequent communication with STA gives the transportation department an in-house feel, Thiery said, but the district benefits from not dealing with headaches directly.

An added benefit of dealing with a private company is contractord can draw on resources in an emergency. When Haddam/Killingworth was short on drivers and buses because of an illness, STA brought in buses and drivers in other districts to fill the void.

“That was an economy of scale that we never would have been able to do,” Thiery said.

DATTCO provides busing for 16 Connecticut school districts, a number steadily increasing. DATTCO recently added the Easton/Redding Regional School District 9, said Gibson.

“There are only a few districts that still do it themselves,” Gibson said. “It is a very costly business to be in.”

The number of Connecticut school districts outsourcing busing continues to grow. The Newtown Public School District is the latest, switching this year.

“The educators have realized it is not their expertise,” Gibson said.


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