What opportunities are there for private sector providers to deliver public transportation services?
Opportunities for private sector providers generally fall into two categories:
- Introducing private transportation service to new or expanded customer markets, and
- Contracting with public providers to provide service on particular routes or to particular customer markets.
Direct Service to New or Expanding Markets
Important opportunities for development of new or expanded services often exist in the areas of job access and human services transportation. Private providers may be uniquely qualified to serve these potential customers by providing access and circulator services connecting activity centers such as major employers, health care facilities, shopping centers, and government offices to the larger regional public transit services and transfer facilities. To qualify to receive federal funds to provide these services, local officials must first prepare a locally developed, coordinated, public transit-human services transportation plan. That report documents current and future demand for transit services, inventories transit services currently available to serve those needs, and identifies gaps for which new or expanded services will be needed.
Private operators can work with state and local government officials and the general public to identify markets for offering new or improved transit service; they may also decide to offer services directly to those customer markets. State and local governments, in the course of preparing plans and budgets for future services, should seek involvement and advice from private sector providers. A private operator may propose that its own directly operated transportation services be included in the federally assisted program. To qualify, the private operator must be authorized by a local authority to provide such service and the service must qualify under one of FTA’s programs as an eligible public transportation service.
Contracting with Public Operators
Private sector providers may also provide service under contract to public transit operators in corridors and communities within the service areas of those public operators. Suburban employment and activity centers and other community-based markets are among the many “niche” customer bases that private sector providers may be uniquely qualified to serve.
The Americans with Disabilities Act of 1990 (ADA) requires public transit systems that provide fixed route service to also provide ADA complementary paratransit service. Many systems contract for this service. An FTA grant recipient in compliance with the ADA can treat as a reimbursable capital expenditure up to 10 percent of its annual formula apportionment under the urbanized and rural area formula grant programs to provide this service, or use federal operating assistance.
Express commuter service in selected corridors and implementation of vanpool programs are two additional types of services that transit providers may find that can be provided more efficiently by the private sector. Public transit operators can use federal funds to contract for these services.
Transit providers in both urbanized and rural areas are permitted to contract with private companies to provide service. Transit providers in all areas, regardless of size, may use FTA funds to pay for the capital costs of contracted service. Cities with a population under 200,000 can also use federal operating assistance funds to contract for service. Transit providers must follow federal third-party procurement rules when contracting to ensure competition.
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