Bus-ted: For years, local officials used a Texas price agreement to green-light bus purchases. Now they’ve stopped—but the same out-of-state bus company still dominates the market

by Joey Peters Bus-Ted, Santa Fe Reporter (Hawaii pops up at the end of this story)

On July 12, 2011, Lynn Degenhart resigned from his post as a member of the New Mexico Passenger Transportation Association board with a message titled “Ethical Concern.”

“I have a real dilemma,” his email begins. “I feel I have a moral and ethical duty to let it be known that some members of the association (including some board members), and the new business member are involved in a pay to play scheme.”

Degenhart had recently owned Albuquerque-based Zia Bus Sales but explained in the email that his allegations had nothing to do with his company. NMPTA’s members, who include transit employees and players across the state, had elected Degenhart to the NMPTA board in 2009. He sent his email to all board members, including employees of the New Mexico Department of Transportation and a salesman from Georgia-based National Bus Sales. Degenhart continued: “The company involved is an out of state company that pays for NMPTA member’s [sic] personal trips, golf outings, and other perks in consideration for bus sales.”

It almost seemed like a direct reference to National Bus Sales—an out-of-state company with which nearly everyone who received Degenhart’s email had done business. Two months earlier, the NMPTA board had elected one new business member—Brent Roy, a business director with National Bus Sales….

For years, New Mexico’s procurement laws have allowed public agencies to sidestep the standard sealed bidding process and purchase buses through out-of-state arrangements. In particular, a Texas-based cooperative bidding agreement has allowed National Bus Sales to dominate much of the state’s transit market without even opening a full office in New Mexico. Now, as regional transit districts expand across the state, National Bus Sales is poised to do even more business here, despite its questionable past….

Despite NCRTD’s importance to northern New Mexico, most of its buses come from outside the state, using Texas’ Houston-Galveston Area Council cooperative price agreement.

Dale Couturier, a general manager with Arizona Bus Sales, says the Houston-Galveston agreement works like a prepared menu. Instead of writing specifications for each vehicle and waiting for the best offer, buyers can simply choose buses from a list that offers fixed prices that were previously negotiated. The agreement, established in 1973, enables transit districts to bypass a lengthy bidding process and, instead, purchase buses for a set price. Over the past few years, cities and transit districts across the western US have used the agreement to buy buses, funneling hundreds of thousands of dollars to NBS.

Proponents of such cooperative agreements tout them as an effective alternative for smaller agencies that might not have the resources or time to write the specifications for a vehicle.

“For small agencies, [cooperative bidding] is efficient in terms of our time and sometimes in terms of our cost,” Bartholomew tells SFR. The Houston-Galveston agreement provided a quicker, more efficient way for New Mexico transit districts to get the buses they needed.

“A lot of times, when entities are in a rush to get started, to just push it out in a straight [request for proposal] can slow the process tremendously,” Gino Rinaldi, who served as a program manager with the Rio Metro Regional Transit District through 2011, tells SFR....

To pinpoint the extent of NBS’ business in New Mexico, SFR requested public records of bus purchases from several cities and districts since 2009. In each case, NBS was awarded the majority—and in some cases all—of the purchases. …

But it’s not just the volume of New Mexico dollars flowing to NBS that has critics up in arms. The company has also been associated with allegations of inappropriate purchases and selling buses without proper licenses….

The trouble associated with the NBS purchases doesn’t end there. In fact, the Houston-Galveston model has been so problematic that federal authorities have barred transit districts from engaging in similar types of price agreements.

Last fall, Federal Transit Administrator Robert Patrick sent a letter to a colleague in the region encompassing New Mexico. In it, Patrick wrote that some cooperative purchasing agreements might be too open-ended to meet federal standards of “full and open competition.” The Federal Transit Administration also questioned the validity of Houston-Galveston in responding to a question from Tennessee’s Department of Transportation about whether it was legitimate to buy buses using the agreement.

“HGAC did not advertise for a finite number of vehicles,” FTA’s response reads. “The vendors’ pricing…appears to be based on an indefinite quantity of vehicles.”

In other words, it was FTA’s view that, because the agreement allowed for an open-ended number of vehicle purchases, it wasn’t fair to other vendors. If the agreement continues indefinitely, NBS’ competitors may never have a full chance to compete for transit districts’ business.

In response to FTA’s letter, transit agencies across New Mexico have stopped using the Houston-Galveston agreement to buy buses. “In the state of New Mexico, there aren’t any purchases being made off [Houston-Galveston] at this time,” Los Alamos Transit Manager Mike Davis tells SFR. Arnett writes that no transit district has reached out to NMDOT for help with the new FTA guidelines yet.

But for some, the FTA has simply muddied the water. Both Bartholomew and Davis say the FTA’s guidance isn’t always completely clear. The agency has OKed Houston-Galveston purchases in years past, Bartholomew says—but even so, he’s waiting from clarification on what exactly is allowed by FTA before he goes ahead with further bus purchases.

“I think we’re definitely going to have to ask questions,” Bartholomew tells SFR. “We need to at least ask FTA what’s going on.”

That uncertainty extends far beyond New Mexico.

“I think a lot of the confusion lies with FTA,” Denise Soderholm, who runs Honolulu-based Soderholm Bus Sales and Leasing, tells SFR. “They’re putting out a guideline that attempts to interpret the law. That’s not what their job is.”

The FTA, which is part of the US Department of Transportation, primarily compiles statistics for and gives financial support to local transportation districts. But Soderholm’s company has also locked horns with NBS.

Last November, her company filed a lawsuit against NBS for selling buses in Hawaii without a proper state license. NBS settled with Soderholm in February for an undisclosed sum.

State licenses are required in both Hawaii and New Mexico, but comparatively, Hawaii’s are much stricter—in part an outgrowth of the island’s remoteness, which limits out-of-state companies’ ability to manage operations from a neighboring state. Hawaii, for instance, specifies the amount of space a bus sales office must have, whereas New Mexico only requires a space “large enough to accommodate the dealer’s office.” Hawaii’s licenses also set regulations in areas such as vehicle warranties, and Hawaiian transit districts don’t join cooperative bidding agreements like Houston-Galveston.

“All of our contracts have been sealed bids,” Soderholm says.

read … Bus-Ted