When the cash-strapped Hollister School District awarded a
five-year student busing contract to Tiffany Transportation
Services, officials relied on questionable legal advice and will
end up shelling out $650,000 more than they had to
– enough to pay the salaries of two teachers annually.
Hollister – When the cash-strapped Hollister School District awarded a five-year student busing contract to Tiffany Transportation Services, officials relied on questionable legal advice and will end up shelling out $650,000 more than they had to – enough to pay the salaries of two teachers annually.
In June, the HSD Board of Trustees awarded the contract to bus the district’s 6,000 students to Tiffany, missing an opportunity to form a partnership with the Gilroy Unified School District that could have saved $129,500 per year. The potential savings came when the Gilroy school district, in an attempt to operate more efficiently, submitted a proposal that was substantially lower than Tiffany’s bid. But through a series of miscommunications, an outright rejection of the initial round of bidding and a failure to pursue the better deal, HSD signed a more costly contract.
Gilroy Unified School District Superintendent Edwin Diaz believes Hollister missed out on a good deal, one that would have benefited both districts.
“I think it’s pretty obvious that (HSD) lost out on some cost-savings,” Diaz said. “Our bid gave them an opportunity to save money.”
Saving money would seem to be a top priority for HSD, which is struggling through such difficult financial times that the county superintendent of schools says it is a very real possibility that the state could take over the district. In fact, the district’s chief business officer told the school board on Sept. 27 that it needs to cut a projected $6 million from its budget expenses over the next three years to avoid state intervention.
At least one expert in the field of public transportation was surprised that the two districts failed to reach an agreement.
Kirk Hunter, the chief executive officer of the Southwest Transportation Agency, a non-profit joint powers authority that provides school transportation services in the Fresno area, suggested that if the districts were serious about saving money they would form a Joint-Powers Authority and work together.
“There’s no reason in the world (the two districts) are not doing a JPA,” he said. “It’s short-sighted and irresponsible. You have a fiduciary responsibility to put every dollar you can back into the classroom. At some point you have to think about the kids.”
School board members and Robert Tiffany, the president of Tiffany Transportation, say the district made no effort to favor the local company which has held the busing contract for 50 years. Instead, school officials say they took the position, on the advice of their legal counsel, that a public entity like GUSD could not legally bid on a contract. HSD officials also said that they did not have enough time to draft a contract that would allow the two districts to work together.
Questions over the contract first arose when HSD officials opened the two bids on Feb. 17. That’s when they found that Gilroy had underbid Tiffany by more than $222,000 per year.
“We bid our fully absorbed cost,” GUSD Assistant Superintendent Steve Brinkman said. “We can’t bid it at a profit.”
Rather than being elated at their good fortune, HSD officials almost immediately began to question their own process. They went to their attorneys, Guy Bryant and Meredith Brown of Oakland, and on March 1 sent out a letter rejecting both bids – an action HSD reserved the right to perform in its bid package.
Former HSD Superintendent Judith Barranti, who resigned from her position in August, informed bidders that HSD would start over because “staff recommended significant revisions in the bid specifications to better articulate the needs of the District.”
Revisions to the bid packet were indeed significant: The original 14-page bid packet was eventually expanded to 104 pages and included several general liability insurance requirements.
The notification rejecting both bids gave no new bid date and did not explain what in the first bid packet prompted its concerns, or why those concerns had not been evident before the bids were opened and GUSD’s low bid had been revealed.
Fighting for the Home Team?
Hollister School District administrators and board members strenuously deny that they rejected the first round of bids in order to give Tiffany a second chance.
“That’s preposterous,” Board of Trustees member Dee Brown said. “The bid process was done according to all the proper guidelines.”
Both Superintendent Barranti and HSD Transportation Manager C.R. Rogers said their decisions regarding the bus contract were not the result of pressure from Robert Tiffany.
“I’ve never received anything from Bob Tiffany,” Barranti said in July.
Tiffany said any suggestion of impropriety, either on the part of Hollister School District or Tiffany Transportation, was offensive. The bid process was not altered or changed in any way in order to benefit Tiffany Transportation, he said.
“We are honest people, we would never do anything like that,” Tiffany said. “That’s just not the way we do business. Tiffany Transportation has a long record of doing positive things for the education community.”
Despite publicity surrounding the rejection of the bids, District Attorney John Sarsfield declined to look into it, as did several state and county officials, because there was no clear indication of criminal wrongdoing or it was out of their jurisdiction. Sarsfield suggested the matter could be looked into by a civil grand jury if evidence surfaced showing that the Hollister School District consistently had trouble requesting bids.
The California Department of Education suggested the matter be brought to the County Superintendent of Schools, Tim Foley. But Foley said it was outside of his jurisdiction unless a lawsuit was filed.
First Round Rejection
Seven months later, it’s not clear why the first round bids were rejected. HSD officials have provided different and sometimes contradictory reasons for the rejection.
Transportation Manager Rogers, contradicting Barranti’s letter rejecting all bids for “significant revisions in the bid specifications,” told the Free Lance in August that they were rejected because of legal questions surrounding Gilroy’s bid.
“The question was: Can Gilroy bid? If you have a public institution that uses taxpayer’s money for transportation offering (services to) another public institution receiving money from the state, that was a legal question,” Rogers said. “The administration said, ‘I don’t think they can do that.’ So they said ‘we better call the lawyers,’ and the lawyers said ‘no, they can’t do that.'”
In an April 20 letter, Barranti wrote Diaz that HSD’s attorneys told the district that “school districts could not use tax dollars to support the business of transporting students from other school districts.”
The Free Lance submitted several public record requests for a copy of the legal opinion on which HSD officials depended when saying the bid was illegal. Barranti and the district’s attorneys declined to provide it, claiming attorney-client privilege.
HSD board members told the Free Lance they never received nor requested their attorney’s written legal opinion, and their decision to reject both bids and later award the contract to Tiffany was based on Barranti’s recommendation.
In addition to the question of legality, HSD raised questions about Gilroy’s ability to provide adequate insurance.
In interviews with the Free Lance, Bryant said GUSD’s lack of such insurance would have put Hollister students at risk.
But GUSD officials, who never received the second bid packet, were puzzled when the Free Lance brought HSD’s insurance concerns to their attention. The issue of liability coverage had not been raised in either of Barranti’s letters or in any communication GUSD officials could remember. GUSD officials said their district was fully insured and could have provided additional insurance to cover any possible liability.
Gilroy Drops Out
After receiving Barranti’s April 20 letter, Diaz said he made several unsuccessful attempts to contact the Hollister superintendent by phone to discuss how the two districts could work together. Meanwhile, a new bid packet was prepared and reopened for bidding on May 19. But GUSD officials didn’t find out about it until a week before the June 3 deadline for bid submissions, and only learned about it “through the grapevine,” said Darren Salo, director of transportation for GUSD.
On June 1, in a last-ditch effort to salvage an agreement, Diaz sent a letter to Barranti citing a California Attorney General opinion, “in which the Attorney General concluded that a school district may provide school-related services for another school district.”
Diaz suggested “some form of Interagency Agreement or MOU” to accomplish this, and made it clear that GUSD felt it was on solid legal ground in pursuing a contract to bus Hollister students. A Memorandum of Understanding is a formal agreement between two or more parties that details their working relationship.
“We would never have pursued this if we felt we were on shaky legal ground,” Diaz wrote.
Barranti’s response, faxed the same day, baffled GUSD officials.
“Thank you for your letter of this date confirming the legal prohibition preventing a school district from engaging in business functions outside of its governmental powers; specifically Gilroy’s submission of a competitive bid to perform pupil transportation services for our school district,” Barranti wrote.
That closed the door. On June 1, two days before the opening of the second bids, GUSD decided to drop out.
“It appeared that because of the response we were getting from the district, and the legal advice they were getting, we were not going to get the contract,” GUSD Superintendent Diaz said. “At that point we decided it was a battle we didn’t want to fight.”
Barranti said that she tried unsuccessfully to contact GUSD in the weeks preceding the second bid and time was a factor because the district needed transportation in place for summer school.
“There was not enough time to draft an MOU or an interagency agreement,” Barranti said. “They should have come to us with this at the beginning of the bidding process.”
Still, Tiffany did have competition in the second round of bidding. Durham School Services of Chicago, the third-largest bus transport system in the country decided to enter the race and submitted a bid of $871,000 per year. But Tiffany won with a bid of $782,000 per year over five years. Tiffany’s second bid was $95,000 per year lower than its first bid of $872,000, and was even $23,000 lower than the 2004-2005 contract it fulfilled last year. But it was still more than $129,500 higher than Gilroy’s first bid.
A contract with Tiffany was approved by the district board June 8 – five days after the second bids were opened.
Precedents for Gilroy’s Bid
Several cooperative transportation agreements exist throughout the state. In California, 50 school districts have organized into six cooperatives to share the cost of home-to-school busing expenses.
School buses at one such cooperative, Southwest Transportation Agency, travel a million miles a year transporting 3,500 students for 15 different school districts, Southwest Transportation CEO Hunter said. The cooperative was formed by five Fresno school districts in 1988 looking to save money on transportation costs. Since then, Hunter has contracted with 10 more school districts in the area and said he saved money for all of them since he took over the agency in 1990.
Although Tiffany Transportation has been providing HSD with transportation services for more than 50 years, Hunter said a non-profit joint powers agency could provide the same exact services for less.
In addition, John Green, supervisor of the Office of School Transportation for the California Department of Education, said he knew of nothing that would make GUSD’s bid illegal or improper.
“There is nothing in the education code, or any other code for that matter, that I know of that would prohibit this,” Green said. “We’re always talking about maximizing the use of equipment.”
The Financial Consequences
The $129,500 per year – $650,000 over five years – HSD would have saved by contracting with GUSD is based on the district’s formula for determining the lowest bidder. It would not have put the district in the black, but it would have eased the district’s financial woes.
“That’s two teachers (per year) who could have lowered class sizes and helped improve test scores,” Hollister Elementary School Teachers Association President Jan Grist said.
HSD has been using reserve funds to balance its budget for the last two years. In June, the Board of Trustees solved a $1 million deficit by dipping into its reserves and narrowly passing a $42 million 2005-2006 budget. The district faces cuts of $6 million over the next three years to balance its books.
County Superintendent of Schools Tim Foley has made it clear to district officials that they must balance the budget in order to avoid intervention by the state. However, school board members are working toward, and will submit, a balanced budget, Board of Trustees President Margie Barrios has said.
Although she was unfamiliar with the bidding process, Grist said the board must always strive to get the best possible contract.
“HESTA expects our elected officials to find the best services for our students at the best price,” Grist said.
Barrios said that’s what the board did. And as far as she was concerned, Gilroy was never out of the running, despite the district’s position that a Gilroy bid would have been illegal.
“(A contract or interagency agreement) wasn’t pursued because Gilroy didn’t submit a second bid,” Barrios said. “They would have been treated the same way as everybody else.”
Board of Trustees member Randal Phelps said the board was acting under the assumption, based on advice given to Barranti by HSD attorneys, that GUSD’s bid was illegal. Phelps said he would consider working with GUSD in the future if it could legally provide transportation services for less.
“I’d hate to think that we made a decision based on faulty information,” Phelps said.
Lessons Learned from Cooperative Pupil Transportation
Both Hollister School District and Gilroy Unified School District expressed interest in working together to save money on transportation, but a productive, cost-saving agreement was never reached.
In California, 50 school districts have organized into six cooperatives to share the cost of home-to-school busing expenses. Those districts believe that working together saves money, said Stan Ross, the joint powers authority director for the Pupil Transportation Cooperative in Whittier.
The districts have established precedents for creating interagency agreements or memorandums of understanding (MOU). Such agreements can lead to more concrete contracts such as joint powers authorities.
For example, more than 15 years ago, four rural school districts in the Antelope Valley formed a joint powers authority to transport students. The JPA is a separate, nonprofit, legal entity that provides home-to-school transportation for all students in each district, said Ken Scott, transportation manager for Antelope Valley Union High School District.
Since all districts share the cost of transportation, Scott said, the program helps all four districts save money.
A similar JPA, the Pupil Transportation Cooperative in Whittier, provides home-to-school transportation for six districts in that area. The JPA was established in 1984 and has saved all six districts money, Ross said. However, creating a JPA is not always necessary for school districts looking to save costs by pooling resources and working together. Schools can also work together by drafting a MOU, Ross said.
“When there are just two districts, the bigger district usually does it and says ‘we’ll charge you this,'” Ross said. “It’s much, much easier to do it that way.”
Such an agreement between two school districts can be established without a formal bidding process, Ross said, although he was unaware of any legal prohibition to pursuing a bid process.
Cooperative agreements aren’t always the best idea, Ross said.
“You need to make sure everyone gets along, but in most cases it will be cheaper,” he said.
Although cooperative transportation agreements don’t reduce the costs of operating school busses, they do reduce administrative costs, Ross said.
“(The Whittier JPA) has one director for six districts instead of having six directors for six districts,” Ross said. “That is how we save money.”
Bid Breakdowns
Bids are estimates of how much a bidder thinks it would cost to complete a contract. The actual cost could be higher or lower depending on day-to-day transportation needs, such as the number of routes and field trips the district requires.
Although the bid specifications and the methods used to determine the lowest bidder changed when the Hollister School District’s original bid packet was revised, the base rates, which indicate how much it would cost to operate one bus per day, did not change and can be compared.
GUSD’s base rate, for both special education and regular home-to-school routes, was $253.50 per bus per day and included a $2.36 charge for every mile the bus traveled over 50 miles.
In the same round of bidding, Tiffany Transportation’s base rate for regular home-to-school routes was $348.77 per bus per day and included a $1.67 charge for every mile the bus traveled over 50 miles. For special education, Tiffany bid $424.60 per bus per day and charged $1.67 for each mile the bus traveled over 50 miles. By comparing base rates, it is clear that GUSD’s bid was far lower than Tiffany’s initial bid.
In the second round of bidding, Tiffany Transportation’s bid was slightly lower for both special education and regular home-to-school bussing. In the second round, Tiffany’s base rate was $345 per bus per day with no additional mileage charges. For special education Tiffany’s rate dropped from $424.60 per bus per day to $395.00, again with no additional mileage charges.
In the second round of bidding, the district used a slightly different formula to calculate the lowest bid. This time, instead of having one flat rate, the district had three rates, one for regular transportation, another for special education and a third for field trips. Regular transportation accounted for 60 percent of the bid, special education accounted for 35 percent and 5 percent for field trips.
Although Tiffany Transportation Services lowered its bid considerably during the second round of bidding, it was still about $129,500 higher than GUSD’s bid. Over the life the five-year contract, Hollister School District could have saved $650,000 by contracting with Gilroy Unified School District, according the specifications of the second bid packet.
Brett Rowland covers education for the Free Lance. He can be reached at 831-637-5566 ext. 330 or [email protected].
