New rules threaten small business
June 08, 2010
Editor’s note: On June 2, at Queen’s Park, Wellington school bus operator Lesa
McDougall, of Mount Forest, made an impassioned plea to the premier to understand the
school bus industry before imposing a tendering process that would have significant
outcomes for the provincial treasury and local operators. This is an edited version of her
address.
My husband and I own and operate a family business. We bought it from my father-inlaw after he retired from 50 years in business. Cook School Bus Lines has been in
business since 1964. We live and work in our community, the town of Mount Forest,
where for decades we have safely and efficiently transported several hundred students
to school on a daily basis.
When we bought the company, we felt we made a good investment. School bus
operations were a “safe” investment. The provincial government describes school busing
in Ontario as a “stable business with consistent demand and guaranteed payment.”
In the past year and a half, however, our business has been devastated. I want to warn
small business owners across the province that there is a pervasive and dangerous
attitude at Queen’s Park that dismisses the needs and realities of small business. We
have gone from being an owner operator of 19 routes to operating one and from an
employer of 25 to two. This is because the Ministry of Education has changed the rules
of procurement, mandating school boards procure student transportation in a drastically
altered manner through request for proposal. This rushed and flawed process has cost
us our business.
The chaos began when our transportation consortia was enlisted by the ministry to be a
part of a pilot project to experiment with templates that had been developed to
“transition” the sector to the public competitive procurement standards. However, when
the results of the pilot became apparent, and the demise of our sector of the industry
became obvious, the former minister of education stated there was a moratorium in
place on all future RFPs. That there would be “refinements” made to the tools and
templates employed in pilot RFPs and that “lessons needed to be learned.” The
moratorium did not exist, and lessons that might have been learned were ignored.
In March we learned that our business was hammered in a subsequent round of RFPs.
The uncertainty and arbitrary nature of the RFP process is at the heart of my concerns.
When a company does well in one round, and then loses big in the next (11 months
later), it has nothing to do with that company and everything to do with the flawed
assumptions that went into designing the process. This process creates an environment
of uncertainty, predatory bidding, destabilization, and this level of risk comes at a price.
In the short term, operators bidding on RFPs will have to factor this new level of risk into
their bids, or risk cutting their throats over the life of the contract. The current Ministry
of Education benchmark (the provincial average cost to operate a bus in Ontario), does
not have this risk premium built in. The ministry does not seem to understand this “cost”
in spite of the studies they themselves commissioned. Deloitte and Touche have stated
that an RFP environment could result in short-term economic savings, but long-term risk
of a monopolistic environment that may mean increased costs. We bid beneath the
current benchmark and we lost our business.
We couldn’t win this new RFP process. It was price driven and we weren’t “low” enough.
Worse than losing the bid would have been winning the bid that was artificially
suppressed, just to be able to stay in business. To suppress driver wages, cut corners on
maintenance, or compromise student safety were not concessions we were prepared to
make.
It is hard to understand why our own government is endorsing a process that makes
small business investment in Ontario even riskier. Given the current economic climate in
this province, one would assume that independent business is a focus for the Ontario
government, and that “stability” in small businesses is a priority. Yet, the reality for us is
that in spite of our customer’s satisfaction – schools and families who are perfectly
happy with our services — we could lose everything by an arbitrary process that does
not acknowledge the experience and past-performance of our business, all without any
level of accountability as trustees never passed any resolutions to authorize this process.
While the ministry has declared these pilots, and subsequent full RFPs, to be a
“success,” there are no objective criteria whereby anyone could make that claim. As this
was the first time the new RFP template and evaluation criteria were used in Ontario, it
was up to the individual operator to guess what the criteria and framework for responses
ought to be. It was, and still is not clear what the consortium expected, other than the
lowest price. The operators did not know what the evaluation criteria were, the formulas
used to calculate scores, and successful bids were secret.
Thus, the RFP process lacks transparency and accountability. It is fundamentally flawed,
and the process should be suspended.
The RFP document was onerous, overly complicated, and added a level of administrative
burden that existing contracting process avoids. The RFP process does not factor those
costs into the equation when they tell you there were savings. The reported savings are
not a full accounting of all the consultants and bureaucrats in the process. Nor are they
accurate reflections of what the savings may or may not be. Without a full year of
service, there is no real way of knowing accurately if there are real savings at all.
For the government and its bureaucrats, the tendering process is an optics-driven
experiment. An experiment driven by the excesses of E-Health and the scandal in the
Ontario Lottery and Gaming Corporation identified by Ombud Andre Morin. In rural
Ontario, the government’s experiment means loss of jobs: real economic losses to
families, the community, and business closures. Six communities in North Wellington
alone lost their local operator — Mount Forest, Arthur, Drayton, Alma, Belwood and
Kenilworth. We cannot pick up our business and move to another locale. We have one
customer and are bound to our communities.
As small-business owners our roots are in our communities. We coach soccer, sponsor
hockey teams, donate to local cancer societies. These family-owned businesses
contribute to Big Brothers, offer complementary shuttles for the local schools, sponsor
sports teams, and are part of the local community. Our kids travel on the same buses
our neighbours’ kids do. The commitment of small business to our local community is an
investment in our communities.
I began this process actually believing and trusting the government. They told me I was
their “partner” and that I was the kind of operator they were looking for. In the end, it
became apparent that everything I was told, and all the assurances I received, were
simply window-dressing to achieve the end goal – the lowest price wins.
There is now a reduction in competition, and the increase in costs on the next bid may
be substantial. But, when price is more important than safety, there are ramifications
that may be dire. It’s too late for my husband and I and our family, but I will plead with
the provincial government, and to Premier Dalton McGuinty.
Community-based businesses are lost, the process is flawed with measureables still
unknown. The “lowest cost model” is inaccurate and unsustainable with potential risks
for children and their safety. I am here today because I fear for the future of student
transportation in Ontario. This price-driven process puts short-term economics ahead of
long-term sustainability, and is destined to failure: the price is families, small business
and communities.
Lesa McDougall of Mount Forest is an operator of Cook Bus Lines.
June 11, 2010
Letters to the Editor
The lowest bid isn't always the best bid
When did efficiency become the only criteria the government was allowed to apply in the delivery of
public services? And what if efficiency comes at the expense of all the other priorities we expect our
government to have -- intangibles like public safety, regional development and support for small
businesses?
Take, for example, the plight of independent school bus operators in Ontario. These family-owned
and operated businesses are a looming casualty of the eHealth fallout. It's now the government's
belief that the only politically correct way to purchase goods and services is through a one-size-fits-all
competitive procurement template.
Pilot projects have proven this delivers arbitrary and inconsistent results, making business investment
riskier at a time when our economy could use a little certainty.
Essentially, the province's panacea rewards the lowest cost bidder at the expense of safety. It's now
a race to the bottom in school busing.
School transportation is a mere 4% of the overall education budget. And school bus transportation is
already the most economical transportation service the province pays for -- provincial investment in
municipal and GO transit is much more significant. And this process may drive down costs for school
boards now, but it will also serve to evaporate competition.
Our businesses may be "mobile," but they are not portable. They have deep roots in their
communities, where generations of families have gone to school riding the buses owned and
operated by the neighbour, who in turn spends his income in support of their business. That's how
rural communities work best.
Competitive tendering is a process designed to keep politicians safe from the nepotism and cronyism
inherent in contracting $200/hour consultants. What it won't do, when applied to school bussing, is
keep your kids safe.
When blind adherence to a process becomes more important to Queen's Park than hundreds of
otherwise viable family businesses, something is very wrong.
Sean Payne
President, Independent School Bus Operators Association, Napanee, Ont.