The American Public Transportation Association (APTA) has issued a series of short-term and long-term recommendations from its Bus Manufacturing Task Force it believes will ensure bus vehicle manufacturers remain financially viable, improve vehicle procurement best practices and enhance competition.
The task force was formed in October 2023 following stress in the bus manufacturing market that includes a competitive labor market, inflation that has affected material and component prices, commodity shortages, hardships by many parts suppliers and an increase in the cost of capital. These challenges ultimately led to the bankruptcy and selling of Proterra, the pending cessation of ElDorado National-California operations and the pending exit of Nova Bus from the U.S. market.
“Preserving, protecting and nurturing a highly competitive U.S. bus manufacturing market and the capacity to transition to zero-emission buses are essential,” the task force wrote in its report.
The task force is led by Dorval R. Carter, Jr., former APTA chair and president of the Chicago Transit Authority, together with task force Vice Chair Richard A. Davey, president of New York City Transit. The drive behind the recommendations is to create a more stable and competitive bus procurement market.
To address cash-flow challenges of OEMs, the task force is recommending the following three actions:
- Price Adjustments: Transit agencies should consider price adjustments to existing bus procurement contracts executed between 2020-2023, including appropriate relief from liquidated damages for delays outside their control and as negotiated with the grantee.
- Progress Payments: Transit agencies procure an average of 4,500 heavy duty buses annually and typically pay for buses upon delivery, which can be 24 months or longer from the time an order is placed. The task force recommends agencies should incorporate advance payments and progress/milestone payments when appropriately collateralized in future contracts and consider modification of existing contracts to add progress payments in exchange for negotiated value to the grantee.
- Pricing of Vehicles: For future contracts, transit agencies should include a vehicle price adjustment mechanism (increase or decrease) by using indices to reflect price inflation/deflation in the cost of materials and components at the time vehicles enter the production cycle.
Additional recommendations made by the task force include the development of bus procurement best practices via the review of APTA’s White Book and would address proposals involving provisions for progress payments and price adjustments, but should also identify other reasonable best practices related to payments, penalties for delays, liquidated damages and other contract issues. During the next three months, the task force recommends three APTA committees — the Standard Bus Procurement Guidelines Working, the APTA Business Members Procurement Committee and the APTA Procurement and Supply Chain Committee — should focus on development of a set of bus procurement best practices for review by the task force.
The task force is also working to address customization in the bus procurements. The task force recognizes that some customization of vehicles is necessary but there may be benefits to developing limited customization options involving components such as floor and seating layouts, axles and drivetrains, the operator’s cockpit, door and window systems and HVAC systems. The task force believes limited customization could strengthen the supply chain, reduce bus production schedules, reduce costs and simplify bus procurements.
In addition to the recommendations that can be acted on quickly, the task force included a series of longer-term recommendations to enhance competition and to fund the transition to zero-emission fleets. These include:
- The development of reauthorization recommendations by APTA on how to fund the incremental cost of zero-emission buses in a reliable fashion.
- The transition to zero-emission fleets involves several elements beyond the transit vehicle. The task force recommends coordination and focus to develop utility support, certification of buses and chargers to ensure compatibility and improved employee training through regional zero-emission training centers.
- Growing domestic manufacturing capacity that improves availability of vehicles but does not place Buy America compliant manufacturers at a disadvantage; APTA says this topic will be explored several relevant APTA committees.
The task force’s report with recommendations was released as a group of transit industry stakeholders was set to meet at the White House to discuss the challenges experienced with bus procurements that are funded with federal dollars.
Additional details of APTA’s Bus Manufacturing Task Force recommendations can be found at APTA’s website www.apta.com.