June 2009

Credit crisis impacting transit

by Frank Di Giacomo, Publisher

Although most transit agencies are feeling the impact of the collapse in credit markets that began last fall, the supply side is also reeling from the impact, so much so that it could affect the industry's ability to spend the federal stimulus money. Both sides of the

industry, suppliers and operators alike, need to be mindful of this situation, reach out to one another and strengthen this partnership more than ever before.

A new report commissioned and funded by APTA's Business Members shows just how far-reaching the effects of the credit crisis have been. The report found that the credit and bond markets are still locked up, which is also affecting procurement activity.

The new report also examined other effects on suppliers, which include constrained bank lending that has limited access for some suppliers to get the working capital essential to ordering materials, components and subsystems to deliver equipment to their transit clients. This even affects consultants because some of them are having difficulty finding working capital to maintain ongoing operations. In other cases, the downturn and the credit crisis are severely affecting the surety bond markets, which in too many cases is making bonding more costly, if not impossible, the report documents.

As FDR said, the fear of "fear itself" has created an extremely conservative business climate - a fear of the other guy on the other end of any transaction. This near-paranoia in the face of huge budget problems at agencies nationwide has also affected the transit industry at a time that many, including the Obama administration and the majority in Congress, are looking to us as a solution to turning back the fear of a further economic slide. That's what the stimulus bill was about: they trusted us to help get the economy moving again.

Now is the time to trust

Because they trusted us, we need to trust each other. Now more than ever, it is time to be flexible in bonding policies, in granting progress payments and making sure that invoices are paid on time. Suppliers must deliver. And when there is a sign of trouble in meeting terms, there must be an honest dialogue and quick decisions to resolve issues.

Suppliers and transit agencies now more than ever must see each other as true partners in making sure that we live up to the confidence our nation's elected leaders have shown in us. If we show that these projects were in fact "ready to go" and goods and services are proceeding on time and on budget, generating the economic activity we said we could make happen, then we will be rewarded even more when the new federal transportation policy comes up later this year and future budgets are passed.

If fear overtakes that trust, and we fail to deliver, then the wrath we will face will make the current crisis seem mild.

 

 


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