Historic White House Bus Summit Brings Possible Procurement Changes

On the eve of the Federal Transit Administration (FTA) making approximately $1.5. billion in Low- or No-Emission and Bus and Bus Facilities program funding available, leaders from the Administration, the American Public Transportation Association (APTA), bus supplier OEMs, and more convened for a historic roundtable at the White House on Feb. 7, to discuss Clean Bus Manufacturing.

During the discussion, leaders highlighted solutions to ensure U.S. capacity to manufacture and deliver clean, zero-emission buses at the scale and pace necessary to meet market demands and achieve national climate and equity goals.

With the recent Proterra bankruptcy, Nova Bus’s plan to leave the U.S. market, and the announcement that REV Group is winding down operations at ENC, there are currently only two major bus manufacturers — GILLIG and New Flyer — in the U.S., which undermines competition, innovation, and the capacity to ramp up low- and zero-emission bus (ZEB) production, said APTA President/CEO Paul P. Skoutelas.

“The roundtable was built on the work and recommendations of APTA’s Bus Manufacturing Task Force,” Skoutelas said about the reasons behind the White House summit. “The White House closely followed the group’s work and hosted a meeting to discuss the recommendations. The White House’s interest helped to highlight the industry’s critical underlying financial and capacity issues at a time when the federal government is providing unprecedented funding for transit agencies to replace aging, fossil fuel vehicles with modern, reliable clean-fuel buses.”

Funding Continues, Solutions Sought

The latest round of the FTA's bus funding, announced Feb. 8, represents the third bus grant package since President Biden signed the Bipartisan Infrastructure Law (BIL), which has invested more than $3.3 billion in American transit buses and the infrastructure that supports them.

Over the next three years, record funding for American transit investment secured under President Biden's leadership will provide almost $5 billion more for bus programs. 

With that continued funding and demand staying consistent, APTA officials discussed the Bus Manufacturing Task Force’s findings and unveiled new recommendations to bolster competitiveness and stability in the U.S. bus manufacturing sector to help meet market demand, climate goals, and equity objectives for zero-emission buses.

Specifically, the Task Force recommended transit agencies incorporate three changes in bus contracts to help manufacturers address immediate cash-flow shortages: Price adjustments, progress payments, and use of price indices.

“Following discussion of recommendations at the roundtable, major transit agencies in attendance committed to use their respective authorities to implement the APTA Task Force’s recommendations as fully as possible, particularly focusing on the new round of Fiscal Year 2024 competitive bus grant funding that was announced,” an FTA spokesperson told METRO. “These agencies are collectively responsible for almost 50% of bus trips taken in the U.S.”

"Even before the pandemic, today’s public transit agencies have become more flexible, innovative, and efficient at adapting to and leading change. Transit organizations are capable of modifying their procurement practices virtually overnight,” added Skoutelas. “The transit agency members who served on the Task Force, and other transit agencies with which we worked, have embraced these changes, and have pledged to quick implementation of the Bus Manufacturing Task Force recommendations.” 

In addition to APTA’s recommendations, FTA is taking additional actions to strengthen the American bus manufacturing industry, lower bus costs, and accelerate transit vehicle deliveries, including:

• A new bus procurement webpage, with updated FAQs.
• New priority considerations in the FY24 Buses and Bus Facilities and Low or No Emission Notice of Funding Opportunity.
• An FTA-hosted bus procurement best practices webinar.
• National Transit Institute procurement courses.
• Formation of a new FTA Acquisition Oversight Division.

Both APTA’s Task Force recommendations and the FTA’s ongoing actions and technical assistance were summarized in a Dear Colleague letter from FTA Administrator Nuria Fernandez, which was released following the historic summit.

“Changing decades-old procurement regulations and practices is not easy. It requires the leadership of transit agency CEOs, legal and procurement staff, and the transit board members who must approve budgets and contracts. To be successful, education and training for all these stakeholders is essential,” said Skoutelas. “Both APTA and FTA have important roles to play in communicating a better understanding about the need for change and how communities and transit users will benefit. The result will not only be healthier and growing OEMs, but also increased competition and less expensive buses. This is truly a win-win for the entire industry, as public transportation agencies can stretch their federal dollars and modernize more of their bus fleets sooner.”

Optimism Manufacturers Can Meet Demand

On a positive note, representatives from both GILLIG and NFI Group, New Flyer’s parent company, who were both on hand at the summit, said they are optimistic they will be able to continue to ramp up capacity and meet the demands necessary to produce bus, including ZEBs.

“Both Gillig and NFI have expressed confidence that they have sufficient capacity to meet demand for buses,” said Skoutelas. “The challenges have been the lack of working capital and the high cost of capital in this high-interest rate environment. These factors not only constrain the ability of the OEMs to invest in and maintain their production facilities, but also result in higher-cost buses, as these costs are passed on to the transit agencies.”

Skoutelas added that, to their credit, both bus manufacturers have worked hard to remain viable by strengthening the supply chain during the pandemic. However, without changes in procurement practices of transit agencies, such as the use of milestone payments, the cost of buses will continue to rise as capital remains scarce, thereby severely limiting the ability of transit agencies to modernize their fleets.

“We are thrilled with the outcomes [of the summit], which will be transformative to our industry,” said Jennifer McNeill, VP, public sales and marketing, for NFI’s New Flyer and MCI. “We now look forward to taking these important guidelines forward with our customers to modernize bus procurement practices and create a healthier contracting environment for U.S. bus manufacturers with both current contacts and future procurements.”

In a release following the summit, the NFI Group stated the company will provide updates on the impacts any recommended or proposed changes to U.S. procurement or pricing structures may have on its operations or financial reporting, if or when they are implemented or take effect, through its regular quarterly and annual reporting.

“We fully support the task force’s recommendations, which are essential in removing barriers to sustainability and keeping communities connected, reflecting the Administration’s commitment to supporting union jobs and the Buy American ethos,” GILLIG officials told METRO Magazine in statement. “In aligning with the task force’s recommendations, GILLIG reaffirms our pledge to the health and strength of our industry. Our journey toward a future enriched by clean, efficient, and accessible public transportation continues with unwavering resolve.”

GILLIG officials added they have made significant investments to support the U.S. transit market, including building a state-of-the-art 640,000 square-foot manufacturing facility in 2017; significantly expanding its engineering and support resources necessary to design, build, and support zero-emission buses; and through the recent signing of a five-year labor agreement with its unionized workforce.

“These developments are not just wins for GILLIG; they are wins for American manufacturing and the communities we serve,” said officials.

Skoutelas said the manufacturers’ bullishness on being able to meet demands will also help keep plans to transition fully to ZEBs on pace by some of the more aggressive transit agencies, as well as in states such as California where there is a mandate to go fully electric by 2035. He adds that vehicle procurement currently isn’t the only issue agencies are facing in the transition, though.

“The OEMs are committed to making the timely transition to clean buses. As inflation cools and procurement practices change, the OEMs’ reliance on high-interest capital will decline. This, in turn, should lead to better pricing, a more stable supply chain, and a faster shift in manufacturing to ZEBs,” he said. “It’s also important to note that a major challenge in converting to ZEBs is building the accompanying new infrastructure — recharging stations, maintenance equipment, and reliable sources of electricity and hydrogen — in parallel to the acquisition of modern buses. In some communities, this is proving more complex and taking longer than traditional bus acquisitions of a few years ago.”