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RTC, First Transit reach agreement on bus contract

Updated Thursday, Nov. 10, 2011 | 2:23 p.m.

In a surprise vote Thursday morning, the Regional Transportation Commission approved a settlement with First Transit to end a months-long deadlock on the operation of the public bus system.

The agreement will end a legal battle, but the final fate of the bus system won’t be known for another year because the settlement calls for the contract bidding process to begin again, but with the bus system split in two.

The current operator, Veolia Transportation, and First Transit, the low bidder, along with any other interested companies will be able to participate in the new bidding process on the smaller contracts. In the meantime, Veolia will continue providing the bus service and First Transit will get to keep its paratransit service for two more years.

The RTC board initially approved the contract with First Transit, which was about $50 million less over seven years than Veolia’s proposal. But after legal questions were raised, the board rescinded the vote and it has since remained tied 4-4 on taking any other action.

First Transit then sued the RTC, asking a District Court judge to order the RTC to take action.

Even though First Transit was likely to win the first round in court, the appeals would likely not be settled until the contract was about to end, so First Transit decided it made more financial sense to drop the lawsuit and end the fight, sources said. First Transit offered the RTC a settlement plan Monday.

First Transit, the low bidder on a proposed contract to operate the system, sued the RTC after the RTC board became deadlocked and failed to approve the contract.

The result was a long and costly legal fight during which First Transit’s competitor, Veolia Transportation, was to remain in possession of the service, so First Transit offered the RTC a settlement offer Monday.

The board unanimously approved the settlement concept after a closed-door session at Thursday’s regular board meeting. The final settlement papers will have to come for another vote at next month’s meeting.

In addition to stemming legal fees, the main benefit for First Transit in the settlement is that it keeps control of the RTC’s paratransit service. That contract was set to end in July, but it included a two-year extension option, which the RTC board agreed to execute in return for First Transit dropping the lawsuit. The board had previously indicated it did not plan to approve the extension.

First Transit has also indicated that it will lower the cost of the paratransit service for those two years, which will save the RTC about $1.6 million per year, RTC General Manager Jacob Snow said.

In return, First Transit agrees to drop its lawsuit and accept the dismissal of the proposed contract. The commission will then start the bus contract procurement process over, but this time the system will be split, probably into two contracts.

Veolia, the current bus system operator and high bidder on the new contract, has been lobbying for the process to be redone and the contract to be split into smaller contracts. The current bus system setup makes the RTC the largest bus system in the country with only one operator.

The large service meant smaller bus companies were unable to participate in the bidding process because they did not have the resources to meet the basic requirements, Snow said.

“We feel like there are really only two companies that could do it now,” Snow said. “If we split it in two, there will probably be half a dozen, which is a good thing.”

The settlement also calls for all sides to pay their own legal fees. The RTC had no extra costs from the lawsuit because it used its regular legal counsel, while First Transit and Veolia have spent large sums on attorneys, consultants and lobbyists, sources said.

The agreement also says the RTC will write a letter of recommendation for First Transit.

The settlement is approved only in theory at this point, although the board’s approval vote was unanimous. The board will have to approve a formal written agreement, officially end the current bidding process, approve the paratransit contract extension and issue a new request for proposals for the fixed-route service at future board meetings.

The RTC said figuring out how to split the contract and redo the bidding process will likely take more than a year.

In the meantime, Veolia will continue operating the bus service. It’s current contract extension ends in March, but it can probably be extended for another year, RTC council Zev Kaplan said.

The Federal Transit Administration, which partially funds the bus system, has expressed concern over the extensions with Veolia, but Kaplan said his recent discussions with the agency suggest it will approve another extension as long as the new bidding process is already under way by March. “As long as we’re moving forward, they’ll be OK,” he said.

Veolia had previously said it would agree to extend the current contract for as long as needed, and it suggested it would provide the service at the lower cost offered by First Transit.

Veolia representatives said the settlement announcement today was a surprise to them, but they are likely to agree because the reprocurement and splitting of the contract is what they had asked for.

“Veolia is pleased that the RTC has made what we believe to be the right decision,” attorney Lee Roberts said in a statement provided to the Sun after the meeting. “A new procurement will allow the RTC to create a level playing field for competition and communicate a clear vision for the continued excellence of the bus system. We believe that a new procurement will ensure fair wages for the bus operators, maintenance teams and other Veolia employees who, together with the RTC staff, have made this one of the top transit systems in the country.”

The lawsuit is likely to remain active until the commission approves the final settlement documents in December, but a hearing scheduled for Nov. 21 will likely be postponed, Kaplan said.

“We’re looking forward to doing something else (other than sitting in court) on the 21st,” Snow said.

The commission members who had previously voted with First Transit did not speak about the settlement, but Clark County Commissioner Chris Giunchigliani, a vocal supporter of Veolia and splitting the contract, praised the agreement.

“In the long run, I think this will be the best thing for this community...I think this will be a win-win for everybody,” she said.

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