Meeting_Body
OPERATIONS, SAFETY, AND CUSTOMER EXPERIENCE COMMITTEE
NOVEMBER 21, 2024
Subject
SUBJECT: METRO MICRO PILOT SERVICES
Action
ACTION: APPROVE CONTRACT AWARDS
Heading
RECOMMENDATION
Title
AUTHORIZE the Chief Executive Officer to:
A. AWARD an Indefinite Delivery/Indefinite Quantity (IDIQ) Contract No. OP122943001 for the Metro Micro Contracted Services - North Region to Nomad Transit, LLC, a wholly owned subsidiary of Via Transportation, Inc. to provide on-demand Microtransit operations services in the Not-to-Exceed (NTE) amount of $45,008,012.36 for the three-year base term and $47,058,021.47 for the three-year option term, for a total combined NTE amount of $92,066,033.83, effective December 16, 2024, subject to the resolution of all properly submitted protest(s), if any; and
B. AWARD an Indefinite Delivery/Indefinite Quantity (IDIQ) Contract No. OP122943002 for the Metro Micro Contracted Services - South Region to Nomad Transit, LLC, a wholly owned subsidiary of Via Transportation, Inc. to provide on-demand Microtransit operations services in the NTE amount of $21,002,472.24 for the three-year base term and $21,951,012.21 for the three-year option term, for a total combined NTE amount of $42,953,484.45, effective December 16, 2024, subject to the resolution of properly submitted protest(s), if any.
Issue
ISSUE
When initially proposed, the goal for the average cost per ride was $20-$25. However, as of September 2023, the average cost per ride was $42 - more than four times the average cost per ride on the Metro bus system. At $42 per ride, the program’s sustainability becomes a challenge. At its September 2023 meeting, the Board approved the extension of the current Micro Transit contract until March 2025 to allow staff time to move forward with a new operational business model to improve overall performance and support a more sustainable on-demand transit service program. As indicated in the Next Steps of the September 2023 Board report, Metro has developed a new business model for an optimized Microtransit Pilot Program (MTP), with the goal of a more cost competitive solution and efficient operation.
The current MicroTransit contract provides for both customized software services, and operation of service, with Metro providing the drivers/operators. Under the new model, the software solution and operation of service have been separated into two individual contracts to allow for operational control and financial sustainability. In addition, Metro will no longer be providing the drivers/operators/supervisors. This Board action seeks to obtain approval for contract award for the operation of service only with the contract for the software solution anticipated for award in January 2025.
Background
BACKGROUND
MicroTransit combines technology and operational approaches to provide flexible, on-demand transit service. Passengers using MicroTransit enjoy flexible pick-up and drop-off locations and times. Instead of using a fixed schedule and route for each driver and vehicle, customers seeking to travel within a service zone are matched with drivers using a smartphone application, phone dispatch service, and/or website.
The MTP has faced several challenges, such as an unsuited business model and the impact of COVID-19. Despite these challenges, staff recognized the program's potential benefits and recommended to the Board in September 2023, extending the pilot to more accurately assess its effectiveness. As part of the Board’s approval at the same meeting, the Board passed Motion 42 for the MicroTransit Pilot Project (see Attachment A) by Directors Najarian, Butts, Dutra, Hahn, Barger, and Horvath, which highlighted the challenge of achieving the goal of $20-25 per trip. It also directed specific actions, including optimizing zones, implementing operational changes, increasing marketing efforts, and discontinuing the introductory fare of $1.00 and integrating existing discount programs with the $2.50 fare, in order to improve costs towards this target to ensuring program sustainability.
Since October 2023, MTP has implemented continuous improvements through external promotion opportunities, adjustments in zone frequency, and time snapping, as well as internal operational changes to enhance operator availability and reduce overtime costs. These efforts include adjusting the fare to $2.50 per passenger, increasing vehicle availability and utilizing enhanced software features to monitor and coach operator performance in real time. As a result, the cost per revenue hour decreased by 30%, from $147 to $101. Coupled with an increase in ridership, the cost per ride has dropped by 39%, from $47.74 (June 2023) to $29.06 as of Q2 FY24.
In order to continue reducing the cost per revenue hour and cost per ride while enhancing availability and reliability, a Side Letter of Agreement was negotiated with SMART-TD in December 2023, allowing for contracted operations of Metro Micro under the new model. In exchange, two contracted bus lines, 167 and 501, were brought in-house, which equates to 44 new full-time SMART operators. In addition, current Metro Micro operators have an expedited path to start training as part-time bus operators at Metro Operations Central Instruction and/or be offered employment opportunities with the new Contractor. Metro Micro AFSCME Supervisors will be able to bid for other positions in bus and rail operations.
Metro issued a new solicitation for the new operating model on April 23, 2024, seeking to meet the KPIs outlined in Motion 42. The current MicroTransit business model includes operation of the service and customized software services, while Metro provides the drivers/operators. Under the new operating model, the Contractor is responsible for operation of service which includes utilizing their own drivers/operators, while the software services are being procured separately as described below.
Discussion
DISCUSSION
Under this operation of service contract, the Contractor will be responsible for:
• Drivers/Operators and supervisory staff (Metro will no longer be providing these personnel)
• Vehicles, including maintenance and insurance
• Vehicle storage and operating facility
Staff revised the Metro service area zones, dividing the eight service area zones into two geographical regions, North Region and South Region (see Attachment B). The regions were developed to encourage competition from different operating firms. Under the revised operating model, each region will be serviced by a single service contract for performing vehicle operations and supplying operators to run the service.
Under this new Metro Micro business model (Metro Micro Contract Services), the Contractor will be required to provide the management, operation, supervision, vehicle fleet, fueling and vehicle maintenance/repair, vehicle storage, facility security, vehicle surveillance software and cameras, and fleet operators. The Contractor will also be required to provide recruiting, training, alcohol and drug testing, and certifications for drivers/operators to comply with state, county and federal regulations to operate Metro Micro service. In addition, the Contractor will provide on-site, dedicated management personnel providing oversight of the operations and reporting to Metro staff.
As noted above, this solicitation split Metro’s Micro existing eight (8) zones into two (2) geographical regions. The North Region consists of five (5) zones, which are predominantly located in the north-east and north-west areas of Los Angeles County, which include the El Monte Zone, Altadena/Pasadena/Sierra Madre Zone, Highland Park/Eagle Rock/Glendale Zone, North Hollywood/Burbank Zone, and Northwest San Fernando Valley Zone. The South Region consists of three (3) zones that are predominantly located in the southwest area of Los Angeles County, which include: Watts/Compton Zone, LAX/Inglewood Zone and UCLA/Westwood/VA Medical Center Zone. Each region has a contract term of a three-year base term and a three-year option.
In this revised operating model, Metro’s direct labor costs for the recruiting and hiring of new drivers/operators and supervisory personnel for the eight microtransit zones have shifted to the Contractor. This results in the first-year combined average (North and South Region) Revenue Service Hour (RSH) rate of $82.35 as proposed by the recommended proposer for the operations of all eight Metro Micro zones. This represents a savings of $15.78 (or 16%) compared to the current operating RSH rate of $98.13 (which excludes the cost for the current software license and support), resulting in an estimated savings of $3,992,437 in the first year.
As Table 1 - Cost Comparison outlines below, the six other proposals received for this solicitation proposed RSH Rates ranging from $101.44 to $147.88, which would be 3% to 50% higher than the current Micro RSH Rate. Additionally, based on the current Passenger Per Vehicle Hour (PVH) of 3.4 under the new operating model, the combined cost per trip is $24.77 with this successful proposer, achieving our goal of $20.00-25.00 per RSH. Based on other proposals received, the range of cost per trip resulted in $29.84 to $43.49 which is significantly higher than successful proposer.
Table 1- Cost Comparison
RSH Rate based on 1st Year and current Passenger Per Vehicle (PVH) Load 3.4)
*Target Cost per Trip = $20.00 - $25.00
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
The approval of this item will ensure service continuity and meeting Metro’s standards by providing as-needed, on-call transit service while providing a proactive approach to maintenance needs to ensure delivery of safe, clean, on-time, and reliable services systemwide.
Financial_Impact
FINANCIAL IMPACT
Initial funding for these new contracts in the combined amount of $11,948,563 for the remainder of FY25 is allocated under Cost Center 3595 - Microtransit Operations, Project 309001, Operations Department Strategic Initiatives.
Since these are multi-year contracts, the Executive Officer, Transit Operations - Strategic Initiatives will be accountable for budgeting the cost in future years.
Impact to Budget
The current source of funds for this action includes Proposition C 40%. This funding source is eligible for bus operations.
Equity_Platform
EQUITY PLATFORM
Metro Micro’s daily operations aim to increase overall ridership and access to important needs such as employment, education, health care, and basic necessities. The project covers a variety of zones, all of which serve EFCs, and some of which are mostly made up of identified EFCs. Even in zones without a high proportion of EFCs, an evaluation done in 2023 found that the proportion of Metro Micro trips that occur in EFCs is higher in every zone than the proportion of transit trips or overall person-trips. One of the goals of the project was to provide an on-demand service in lower-income areas where the market forces driving for-profit transportation network companies (TNCs) make them less likely to pick up rides despite relatively low car ownership and other indicators of high transit propensity; the high uptake of Metro Micro in EFCs suggests that this aim has somewhat succeeded.
Staff will develop appropriate equity program goals for Metro Micro once results are available from the 2024 On-Board Customer Experience Survey. Staff will compare the results of the 2024 survey with previous surveys and identify any additional program modifications to further Metro’s Equity Platform.
The Diversity and Economic Opportunity Department (DEOD) established a 20% Disadvantaged Business Enterprise (DBE) goal for the North and South Regions for this solicitation. Six of the seven proposals submitted failed to meet the goal, including the recommended proposer Nomad Transit, LLC (Nomad) who made a 0.73% DBE commitment for the North Region and a 0.77% DBE commitment for the South Region.
On August 9, 2024, DEOD notified Circuit Transit and Nomad Transit, LLC that they were determined to be non-responsive for failure to meet the 20% DBE goal, and failure to demonstrate adequate Good Faith Efforts (GFE). Under federal regulations and Metro Administrative Code, proposers that fail GFE evaluations are afforded the opportunity of an administrative reconsideration conducted by Metro’s Ethics Department. Both Circuit Transit and Nomad Transit, LLC requested Reconsideration Hearings and the hearings were held on August 21, 2024, and August 26, 2024, respectively.
During their hearings, both Circuit Transit and Nomad Transit, LLC presented evidence to support their position that adequate GFE had been made. Evidence submitted in support of adequate GFE is governed by specific criteria and a process which does not consider, for example, an individual proposer’s previously achieved goal (i.e., whether they achieved 1% or 19%) or a proposer’s cost estimate. Metro’s Ethics Department provided a Reconsideration Officer (RO) to review the requirements of each category, DEOD’s initial evaluation, and all forms and evidence submitted by the Proposers.
On September 5, 2024, Metro’s RO issued the Reconsideration Hearing Opinions for both Proposers.
In the case of Circuit Transit, the RO determined that Circuit Transit did not demonstrate sufficient GFE and as such on September 13, 2024, they were notified that they were determined to be non-responsive for failing to meet the DBE goal and not demonstrating that they made sufficient GFE. Circuit Transit was therefore eliminated from further consideration.
In the case of Nomad Transit, LLC, the RO determined that Nomad demonstrated GFE and was deemed to have passed GFE. The Living Wage/Service Contract Worker Retention Policy (LW/SCWRP) is applicable in this contract. Nomad Transit, LLC’s proposed hourly rate for Drivers/Operators is $28.28 and the proposed hourly rate for Mechanics / Maintenance is $28.00 for the first year with escalating rates for remaining years. The proposed hourly rates exceed Metro’s applicable Living Wage rate of $24.73 by $3.55 per hour for Drivers/Operators; and exceeds by $3.27 per hour for Mechanics/ Maintenance. DEOD staff will monitor the overall compliance with the policy.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
Metro Micro supports strategic plan goals #1.2 and 2.3: Metro Micro is an investment in a world-class transportation system that is reliable, convenient, and attractive to more customers for more trips. Metro Micro continues to improve customer satisfaction at customer touchpoints by offering an accessible, flexible service that better adapts to customer demand and needs.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board may elect not to approve the recommendations. This alternative would cease revenue service operations for the communities and neighborhoods that utilize Metro Micro service for essential trips, including:
• Loss of access to transit for nearly 350,000 residents, including in EFCs and first/last mile connections, as currently 19% of Metro Micro customers connect to fixed route transit using the program
• Loss of potential new customers, as 11% of Metro Micro customers are new to Metro
• Loss of a well-liked transit service with a 4.8 out of 5 customer rating
Next_Steps
NEXT STEPS
Upon approval by the Board, staff will execute the contracts for the North Region and South Regions, respectively, with Nomad Transit, LLC, a wholly owned subsidiary of Via Transportation, Inc.
The software services portion of the contract was issued under a separate solicitation, RFP No. PS124278(2) Metro Micro Software Services on September 30, 2024, and expected to go to the Board for approval in January 2025. The software services will provide passengers the ability to book rides and the operator to receive the driving instructions for picking up passengers.
Attachments
ATTACHMENTS
Attachment A - Motion 42
Attachment B - Metro Micro Service Area Zones
Attachment C - Procurement Summary
Attachment D - DEOD Summary
Prepared by: Roxane Marquez, Director Finance & Administration, (213) 922-4147
Dan Nguyen, Executive Officer, Strategic Initiatives,
(213) 418-3233
Debra Avila, Deputy Chief Vendor/Contract Management Officer, (213) 418-3051
Reviewed by: Conan Cheung, Chief Operations Officer, Transit Operations, (213) 418-3034
