1: Introduction

What is school transport?

1. One of the principles underpinning the school transport policy is that the State provides safe school transport services.¹ The policy is designed to ensure that students’ access to education is equitable. Each year, about 65,000 school students are transported to and from their schools.
2. In 2007/08, the Ministry of Education (the Ministry) was appropriated $131.071 million to fund the purchase of school transport services. Those services were to take eligible students to and from state and state integrated schools. The appropriation also included funding for payments to schools managing their own transport services, and payments to parents/caregivers to compensate them for the costs of taking children to school if other transport services were unsuitable or unavailable.
3. The Ministry’s contracts with providers of school transport services were set to expire on 31 December 2008. Between 2006 and 2008, the Ministry carried out a nationwide procurement process to select providers of school transport services for the six-year period beginning 1 January 2009.² In this report, we refer to the procurement as the 2008 bus tender process.

Summary of the 2008 bus tender process

4. Broadly, the 2008 bus tender process involved:
   • consulting stakeholders (between November 2005 and November 2006) about aspects of the proposed contracting and tendering process;
   • reporting to stakeholders (from November 2006 to June 2007) about that consultation;
   • preparing, consulting on, and then publishing (between July 2007 and March 2008) a Request for Proposal (RFP) document that signalled two phases for the 2008 bus tender process:
     • a qualification submissions phase, where bus operators submitted information that would establish whether they met the required vehicle safety and service quality standards; and
     • a pricing submissions phase, where bus operators submitted prices for the routes they wanted to tender for;
   • the qualification submissions phase (from March to June 2008);
   • the pricing submissions phase³ (from June to September 2008); and
   • contract negotiations with preferred suppliers (from October to November 2008).
5. The way that the Ministry designed the 2008 bus tender process ensured that safety and service quality considerations were emphasised and considered before price became part of the Ministry’s decision-making. Bus operators had to meet a safety standard set out in the RFP before they could bid for any school bus routes.
6. The Ministry used two companies (represented by two individuals known as service agents) to process the bids received for the qualification submissions phase,⁴ and set up a Tender Evaluation Committee (TEC).⁵ Although it was a Ministry committee, the TEC acted as a quality assurance mechanism for the work of the two service agents. It recommended to the Ministry which bus operators should be invited through to the pricing submissions phase, and then, based on the pricing bids, recommended the preferred supplier to operate each school bus route.
7. The two service agents carried out the same tasks. One service agent assessed the qualification submissions for the lower North Island and the South Island. The other service agent assessed the qualification submissions for the rest of the North Island. Both service agents were involved in assessing qualification submissions from the four bus operators that competed nationally by bidding in both service agents’ geographic areas.
8. Overall, the 2008 bus tender process involved 2089 individual school bus routes,⁶ and 165 bus operators took part. Of these 165 bus operators, 151 got through the qualification submissions phase and were invited to submit pricing bids for any, some, or all of the bus routes included in the 2008 bus tender process.
9. Of the 146 bus operators who chose to submit pricing bids, 95 were successful and entered into contracts with the Ministry to provide school bus transport services. Under the contracts that expired on 31 December 2008, there had been 227 providers of school bus transport services.

Why did we inquire?

10. After the outcomes were announced in September, several people asked us to inquire into aspects of the 2008 bus tender process. The concerns expressed to us were varied. Some correspondents were bus operators with concerns specific to their experiences as participants in the 2008 bus tender process. Other correspondents were parents and/or schools concerned about the change of bus operator and/or the level of service to be provided under the new contracts.
11. Allegations were made that the Ministry had not properly followed the RFP rules in evaluating some of the bus operators’ submissions, and that some bus operators had colluded to “undercut” other bus operators and ensure their own success. We also received correspondence expressing broader concerns about the school transport policy and the overall 2008 bus tender process.
12. The Minister of Education (the Minister) also wrote to us, in early December 2008, asking us to inquire into the allegations of illegality and unfairness in the 2008 bus tender process.
13. We considered all of the concerns expressed to us directly, and those in the public domain, when we were deciding whether to carry out an inquiry. It was immediately clear that we could not address some of the concerns that were raised with us. The Auditor-General can audit, inquire into, and report on public entities and how they use public resources. The Auditor-General has no power or authority to nullify contracts or overturn the decisions that public entities make.

Our inquiry terms of reference

14. We considered how any inquiry work we carried out could provide useful assurance to the Ministry, the Minister, Parliament, and interested stakeholders about the 2008 bus tender process. We announced our terms of reference in February 2009. Our inquiry examined:
    • how the Ministry prepared its overall procurement strategy and RFP for the 2008 bus tender process;
    • the extent to which the RFP reflected the Ministry’s earlier consultation with stakeholders, where appropriate, and the clarity with which any important changes to the RFP were communicated to stakeholders;
    • the extent to which the RFP rules were applied correctly and consistently by Ministry staff, contractors, and the TEC; and
    • the extent to which the Ministry responded promptly and effectively when concerns were expressed about aspects of the 2008 bus tender process.

Our expectations of the 2008 bus tender process

15. We made sure that our inquiry terms of reference enabled us to assess how well the 2008 bus tender process followed good practice for procurement. Procurement concerns were a strong feature of much of the correspondence to us about the 2008 bus tender process. We also received many complaints about how the Ministry dealt with concerns and complaints during the 2008 bus tender process. We decided to examine this as part of our inquiry work.
16. This report details the findings and conclusions of our inquiry work, and is divided into three parts:
    • the Ministry’s procurement approach;
    • how the Ministry applied the RFP rules; and
    • the Ministry’s process for dealing with correspondence.
17. We expected the Ministry’s 2008 bus tender process to give effect to the Government’s school transport policy objectives, comply with relevant Ministry policies, and follow good practice for procurement and contract management. We used existing good practice guidance on public sector procurement to inform our views about the Ministry’s procurement approach.
18. We expected the Ministry to apply its RFP rules correctly and consistently. To form views about how the Ministry applied its RFP rules, we selected a sample of qualification submissions and pricing submissions, and applied the RFP rules ourselves.
19. We expected the Ministry to respond promptly and effectively to correspondence about the 2008 bus tender process. We sampled some correspondence from the qualification and pricing submissions phases and examined how the Ministry responded.

1: For more information on the school transport policy, see Ministry of Education (October 2006), School Bus Transport Discussion Document: Contracting and Tendering Review, pages 1-2.

2: The contracts included the option of another six years (three years and an optional extension of three further years), depending on the provider’s performance.

3: This was also called the operator selection phase.

4: Ministry staff analysed the pricing submissions.

5: The TEC mostly comprised Ministry staff, although there were some external members.

6: This includes daily school routes and technology routes. See the Appendix for more information about these types of school transport services.