On appeal from a Final Decision of the New Jersey Transit Board of Directors.
Bilder, Baime and Wallace. The opinion of the court was delivered by Bilder, J.A.D.
This is an appeal by a private bus company from a final decision of the New Jersey Transit Board of Directors determining that an Atlantic City bus route should be operated by NJTransit and not contracted out.*fn1
By the Public Transportation Act of 1979, N.J.S.A. 27:25-1, et seq., New Jersey sought to provide a coherent public transportation system to serve the needs of its citizens. N.J.S.A. 27:25-2. As its chosen instrument for the creation of this system, the legislature established defendant New Jersey Transit Corporation. N.J.S.A. 27:25-4. Included in its mandate to provide a coherent public transportation system are both rail and bus service. N.J.S.A. 27:25-5 and 3e. It is authorized to operate
such service either directly or by contract with other public or private entities. N.J.S.A. 27:25-5h.
As part of its mandate to NJT, the legislature directed:
In the provision of public transportation services, it is desirable to encourage to the maximum extent feasible the participation of private enterprise and to avoid destructive competition. N.J.S.A. 27:25-2d.
And, as particularly relevant to the instant matter, provided for contracting out bus routes.
The corporation may enter into contracts with any public or private entity to operate motorbus regular route, paratransit or motorbus charter services or portions or functions thereof. Payments shall be by agreement upon such terms and conditions as the corporation shall deem necessary. N.J.S.A. 27:25-6b.
Although most of NJTransit's activities are subject to the usual public bidding requirements, contracts for the operation of routes are not. They have been specifically exempted. N.J.S.A. 27:25-11g(2)(d).
The Contracting-Out Program
In order to implement the legislature's desire that the participation of private enterprise be encouraged "to the maximum extent feasible", on April 29, 1986 the NJT Board adopted a contracting-out policy evidencing its intention to contract out approximately five percent of its existing service and to contract out new and restructured service. It interpreted the legislative mandate to mean that private carriers should be used when they can maintain quality service; improve the financial position of the state significantly on the route or routes in question; ensure continued responsiveness; and operate in a coordinated system and safely. It is the second of these goals which forms the background for Academy's dispute with NJT.
Included in the policy adopted by the NJT Board on April 29, 1986 were " CRITERIA FOR CONTRACTING OUT ".
The contracting of service must be based on two important criteria. First, and foremost, the decision to contract regular route bus service must substantially improve the financial position of NJ TRANSIT for the service. Cost increases to other NJ TRANSIT services as a result of contracting shall be considered.
In this regard, the true measurement of cost savings must be predicated on actual cost reduction and not, as [the federal Urban Mass Transit Administration] proposes, the fully allocated cost of operations. To include cost which would not be eliminated (e.g. quality control, to management salaries, schedulers, etc.) distorts the actual benefit accrued through contracting service, and could in fact result in the worsening of the financial position of NJ TRANSIT.*fn2
1. The contracting of service must achieve, at a minimum, a substantial reduction over a five year period in cost for the service in question.
a. Cost per route shall be based on an avoidable direct cost basis.
b. When the contracting out of service results in a reduction of semi-fixed costs, those costs shall also be included as an "avoidable" cost.
c. Lost opportunities to use part-time labor on remaining routes shall be taken into account and considered an increased cost by NJ TRANSIT unless offset by projected growth.
d. Cost related to labor protection shall also be deducted from cost-savings which might be achieved through the contracting of service, unless the private carrier agrees to assume such cost.
e. Any additional cost which may be incurred, including monitoring and administrative costs associated with the contract shall be deducted from cost savings.
2. Garage facilities will be considered for closure should a sufficient number of routes be contracted out, unless such closure would preclude or substantially hamper NJ TRANSIT's ability to assume service should a private carrier under contract cease operation.
3. NJ TRANSIT will consider contracting of service when said contracting allows NJ TRANSIT to forego a capital cost to ...