LA Metro Vendor Dispute Highlights Public Contract Challenges

A dispute between Los Angeles County officials and a major bus supplier is shedding light on the challenges of government contracts with vendors that require base pay for that supplier’s staff.

Reports in The New York Times on Friday (Aug. 9) said the Los Angeles County Metropolitan Transportation Authority (L.A. Metro) is embroiled in a dispute with bus maker New Flyer of America. A contract awarded to the bus maker in 2012 was contingent upon the vendor’s promise to create more than 50 full-time jobs with salaries between $11 and nearly $50 per hour. The contract was worth about $500 million.

According to reports, it is common practice for government entities to award contracts contingent upon a supplier’s ability to create jobs and meet minimum salary requirements.

But New Flyer has reportedly failed to meet those compensation requirements and, according to the county’s transportation authority, the bus maker misrepresented the total value of employee benefits it provided as it fulfilled the contract.

“It was a commitment – it matters,” said Madeline Janis, executive director of nonprofit group Jobs to Move America, which filed the complaint against the bus maker in a California state court, according to the publication. “This case is about holding a huge company’s feet to the fire.”

The nonprofit was part of a previous effort to encourage L.A. Metro to tie procurement to job commitments by awarding contracts based on vendors that could meet those requirements for salary and job creation. L.A. Metro first did so with a 2012 rail car contract, reports said.

A spokesperson for New Flyer said the company believes it has “fulfilled the terms and conditions” of its contract with L.A. Metro.

According to reports, eight other government agencies have looked to tie job and wage requirements to their transportation contracts based on a template developed by Jobs to Move America. But the NYT said Los Angeles’ dispute uncovers the difficulties of ensuring that such commitments are actually fulfilled.

Upjohn Institute in Michigan Economist Timothy J. Bartik told reporters the tactic could lead to higher costs for government agencies, because vendors would raise their prices as a result of having to fulfill those commitments.

L.A. Metro declined to comment, reports said.