June 15, 2018
Kelly Paleczny
London Transit
451 Highbury Ave
London, Ontario
N5W 5L2
Re: Specialized Transit – Primary Contract Extension
We would like to express our appreciation for the opportunity to move forward with a two year contract extension for the above noted contract. We have established a strong working relationship with quality services over several decades.
In order to ensure success in the extension period of this contract we would like to bring your attention to several factors that will present challenges to service delivery.
Labor Market
Following the implementation of the Province’s Bill 148 in January 2018 with the increase in Minimum Wage, wages in transportation industry soared well above the 23% minimum wage increase level. Business found it harder to compete to attract and retain employees amongst not only industry market wages but broader industry sectors as well. As an example, driver wages in student transportation/school busing in adjacent regions has increased between 25 to 35%. Currently the London and region is reviewing wage market conditions for the upcoming school year.
Acquisition Cost of Vehicles
During the course of the initial term of this contract we had increased the size of the fleet to match the increase service demand without any change to the rates, other than CPI as per the contract. The acquisition cost required to onboard these extra vehicles increased between 12 and 15%. In addition, since the Community Transportation Brokerage moved to a new dispatch software platform, the hard wiring for in vehicle communications required us to acquire more spare vehicles ready with communication devices on board. The lead time for installation is too lengthy for us to be agile as in the past with vehicles.
Vehicle Operating Costs
We have experienced significant increases in vehicle cost. As you know, the primary vehicles travel a significant number of kilometers in a year and the original fleet projected to last the entire term, including extension period, will fall short. This year alone we will have to replace 4 vehicles in order to ensure continuity of service.
Our contract is due to expire on July 31, 2018 with an extension for a further 2 year period and therefore we request you review our rates as these increased costs well exceed CPI adjustments. We respectfully request a 12% increase to current primary and secondary rates effective August 1, 2018, with further rate review to take place for January 1, 2019 should additional changes to Minimum Wage go through. 12% would be inclusive of the CPI increase due as per the contract. As the new vehicles introduced to the fleet in more recent years have considerably more useful life beyond contract extension period, we ask that you consider extending for a greater period of time (3-4 years). I welcome the opportunity to discuss this with you.
Thank you for your consideration. I look forward to discussing potential options with you.
Theresa Matthews
President