Legal Aspects Relevant to Outsourcing Transit Functions Not Traditionally Outsourced (2011)

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Legal Research Digest 38 TRansiT CoopeRaTive ReseaRCh pRogRam sponsored by the Federal Transit administration July 2011 TRanspoRTaTion ReseaRCh BoaRD OF THE NATIONAL ACADEMIES LegaL aSPeCTS reLevanT To ouTSourCing TranSiT funCTionS noT TradiTionaLLy ouTSourCed This report was prepared under TCRp project J-5, “Legal aspects of Transit and intermodal Transportation programs,” for which the Transportation Research Board is the agency coordinating the research. The report was prepared by Daniel Duff, Jane sutter starke, and g. Kent Woodman, Thompson Coburn LLp. James B. mcDaniel, TRB Counsel for Legal Research projects, was the principal investigator and content editor. The Problem and its Solution The nation’s 6,000 plus transit agencies need to have access to a program that can provide authoritatively researched, specific, limited-scope studies of legal is- sues and problems having national significance and application to their business. Some transit programs involve legal problems and issues that are not shared with other modes; as, for example, compliance with transit-equipment and operations guidelines, FTA fi- nancing initiatives, private-sector programs, and labor or environmental standards relating to transit opera- tions. Also, much of the information that is needed by transit attorneys to address legal concerns is scattered and fragmented. Consequently, it would be helpful to the transit lawyer to have well-resourced and well- documented reports on specific legal topics available to the transit legal community. The Legal Research Digests (LRDs) are developed to assist transit attorneys in dealing with the myriad of initiatives and problems associated with transit start-up and operations, as well as with day-to-day le- gal work. The LRDs address such issues as eminent domain, civil rights, constitutional rights, contract- ing, environmental concerns, labor, procurement, risk management, security, tort liability, and zoning. The transit legal research, when conducted through the TRB’s legal studies process, either collects primary data that generally are not available elsewhere or per- forms analysis of existing literature. applications Outsourcing involves the transfer of the management and/or day-to-day performance of a business function to an outside service provider. In most instances, ser- vices from an outside organization are procured as a substitute for in-house employee labor, except in the case of independent audits. The substitution is usually made because the skills offered by the out- side organization are needed for only a short period of time or are better than internally available skills. Thus significant outsourcing in the U.S. transit in- dustry already exists—often for paratransit opera- tions or, in some cases, all transit operational activi- ties, or for more limited professional and technical services. There are many occasions when a function to be outsourced will include assets that were purchased with federal funds. As part of this analysis, questions about how to deal with assets that were purchased with federal funds, including any provisions the Fed- eral Transit Administration mandates its grantees incorporate in any prospective outsourcing arrange- ment, will be considered. The purpose of this digest is to focus on the legal aspects relevant to outsourcing transit functions not traditionally outsourced. Presumably revenue opera- tions and paratransit services are considered “tradi- tional” outsourced transit functions. “Nontraditional” then may be seen to cover all other activities, from outsourcing maintenance services, architectural and engineering work, custodial services, security ser- vices, human resources, IT, call center services, and marketing and advertising, to a variety of others. responsible Senior Program officer: gwen Chisholm Smith