Moreno Valley Unified School District*

MVUSD is operating 20-22 home-to-school bus routes with Laidlaw without a formal written contract signed by both parties. Instead, they are using a bid proposal document received from Laidlaw as an operational contractual agreement, which is outside the scope of the work to be performed exposing each party to substantial risk, litigation and unlimited cost. This agreement does not meet the requirements of California Public Contracts Codes (CPCC) §20111, §20112 and Moreno Valley Administrative Regulation (AR) §3310. Response The District disagrees partially with this Finding. Important elements of the Grand Jury's finding are simply wrong, legally and factually. The Grand Jury appears unaware that contracts for student transportation services are governed by Education Code section 39800 et seq. and not merely the Public Contract Code or Education Code section 17596. Section 39802 incorporates the competitive bid process set out in Public Contract Code section 20111 and 20112, with some important differences as it relates to award of bids, and allows contracts of longer duration than authorized under Section 17596. (See, Educational and Recreational Services, Inc. v. Pasadena Unified School District (1977) 65 Cal.App.3d 775.) Nevertheless, Laidlaw was the low bidder for 84 passenger buses and was awarded the contract. The Grand Jury appears to contend that no contract exists between the District and Laidlaw. In the public bidding context, however, a contract is generally complete and binding when a valid bid is accepted. (Menefee v. County of Fresno (1985) 163 Cal.App.3d 1175.) The bid was accepted and an award was made by the District Board of Education on August 17, 2004. Therefore, even though no contract has been signed by both parties, upon acceptance by the District Governing Board, Laidlaw's bid became a binding contract, subject to the terms set forth in the bid documents. The bid documents contain all of the "classic" elements of a transportation contract, such as duration, price, required permits and licenses, payment terms, equipment requirements, compliance with law, and termination. The contract also contains provisions requiring Laidlaw to maintain satisfactory insurance and to hold harmless and indemnify the District for any claim or demand arising from injury to persons or property caused by Laidlaw. The bid was entitled "Charter Bus Service" and specifically referenced "field trip transportation," although the latter term was undefined. The bid specifications, however, would be equally useful for home-to-school transportation. Further, the contract documents did not expressly preclude use of the buses for home-to-school transportation. In any event, Laidlaw has provided home-to-school transportation under the Charter Bus Service contract. This has not exposed the District to "substantial risk, litigation and unlimited cost" as suggested by the Grand Jury. The cost of service is specifically stated in the contract. The District has complete control Mr. John B. Todd August 28, 2007 and decision-making authority as to the amount of services obtained and, therefore, also of the resultant cost. Risk and liability arising from potential litigation are actually reduced under the contract, due to the insurance and hold harmless/indemnification provisions of the contract. Laidlaw carries $10 million in liability insurance — $5,000,000 more than the minimum required by the contract. Thus, the potential for liability under the Laidlaw contract is actually less than for services rendered by District employees, for which the District would be liable.

As of the end of January 2007, Laidlaw has been paid over $700,000 for home-to school bus service with MVUSD without a contract. MVUSD is non-compliant with state code and its own policy for not advertising for competitive bidding for home- to-school bus service. State code requires advertising for contracts over $65,000 for school year 2006 and $69,000 for 2007, and awarding the contract to the lowest qualified bidder, in accordance CPCC §20112 and MVUSD Business Policy (BP) §3311. Response The District disagrees partially with this Finding. Again, important elements of the Grand Jury's finding are simply wrong. As explained above, the District did comply with competitive bidding laws for the "Charter Bus Service" contract. A valid contract exists with Laidlaw, under which the current home-to-school transportation services have been obtained. However, the District has decided to conduct another competitive bidding process to expressly address "home-to-school" transportation services. It should be noted that, although competitive bidding is a mandatory requirement in the award of transportation contracts by school Districts, exceptions have been recognized by the courts. In Taylor Bus Service, Inc. v. San Diego Board of Education (1987) 195 Cal.App..3d 1331, the court wrote that, because the competitive bidding requirement is "tied to a policy of insuring efficient, economic and responsible government, if those goals would be offended by competitive bidding the bidding requirement yields." In that case, the two low bidders for a school transportation contract were found to be non-responsive. District staff indicated that, "with school starting in September, it was too late to advertise for, screen and award new contracts." The Court held that, "[g]iven the need for buses and the lateness of the hour, the District could properly forego the requirements for competitive bidding for the remaining buses needed to cover the contract originally awarded to Taylor." The District faced similar exigent circumstances when making its decision to obtain home-to-school transportation services pursuant to the existing contract with Laidlaw.

MVUSD is not planning to follow the Education Code, as it pertains to contract extension. The code only allows a contract to be extended for a total period of five years. Special provision #3 of MVUSD bid proposal document for charter bus service of 2004 states their agreement ends on June 30, 2005. The time frame of the bid proposal includes an option to extend for up to two additional years; therefore, the duration of the service will end not later than June 30, 2007. MVUSD Mr. John B. Todd August 28, 2007 plans to extend the bid proposal document an additional five years beginning July 1, 2007. The extension will exceed the five-year limitation, in accordance with California Education Code (CEC) §17596. Response The District disagrees partially with this Finding. This finding is factually and legally inaccurate. The District has no plans to violate the Education Code or to extend the contract "for an additional five years beginning June 30, 2007." The District is actively engaged in a bus driver recruiting program, and intends to reduce or eliminate the use of outside contractors for home-to-school transportation as soon as possible. The Grand Jury mistakenly cites Education Code section 17596 as prohibiting bus transportation contracts exceeding five years in duration. However, Education Code section 39803, which specifically addresses bus transportation contracts, authorizes terms "not to exceed five years . . . renewable at the option of the school District and the party contracting to provide transportation services, jointly, at the end of the term of the contract." Therefore, bus transportation contracts may legally exceed the five year limit set forth in Education Code section 17596.

Laidlaw was the low bidder for 84 passenger vehicles in the bid proposal document of 2004. The bid proposal document did not include 22-passenger vehicles, however, MVUSD is using eleven (11) Laidlaw 22-passenger vehicles. Therefore the District is not in compliance with state code and District policy, CPCC §20111m §20112 and AR §3310. Response The District disagrees partially with this Finding. Laidlaw was the low bidder for 84 passenger vehicles. The District contracts with Laidlaw for the use of twenty-five 84 passenger buses. The District does not use any Laidlaw 22- passenger vehicles. The Grand Jury's finding regarding 22-passenger vehicles is simply wrong. In 2006, MVUSD's governing board (school board) approved the purchase of 10

buses at $150,000 each, without a comprehensive plan, to replace Laidlaw as the bus service provider. As of January 2007, MVUSD has failed to hire a sufficient number of qualified drivers for the new buses; therefore, the governing board approved making this $1.5 million expenditure while also paying for student transportation by Laidlaw. 九 Mr. John B. Todd August 28, 2007 Response The District disagrees partially with this Finding. Again, important elements of the Grand Jury's finding are simply wrong. The Grand Jury apparently desires to create the (mistaken) impression that the District has doubly wasted public money on school buses that are sitting unused while contracting with a third party for the same services that could be provided through proper use of those buses. However, such is not the case. The 10 buses were purchased in accordance with a comprehensive plan - and each bus is currently in service having replaced aging and obsolete District equipment. The new buses were not purchased to replace Laidlaw as a bus provider. Again, these buses were purchased to replace old, deteriorating buses in the District's fleet. The comprehensive bus replacement plan was approved by the District's budget committees through normal processes, as well as the Board of Education. The plan shows bus purchases each year through 2014-2015. The plan was prepared based upon a recommendation from TransPar, a transportation consulting and management firm, which showed that the District had too many old buses in its fleet. For example, six buses were model year 1986, and five buses were model year 1989. Most of the parts were obsolete and could not be obtained. The new buses were purchased for the safety of our children and not to replace Laidlaw routes.