This paper addresses heterogeneity in the deterministic portion of a cost frontier and in the parameterisation of technical inefficiency using an unbalanced panel of bus transit systems. It conceptualises six groups of variables which affect heterogeneity in cost and technical inefficiency: organisational size, ownership, service delivery methods, regulations, external factors and trend. Then, it specifies and estimates a translog cost frontier and from its results identifies those variables that affect technical inefficiency. It finds that purchasing some passenger services and providing others directly and bus useful-life regulation increase technical inefficiency. It also finds that MPO-owned single mode bus systems have less technical inefficiency and while network size increases technical inefficiency it reduces cost. From this result it cautions making inferences about how a variable impacts cost from its effect on technical inefficiency. It examines the managerial implications of the results and suggests using variables in the parameterisation of technical inefficiency whose effects on costs have been established empirically or through conceptualisation.