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MBTA disappointed that only two companies competing to provide commuter rail service

Massachusetts Bay Commuter Railroad has run the state’s rail system since 2003, earning it more than $1 billion.
Massachusetts Bay Commuter Railroad has run the state’s rail system since 2003, earning it more than $1 billion.Suzanne Kreiter/globe staff files

Only two companies have committed to bid for the $1 billion-plus contract to operate the state’s sprawling commuter rail system, disappointing MBTA officials and raising concerns that the lack of competition could increase the cost or weaken service for the system’s 70,000 daily commuters.

Twenty-five companies from all over the world initially expressed interest in competing for what is believed to be the most lucrative rail contract in North America, and one of the biggest state contracts of any kind in Massachusetts history. But only the French company Keolis and the firm that currently runs the rail system filed the necessary paperwork to bid.

The T had hoped for at least half a dozen competitors to help sharpen bids for a multiyear contract that currently pays the operator nearly $300 million a year.

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“I’m disappointed there’s only two” companies interested in the contract, said Jonathan R. Davis, the MBTA’s acting general manager. “Where there’s competition, there’s usually a benefit to the MBTA.”

People following the competition closely say that other firms may have been scared off because they believe the current contract holder, the Massachusetts Bay Commuter Railroad, has the inside track.

Not only has Mass Bay run the system since 2003 — collecting more than $1 billion in fees — but it was founded by James O’Leary, a former MBTA general manager with deep local connections, including mentoring Richard A. Davey, the state’s transportation secretary.

However, Mass Bay has occasionally infuriated riders with chronic train delays during the winter of 2010-11, air conditioner breakdowns in the summer, and a series of contract amendments negotiated with the T that gave them financial rewards even when service was poor.

T officials say that with the contract set to expire next year, their only interest was in making sure they had numerous alternatives to compete against Mass Bay.

“We did a significant amount of work to encourage bids,” Davis said, while noting that the two companies now in competition are industry leaders that are sure to compete aggressively.

From a commuter’s point of view, limited competition could translate one day into higher prices for riders.

“Obviously, more bidders equals more competition, and more competition usually means lower prices,” said Henry Savelli, a commuter from Milford, who in the past has complained to the T about service breakdowns. “But one of the two bidders is the current contract holder. So, it doesn’t look advantageous from a purely fiscal point of view.”

The other company in the hunt is Keolis America Inc., a subsidiary of a French company that ranks among the world’s largest commuter rail companies, with contracts in France, United Kingdom, the Netherlands, Germany, and the United States. The company operates rail service for about 19,000 daily commuters in Washington and northern Virginia.

Steve Townsend, chief executive officer of Keolis, said his company entered the competition knowing Mass Bay is on the inside track.

“There’s no question that in procurements of this nature, the incumbent has the advantage due to knowledge of the system and other factors,” he said. “But we are going to be very aggressive in our pursuit of this contract.”

Townsend was not overly concerned about Mass Bay’s inside connections, saying, “We would not be investing money into this without having satisfied ourselves there’s a level playing field.”

The T set July 26 as the deadline for companies to submit statements of qualifications to bid on the commuter rail contract next year. Davis said no company can go forward with a bid without having submitted qualifications. He said he planned to confer with other T managers and consultants to determine what options are open to the T if it wishes to strengthen the competition.

Davis said he assured all competitors that “there would be an open, transparent, and fair process in awarding the contract.”

Officials at Mass Bay, which is majority-owned by Veolia Transportation of France, said they welcome all competitors, pointing out that train delays have dropped dramatically since the winter of 2010-11, when some trains became stranded by the ice and snow.

A company spokesman, Scott Farmelant, said on-time performance is almost 92 percent so far this year, a great improvement over its worst period, in January and February of 2011 when on-time performance was about 75 percent.

Outside analysts said that Mass Bay and Keolis will compete aggressively to win the Boston contract, which has not yet been drafted but is expected to run for five to 10 years.

“They are very tough competitors within France and the rest of the world,” said Jean-Claude Ziv, a professor at the Conservatoire National des Arts et Métiers in Paris.

The last time the commuter rail system contract was put out to bid, the competition largely evaporated. Though three firms put in a bid, the one from Boston & Maine Railroad was a long shot that cost twice as much as the others, while the bid from Transit America was disqualified for technical reasons even though the group offered the lowest price.

Davis said the T is incorporating lessons it has learned into the bidding this time.

“Those who ride the T should be encouraged by the process,” he said. “We will take what we have learned, what’s been successful and what hasn’t been successful, to improve.”

The new contract is set to begin July 1 next year.

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