Why the MBTA reversed course on its commuter rail contract with Keolis

"The pandemic has created quite a bit of uncertainty about the market."

Framingham, MA., 06/20/10, The western suburbs of Boston wanted more commuter rail trains. Now, they might get them---in their backyard. Almost a year after they first announced a $100 million agreement that could add at least seven train trips and improve the efficiency of the chronically delayed Framingham-Worcester MBTA  line by 2012,  state politicians and CSX executives recently said they were closer than ever before to sealing the deal.  This is the station in Framinham. Section: West Weekly, Reporter: John Dyer.  Globe staff Suzanne Kreiter          Library Tag 07152010  National/Foreign
A commuter rail station in Framingham. –Suzanne Kreiter / The Boston Globe, File

Three-and-a-half years ago, amid complaints about service, Gov. Charlie Baker’s administration said they would not renew their current contract with the MBTA’s commuter rail operator, Keolis Commuter Services.

The decision meant that the multi-billion-dollar contract to run — and potentially improve — the state’s commuter rail system would go up for bid when it was set to expire in July 2022. Keolis would have potentially been able to win a new contract — or it could have gone to some other company.

However, the coronavirus has changed those plans.

During a meeting Monday afternoon, the MBTA’s Fiscal and Management Control Board approved a four-year extension of its contact with Keolis through the end of June 2026. The extension, which gives the MBTA an opt-out option in 2025, pays Keolis roughly $400 million a year to operate the system. While that rate is more than the T is currently paying the French rail operator, T officials say it’s probably the best deal they’ll get in the current climate.

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“The pandemic has created quite a bit of uncertainty about the market,” Rob DiAdamo, the MBTA’s commuter rail executive director, said during the meeting.

The commuter rail has seen ridership practically disappear in the wake of the COVID-19 outbreak. And even as Massachusetts reduces the rules meant to prevent the spread of the disease, MBTA General Manager Steve Poftak said Monday that commuter rail ridership remains at just 3.5 percent of its normal levels.

FMCB members had hoped to use the expiration of the agreement in 2022 to procure a “transformative” contract with Keolis or another rail operator, as they chart plans to ramp up commuter rail service, electrify most of the lines, and integrate the regional network with the rest of the MBTA system.

However, it remains unclear if and when commuter rail riders will return; DiAdamo said it could take more than a year for it to fully bounce back.

In April, officials began suggesting that they were reconsidering plans to let the current contract expire, noting that the bidding process takes several years. And even before the outset of the pandemic, they said the market conditions were not favorable.

DiAdamo said there was “substantial risk” that letting the contract with Keolis expire would result in cost increases for the MBTA. He cited examples in Toronto and Los Angeles, where transit officials recently faced foreboding challenges. In Los Angeles, officials ultimately canceled an effort to procure a new operating contract after a three-year process; the best proposal would have cost 10 percent more than their budget, due to a variety of factors from union labor rates to equipment to technology upgrades.

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DiAdamo said there was even concern that the MBTA would not receive other bids.

“We want people to want to do business with us,” he said. “We either wouldn’t have bidders, or they would give us a really significant price increase.”

The meeting came after the Massachusetts Taxpayer Foundation released an analysis Monday estimating that the MBTA could face an operating budget deficit of $400 million by 2022, due to the “deep impacts” on revenues.

DiAdamo acknowledged that Keolis has “not always been perfect by any stretch of the imagination.”

However, despite a lackluster performance in 2015, Keolis has since improved its service, with trains arriving within five minutes of their scheduled time roughly 90 percent of the time over the past five years.

And before the pandemic this year, Keolis was running the commuter rail at its “highest [on-time performance] they had ever run at,” DiAdamo said Monday.

Cancellations and terminations have also trended downward in recent years — even when not counting the disastrous 2015 winter (the 2014-2015 fiscal year had more than 1,600 trips that either never occurred or were cut short). After a total of 638 canceled trips during the 2018 fiscal year, those figures dropped to 422 and 388 during the last two years, respectively. Keolis has also consistently increased its number of employees and trains ready each day.

Still, the company has come under criticism for delays and cancellations.

The contract extension includes incentives for Keolis to meet certain performance metrics, including on-time arrivals and seating capacity. The tiered regime gives Keolis monthly bonuses ranging from $2,500 to $70,000, depending on the line, for reaching adjusted on-time performance rates of up to 98 percent.

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However, the company won’t get any incentives if its adjusted on-time performance rate (which accounts for delays caused by issues out of the company’s control, like trespassers or fallen trees on the track) falls below the required 92 percent rate on any of the lines. It also caps the total amount of bonuses paid by the MBTA to $5 million a year.

The extension will also allow the MBTA to move ahead with its plan to install commuter rail fare gates this year at three of Boston’s busiest stations and incentivizes the acceleration of other capital investments.

“This will give us some cost certainty, so we can actually plan for the next couple of years to understand what our budget is,” DiAdamo said.

During the meeting, DiAdamo noted that some people have suggested the MBTA should contract with Amtrak to run its commuter rail system or even operate the network itself; he said the latter option was “worth exploration,” but would be a complicated undertaking involving labor issues and potential legislation. Ultimately, DiAdamo said neither were viable options for the immediate future.

However, as much as he described the the transition process as complicated and disruptive, DiAdamo also emphasized the fact that the MBTA could cancel the contract one year early in 2025.

“If we are ready for the transformational contract sooner, then we can cancel the fourth year and begin with the transformational process,” he said. “We think it’s both flexibility and cost certainty.”

Even if they don’t cancel the contract, officials hope to award a new contract by January 2026.


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