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(NECN: Peter Howe, Boston) - If you’re among the 70,000 people who ride commuter rail in Eastern Massachusetts and Rhode Island, you can expect significant changes starting July 1, including promises from a new operator of better on-time performance and cleaner trains with better service.
On a unanimous vote, the Massachusetts Department of Transportation board Wednesday accepted a recommendation from MBTA General Manager Dr. Beverly Scott that they replace the current commuter rail operator, Massachusetts Bay Commuter Railroad, with Keolis Commuter Services LLC. Keolis’s parent company is 70 percent owned by the French national railroad, SNCF.
Transportation Secretary Richard A. Davey recused himself from the vote and contract review because he was an MBCR general manager before taking over as MBTA general manager and later transportation secretary.
Scott said the change is about "ensuring the best value for the public, including improved customer service and efficiency."
MBCR has won mixed reviews for its decade-long stewardship of the rail system, including rider furor over severe delays during cold winter weather and storms, but has complained it’s working with 30-year-old locomotives and equipment the T should have replaced years or decades ago.
At $4.26 billion over 12 years, assuming Keolis wins a 4-year extension on top of an 8-year base contract, the rail deal is the biggest single contract ever awarded in Massachusetts state history. Keolis runs the Virginia Railway Express, a weekday Virginia-to-Washington commuter service, but the T commuter rail operation in and out of North and South Stations would be by far the biggest rail operation run by its U.S. subsidiary: over 500 trains a day, operating on 737 miles of track with 1,900 employees from 14 different unions.
"We are very focused on customer service, cleanliness, reliability, on-time performance. It's going to be a major effort of ours. We have a great management team. We're going to bring improvements to the service, and we hope they see those improvements from the beginning," said Steve Townsend, president of Keolis America Inc.
Keolis counts former MBTA chairman Patrick J. Moynihan and former Boston city councilor Michael J. McCormack as two of its key local strategic advisors.
Keolis under-bid MBCR by nearly $25 million a year over the course of the 12-year contract term, and according to the T, in its first year of running the business, it would cost $12 million less than MBCR: $304 million for the year beginning July 1 versus the $312 million MBCR will make this year. Those numbers don’t include a $9 million T budget item for the one-time cost of a transition to a new operator.
MBCR, led by former MBTA General Manager James F. O’Leary, has huge problems with how the contract was bid, saying his consortium submitted an 1,100-page application to keep the business and spent $4 million preparing their bid, but got just a 45-minute interview with 11 questions from T staff. They’re reviewing whether to protest the bid to the Federal Transit Administration, which helps pay for commuter rail, or sue in court.
“It’s too early to tell” if MBCR will resort to litigation, O’Leary said.
O’Leary also questioned how Keolis can charge so much less money and whether it will wind up like an ill-fated 1999 T maintenance contract awarded to a low bidder who was finally fired after failing to deliver.
"Seventy percent of the costs are labor, so you've got to anticipate that if there is that kind of spread, that kind of difference" between what Keolis is charging and what MBCR bid, “that there's going to be some impact in terms of labor rates and benefits’’ that could lead to poorer service or labor unrest, according to O'Leary.
He also said MBCR, whose principal backer is international energy and transportation conglomerate Veolia, as a private enterprise stood little chance beating a socialist government for the contract.
"We were bidding against the French government, basically. This was the French national railroad. If they chose to lower their profit margin to a point, frankly, where we can't reach as a private company," O’Leary said, "then I suppose that's a question for French taxpayers."
Scott confirmed that the gap in profit margin – Keolis is proposing to make $0 in profit in its first year running the system – was the biggest reason MBCR couldn’t beat Keolis on cost.
"The profit margin was significantly higher for MBCR," Scott said, and the only other significant cost difference, much smaller than the profit difference, was in human-resources overhead.
Scott added that the T isn’t looking to levy huge fines on Keolis and hopes to work cooperative to improve on-time performance and train cleanliness and amenities, but noted that under the new contract, the T has the authority to levy fines of up to $12 million a year for failure to hit service goals – four times as much as the current $3 million maximum poor-performance penalty MBCR has faced.
With videographer Scott Wholley