Massachusetts Bay Transportation Authority's Commuter Rail Operations

This is a State Auditor report reviewing how the MBTA awarded and oversaw its commuter rail operating contract with Massachusetts Bay Commuter Railroad Company.

“Our review of the MBTA was conducted to determine the overall effectiveness of the MBTA’s awarding and oversight of the contract with MBCR to operate and maintain the MBTA’s commuter rail system.”

Auditors looked at whether MBCR followed contract rules, whether the MBTA monitored MBCR properly, and whether the MBTA collected penalties when MBCR did not perform as required.

“Specifically, we reviewed whether: (1) MBCR is adhering to contract requirements for on-time performance, vehicle maintenance, track maintenance, and safety standards; (2) the MBTA is adequately monitoring the activities of MBCR and ensuring that contract requirements are being adhered to; and (3) the MBTA is assessing and collecting all contractual liquidated damages for non-performance.”

The report matters because the contract was worth more than $1 billion and involved public money used to run commuter rail service.

“In December 2002, the MBTA's Board of Directors authorized the execution of an Operating Agreement for commuter rail operations services for the five-year period July 1, 2003 to June 30, 2008 with MBCR for an amount not to exceed $1,072,194,212 ($1,050,080,812 for basic services plus $22,113,400 for Greenbush Line service).”

If you ride commuter rail or pay Massachusetts taxes, this affects you because the audit says weak oversight may have cost the MBTA money that could otherwise support service or reduce financial pressure.

“In order to ensure that all contractor responsibilities under any future commuter rail contract are being met and that the taxpayers’ interests are being adequately safeguarded, the MBTA should:”

The auditor found three big problems: double billing for certain labor, questionable incentives and fees, and major reductions or waivers of penalties for poor performance.

“Ultimately, by eliminating, reducing, reallocating, and placing monthly caps on penalties, the MBTA rewarded MBCR by as much as $42.9 million in uncollected and waived penalties for contract nonperformance reported by MBCR from January 1, 2004 to June 30, 2008.”

The auditor recommended that the MBTA stop allowing double billing, strengthen oversight, limit questionable markups and incentives, and fully collect penalties in future contracts.

“Finally, for any new commuter rail contract issued by the MBTA, the penalties to be imposed for contract noncompliance should be fully collected to demonstrate to all future commuter rail operators, and to the riding public, that the MBTA intends to hold its commuter rail contractor fully accountable for all service violations and contract noncompliance.”

The report is significant because it says contract amendments and oversight choices may have shifted large costs away from the contractor and onto the MBTA.

“Finally, the practice of continually amending the performance requirements of the contract to unjustly reward the operational inadequacies of MBCR sends the wrong message as to the price MBCR will ultimately pay, if any, for failing to fully earn its $1 billion contract fee.”

“Force Account work” means extra work outside the basic contract, billed by time and materials, often for capital improvements or special projects.

“Force Account work is work performed under contract that is billed as time and material.”