Keolis — a French transit company with experience running rail systems in the United States, Europe, and Australia — will take over operation of the Massachusetts commuter rail system starting July 1, the state Department of Transportation’s board of directors decided Wednesday.
The company won the state’s largest operating contract in history with a bid that was 6 percent lower than that of the current operator, the Massachusetts Bay Commuter Railroad Co., which has operated the system since 2003.
MBTA general manager Beverly A. Scott, making one of the highest-profile decisions since she took over the T a little more than a year ago, said the agency will save $254 million over the term of a full 12-year contract.
“Keolis’s proposal presents the best combination of technical quality and price, and is more advantageous to the MBTA,” Scott said.
For the 127,000 people who ride the commuter rail’s 14 lines
each day, much will remain the same. The new contractor will have no control
over fare prices, and most of the trains and other equipment will remain the
same. The new company will, however, face more frequent inspections of its
trains and stiffer penalties for poor service.
Keolis’s chief executive of international operations, Bernard Tabary, who flew from Paris Tuesday for the vote, said the company is prepared for a quick takeover.
“We’ve been working on this bid for over two years, and that includes mobilization,” Tabary said. “It’s going to be a lot of work, but it’s positive work, and we look forward to it.”
On Tuesday, state officials revealed the price tag for the contract: $2.68 billion over eight years, with the possibility for two two-year extensions that could bring the total price to $4.3 billion.
Keolis will be paid $304 million in the first year of its contract. This year, Massachusetts Bay Commuter Railroad was paid $316 million for base operations.
Much of the difference between the two bids came down to profits, Scott said. Keolis’s estimated profit margin was 77 percent lower than its rival, achieved in part with a promise to pay lower salaries for administrative positions.
The Massachusetts contract will be the biggest US system for Keolis. Some transit specialists suggested that Keolis may be willing to operate the system with a smaller profit margin in order to have a major American commuter rail system in its portfolio, a feather in its cap that could open doors to other high-profile transit contracts in North America. Keolis currently runs the Virginia Railway Express, a commuter rail in the suburbs of Washington, D.C., with 32 trains and 21,000 passengers daily.
Scott’s recommendation of Keolis as the winning bidder was unanimously approved by the MassDOT’s board of directors. Scott said the French company scored well on a number of criteria.
Aside from the pricetag, in other measures considered during the procurement process, Massachusetts Bay Commuter Railroad received an overall rating of acceptable, while Keolis received a higher overall rating of good. For example, Keolis has a better record on engineering services, management, and information technology, according to the T. But Massachusetts Bay Commuter Railroad has a better record of contracting with minority businesses.
The T will also save money on the new commuter rail contract because potential rewards that would be paid to the operator for meeting on-time performance — a controversial practice during Mass. Bay’s tenure — were removed from this contract. Scott also told the board that the contract contains more potential penalties for poor service, $12 million per year versus $3 million per year.
“Bottom line, in the new contract these incentives and offsets have been eliminated,” Scott said.
The new contract also increases daily inspection requirements for the trains, puts in place a remedial action plan if Keolis fails to meet expectations, and allows the T to relieve Keolis of certain duties if they are not performed well, for example, snow removal. If that were to happen, Keolis would not be paid for that work.
Before making its decision in a public meeting Wednesday, the MassDOT board listened to two hours of public comments.
The Rev. Bruce H. Wall, who had lambasted Keolis last month for allegations of discriminatory practices, made an about-face, saying that after talks with the company, he “wholeheartedly” endorsed Keolis.
James O’Leary, chairman of Massachusetts Bay Commuter Railroad and a former general manager of the T, told the board that he believed the procurement process had failed to conduct a thorough vetting of the companies, a move that was particularly galling, he said, after 10 years of partnership with the T.
“After all that, we had a sum total of a 45-minute interview,” he continued. “We can only conclude that our proposal was never seriously considered or understood.”
Ronald J. Hartman, chief executive of the rail division at Veolia Transportation, Mass. Bay’s largest shareholder, warned that the T did not know enough about the differences between the two companies. “My only question is, Do you really know what you’re getting with the proposal you’re about to review?” Hartman said. “And do you know what you would have gotten from our proposal, had you had that kind of in-depth discussion and evaluation?”
Scott countered that the T had conducted several written exchanges with each bidder and that the MBTA responded to more than 1,000 questions from both.
Though the MassDOT board voted unanimously in favor of Keolis, their questions seemed to indicate that it was not without some reservations.
Board chairman John R. Jenkins said he needed to know that the T had a plan in place to quickly usher in a new contractor, a process that will cost the T $9 million. Jenkins said Governor Deval Patrick had expressed concern that there might be interruptions in service for commuters.
“They’re going to have to get their feet on the gas pedal,” Jenkins said after the meeting. “They’ve got to keep this thing moving in order to make sure that we do get there on time.”
Janice Loux, another member of the board and a union organizer, said she was also concerned that the smaller pricetag for Keolis’s services could have an effect on union workers’ next contracts.
“The proposed savings are remarkable, just remarkable!” said Loux, with a touch of sarcasm in her voice. “Has the general manager verified that the savings are true and achievable? What are the impacts to the size of the workforce, labor agreements, and benefit packages?”
She continued, “I’m looking forward to seeing this workforce taken care of.”
Representatives of various commuter rail unions — including former state senator Steven A. Tolman, president of the Massachusetts AFL-CIO — expressed similar concerns, saying they were dismayed to learn of the change.
Daniel N. Tavares of the International Association of Machinists and Aerospace Workers said he doubted Keolis would be able to offer improved service while receiving millions less than its predecessor.
“There’s training, there’s a learning curve; a new company coming in just doesn’t sound responsible,” Tavares said.
Andrew Mannion, president of the International Brotherhood of Electrical Workers, said he was concerned that the deal would go the same way as the T’s much-criticized contract with Bay State Transit in 1999, a maintenance contract that was given to the lowest bidder, only to blow up when the company proved incapable.
Mannion said union officials would not accept lower salaries for members. “Under no scenario would we agree to terms that does not fairly compensate our members,” Mannion said.
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