MBCR heads to court over MBTA rail contract

On Jan. 8, 2014, the MBTA awarded a $2.68 billion, eight-year contract to Keolis Commuter Services, a subsidiary of Keolis North America (whose majority shareholder is SNCF, French National Railways), to operate the MBTA’s commuter rail system. The contract includes a provision for up to two, two-year extensions worth approximately $1.6 billion, combined. MBCR, the only other bidder, believing the Keolis bid to be non-responsive, filed an administrative protest with MBTA on Feb. 7, 2014. MBTA has not made a final decision on MBCR’s protest and has extended the deadline for doing so until early April; MBCR said MBTA wants the protest to languish, running out the clock until it is too late to reverse its decision.

On March 6, 2014, MBCR filed a motion in Suffolk County (Mass.) Superior Court  to halt the award of the contract to Keolis, and invalidate the contract.

In its court filing, MBCR cited “irreparable harm created by the MBTA’s decision to move forward with transition to a new operator while refusing to review MBCR’s formal protest in a timely manner.”

“MBCR’s request for an injunction follows discovery of multiple, serious deficiencies and errors found in commuter rail procurement documents made public by the MBTA following public records requests,” MBCR said. “These mistakes include a $428 million understatement of actual commuter rail costs in the MBTA’s Independent Cost Estimate (ICE), which omitted costs such as guaranteed annual wage benefits worth nearly $5,000 per employee, and $10 million in existing costs for parts and materials that are required to maintain trains. When compared with an accurate ICE, the fixed-cost bid price falls more than $500 million below the realistic price of operating the system. Additionally, SNCF/Keolis failed to provide a detailed security plan as required by the Request for Proposals and instead offered a promise to prepare one sometime in the future.”

Records provided by the MBTA “also show the MBTA’s Deputy General Counsel responsible for the integrity of the procurement assisted SNCF/Keolis in an apparent attempt to conceal documentation of significant noncompliance in the SNCF/Keolis proposal,” MCBR added. “A series of emails between the MBTA and SNCF/Keolis officials—exchanged after a legally binding deadline had passed—show the attorney advised SNCF/Keolis to withdraw an inquiry from the official record that would have required public disclosure of noncompliance.”

“The holes in the MBTA’s procurement process are big enough to drive a locomotive through,” said Alan Moldawer, an attorney for MBCR. “Every bid for a government contract must adhere to a strict, legally proscribed process, but the MBTA ignored its fundamental responsibility to provide a level playing field to both bidders and overlooked obvious deficiencies that allowed SNCF/Keolis to stay in the bid process.”

MBCR claims it found more than a dozen “deficiencies” in the commuter rail procurement in documents obtained from the MBTA. Among them:

• “SNCF/Keolis submitted misleading information and misrepresentations regarding SNCF’s subpar commuter rail performance, where public records reveal system On Time Performance (OTP) at 88%, not 95%, and did not disclose data from other commuter operations in France that are widely criticized for widespread delays and poor service.”

• “SNCF/Keolis [provided the names of] employees of its parent company in France as references instead of representatives of agencies it serves, and the MBTA did not check [those] references.”

• “SNCF/Keolis claimed it could not provide accident statistics or a detailed accounting of its past safety performance as required by the procurement because its operations in Europe were ‘too big’ while rail services provided by its American subsidiary were ‘too small.’”

• “SNCF/Keolis’ proposed key management team includes three high-ranking officials who now will not fill the positions as set forth in the SNCF/Keolis bid—a ‘bait and switch’ technique long considered unacceptable.”

• “MBTA disregarded stated financial covenants that required bidders to achieve minimum profit margins that would ensure long-term financial stability and availability of funds to pay for up to $12 million in potential fines and penalties. SNCF/Keolis’ bid presented a ‘zero dollar’ profit margin in ‘Year 1’ and profit margins for the entire contract that breach the bid requirements set forth by the MBTA.”

• “SNCF/Keolis failed to meet the minimal ‘acceptable standard’ for Disadvantaged Business Enterprise (DBE) participation. In January, the MBTA publicly reported that SNCF/Keolis’ DBE plan was satisfactory but internal MBTA documents show the plan was not ‘acceptable.’ The MBTA has since directed SNCF/Keolis to develop an ‘acceptable’ DBE plan prior to assuming control of the commuter rail system.”

• “SNCF/Keolis ignored the MBTA’s bid requirement to submit detailed security and emergency preparedness plans. Rather than develop plans or show an understanding of the system needs as required by procurement rules, SNCF/Keolis promised to develop plans after award of a contract.”

MCBR called upon Robert Stephan, the former U.S. Assistant Secretary for Homeland Security, to review the SNCF/Keolis bid. Stephan, a “globally recognized safety expert,” said that SNCF/Keolis has failed “to provide security and emergency preparedness plans, as required by the procurement.” This “contradicts the basic standards of public transit safety in the United States after 9/11.”

“SNCF/Keolis’ promise to prepare plans at some point in the future is no substitute for the essential requirement of detailed Security, Emergency Preparedness and Emergency Response plans that illustrate a clear, thorough understanding of the risks associated with the commuter rail system in Boston and Massachusetts,” said Stephan. “There is no excuse for failing to prepare these essential plans, or the MBTA’s decision to ignore the omission. These plans are the foundation that tens of thousands of commuters rely upon to safeguard their well-being and security, every day.”

A Keolis spokesman said MBCR’s allegations are misleading and that the company is trying to “disguise its own shortcomings and create an atmosphere of disorder.” MBCR “continues to play the role of obstructionist,” the spokesman said. He added that Keolis is contributing $18 million in working capital, and that Keolis and  SNCF have also posted a $20 million standby letter of credit.

MBTA said it is reviewing MBCR’s allegations, but added that MBCR’s decision to pursue legal action is uncalled for. “If MBCR proceeds to seek an injunction, it will do so in blatant violation of the procedural rules it agreed to and the contractual promises it made to the MBTA under its current contract,” MBTA spokesman Joe Pesaturo said in a statement.

MBCR’s final bid was approximately 6% higher than that of Keolis.