Getting MBTA capital spending on track

THE MASSACHUSETTS LEGISLATURE must free the MBTA from overly restrictive procurement methods and the T must dramatically increase its project and contract management capacity if it is to reach aggressive capital spending targets aimed at upgrading the system and accommodating more riders. We lay out the case for these initiatives in a new Pioneer Institute report, “The MBTA’s Capital Spending Crisis.”

The recent news that repairs caused by a derailment on the Red Line will now extend into October has elicited a collective groan from riders and increased anger about the current state of the MBTA. Despite having a massive capital investment plan in place and new trains on order, the T is struggling to complete projects. Reforms will be needed to deliver the agency’s most important ridership-boosting initiative, the Red and Orange Line Modernization Project, on time and on budget.

Legislation proposed by Gov. Baker would allow the MBTA to extend the use of design build procurement methodology to smaller contracts, but the T also needs freedom from requirements that unnecessarily add to project time and costs. For example, the MBTA is the only US transit agency that is subject to a filed sub-bid law, which requires a complicated procurement process for subcontracts over $100,000 that are part of contracts over $10 million. The process involves duplicate prequalification of subcontractors and requires general contractors to choose among previously submitted subcontractor bids when filing their own bids. If there are fewer than three pre-qualified subcontractors, the process must start over. Unhappy subs can also appeal.

Massport and other state agencies are exempt from this law. The Legislature should exempt the MBTA and allow it to use any procurement methodology published by the Federal Transit Administration as best practice.

The T also needs to hire additional senior executive project and contract managers at market salaries to head up significant modernization projects in the pipeline. Too often, managers have more projects than they can handle simultaneously. And unless capital spending can be ramped up to and kept at $1.6 billion annually, the MBTA will not be able to achieve the modernization needed to improve service and increase ridership.

MBTA heavy rail (Blue, Orange and Red lines) ridership reached capacity around 2014 and has since been falling relative to population growth. The modernization plans would change that. Signal and power system upgrades and new trains will increase Red Line capacity by half and Orange Line capacity by 40 percent. But the upgrades have been beset by delays.

Analysis of MBTA spending patterns reveals that budgeted capital expenditures have risen from less than $500 million in 2013 to $851 million in 2018, according to audited financial statements. Despite spending more, the T still fell short of the $1.6 billion that was available in 2019. The MBTA claims it reached the $1 billion mark last year, although fiscal 2019 audited financial statements will not be released until October.

When planned capital spending has increased significantly, it’s historically taken about four years for actual spending to catch up. Beginning last July 1, the MBTA is aiming to spend $8.5 billion on capital over five years, or about $1.6 billion annually, to maintain and modernize the system. Unless significant changes are implemented, that target is unlikely to be reached.

The problem is not lack of money. The annual budget is slated to reach $2.3 billion in fiscal 2021, but spending is scheduled to fall dramatically, to $861 million by 2023 due to a lack of projects in the pipeline, according to recent comments by Secretary of Transportation Stephanie Pollack. Current staff have managed to double capital spending between 2013 and 2019, but nearly doubling it again will require additional manpower, planning, and expertise.

The MBTA has usually revised spending targets downward when it became clear that capital spending targets wouldn’t be reached. The original 2015-19 capital investment plan, for example, set a $1.403 billion target for fiscal 2016. But when the actual 2016 budget was published, it called for spending $1.046 billion, a reduction of more than 25 percent. This lesser amount was never fully spent.

To improve performance, the T has hired a chief of capital programs and plans to hire 80 more full-time staff. However, sustained improvement will require the MBTA to convert problems into contracted projects. This requires senior engineering and contract management expertise to map out solutions and tackle problems such as leaking stations, smoking trains, flooding of mechanical and electrical systems during storms, and repeated elevator and fare gate failures that are all too familiar to commuters.

To make all of this work will require the legislative changes we have proposed, and a dramatic increase in project and contract management capacity at the T, if it is to reach the capital spending targets aimed at modernizing the system. A shortage of funds is not the problem.

Ian Ollis is a former member of the South African Parliament, having served as the shadow minister of transportation. He is currently completing a transportation-focused master’s degree in planning at MIT. and is a senior research analyst at Pioneer Institute, where he co-authored the recent report, “The MBTA’s Capital Spending Crisis.” He is on twitter @ianollis