T considering privatization of core services

Auditor Bump disputes value of Pacheco Law suspension

THE MBTA, which has already used privatization to cut costs in its warehouse and money room operations and to extract wage and work rule concessions from its largest union, is now pushing to outsource some of its core services, including bus and subway maintenance, bus operations, and customer service.

T officials on Monday said the three-year suspension of the so-called Pacheco Law, which governs how public agencies can outsource services, has already allowed the transit agency to cut costs by an estimated $400 million over the next 10 years. Agency officials estimate privatization of warehouse and money room operations will save $81.2 million and $96.1 million, respectively, over the 10-year period, while a new contract with the Carmen’s Union will save $217.9 million.

But with an operating deficit persisting this year and costs rising next year, officials are now considering the outsourcing of core services, including the maintenance of buses and subway cars, bus operations, and customer service work. The T is reviewing a number of outsourcing options, but officials estimate savings could total as much as $165 million in fiscal 2021.

Brian Shortsleeve, the T’s chief administrator and acting general manager, said the Legislature’s suspension of the Pacheco Law has played a key role in reducing the authority’s cost structure. “The Pacheco waiver has proven very valuable,” he said, echoing the comments of other Baker administration officials.

State Auditor Suzanne Bump, whose office oversees enforcement of the Pacheco Law, scoffs at the MBTA’s claims. While admitting she is not in favor of privatization personally, Bump said in a recent interview that all of the T’s outsourcing initiatives so far could have been accomplished within the confines of the Pacheco Law.

“If the administration makes the case on the merits, we’ll approve it,” she said. The law requires state agencies to provide evidence that outsourcing will save money without impacting service, which the T has done with each of its privatization proposals.

Bump also dismissed claims by MBTA officials that the Pacheco Law suspension, and the threat of privatization it portended, allowed the T to secure wage and work rule concessions from its largest union. She said the threat of privatization would have existed even with the law in place. “They still held that threat,” she said. “They could have obtained the same result if the Pacheco Law had not been suspended.”

Asked about Bump’s claim, Shortsleeve restated his belief that the waiver has been extremely valuable in helping the T cut costs and improve service.

Shortsleeve said the T’s operating deficit for the current fiscal year is projected at $50.1 million, down roughly $30 million from initial projections. One area where little progress has been made in reducing costs is operation of the T’s paratransit service, called The Ride, which is $6.8 million over budget. Shortsleeve said the T tried to divert riders from the core Ride service, which ferries passengers to their destinations at an average cost of $46 per trip, but ridership has instead gone up. “We have continued to see growth in the core Ride service,” he said.

In fiscal 2018, which begins July 1, cost pressures on the T are expected to intensify. Debt costs are expected to rise by $53 million and sales tax receipts, which provide the bulk of funding for the T, are forecasted to be flat. T officials hope to boost parking and advertising revenue, and Keolis, the commuter rail operator, is initiating a more aggressive fare collection process. On the expense side, T officials said they are looking to reduce the number of employees, boost productivity, and reduce or eliminate weekend commuter rail services and discretionary paratransit service.

The T is also planning to expand its use of privatization, with the initial focus on bus and subway maintenance, bus operations, and customer service.  Bus maintenance and operations account for roughly a third of the T’s $1 billion in operating costs.

Mark Aesch, a consultant hired by the T, estimated $30 million to $40 million in annual savings by outsourcing bus maintenance work and $14 million in annual savings by outsourcing subway maintenance. Bus maintenance work is currently handled by Local 264 of the International Association of Machinists. Shortsleeve said private maintenance contractors would also employ unionized workers.

The T’s agreement with the Carmen’s Union guarantees union members will handle the agency’s existing bus service. But Aesch recommended that private operators be used for any expansion of bus service and any fill-in service required when subway lines are shut down for maintenance.

Aesch also called for outsourcing the T’s customer service operation, which consists of 202 agents working at subway stations who are paid $27 per hour, excluding fringe benefits. He estimated the T could save as much as $11 million by outsourcing customer service operations.

Meet the Author

Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

A handout provided by the T discussed much broader outsourcing proposals, ranging from contracting out select bus routes to contracting out all bus operations. The handout noted that only 65 percent of MBTA buses are on time (departing within three minutes of scheduled departure times) and 30 percent are crowded at peak times.

  • Mhmjjj2012

    WBZ/4 Boston’s website has an article, “I-Team: Managers At MBTA Drive Secret Take-Home Cars Owned By Contractors,” stating “For possibly more than 30 years, some managers at the MBTA have enjoyed a perk that’s been hidden from the public: Unmarked take-home cars that are owned by construction companies. The I-Team discovered the cost to taxpayers is almost impossible to determine because the vehicles have been buried in the overall price of multi-million dollar projects…Less than a week after the I-Team started asking questions, the MBTA returned all 23 vehicles to construction companies…Gas, insurance and maintenance costs were all covered by the contractor, while the MBTA picked up the tab for the $625 monthly parking pass at a private downtown garage…(Brian) Shortsleeve (the T’s chief administrator and acting general manager) said the perk was flagged in November by a new capital delivery manager, who was offered a car and a downtown parking pass. A short time later, the MBTA ended the practice of putting the vehicle provision in its contracts, he said.” Shortsleeve knew about the perk in November and his only action was to stop including the vehicle provision in new contracts. It took the I-Team investigation to force the practice to end. The MBTA needs a real general manager who will go through the MBTA’s management practices with a fine tooth comb and take immediate, appropriate corrective action where/when necessary.

    • Aeroguy

      Anything involving a ‘free car’ will get people angry — me included. But, realistically, the ‘secret car’ situation involves less than $1 million a year; maybe half that. It’s small potatoes compared to other T areas of waste — e.g., the Money Room, the Parts operation, bus maintenance, absenteeism, overtime manipulation, parking revenue ‘shortages’. The current T top management has picked the right priorities.

      • Mhmjjj2012

        The fact is Shortsleeve knew about those secret cars back in November but he didn’t return the vehicles until the I-Team got on it. How crazy is that? Why did Shortsleeve wait until the practice was about to become public to act? That’s the wrong attitude…the wrong way to make decisions in a public enterprise…it’s OK until the public finds out…wink…wink. Just the annual cost for the monthly parking pass came to $172,500 so I doubt very much the secret cars involved less than $1 million a year. And anyhow, when did $1 million become chump change to the MBTA or to the state? Seriously, when? Somerville is on the hook for somewhere around $50 million to help finance an MBTA project that should have been completed well over a decade ago at no cost to Somerville.
        Previous articles in CommonWealth reported the Governor’s oversight panel didn’t use real facts or come to honest conclusions on the MBTA’s operations. The MBTA still has no full-time general manager. The MBTA is getting so fragmented there’s a company counting money, a company handling parts inventory, a company running the commuter rail, a company handling calls from employees taking unscheduled absences and who knows how many other companies are inside the MBTA’s workings. The bottom line is I don’t know what the MBTA’s priorities are…I really don’t…and I certainly don’t have the confidence you have in the current “top” management at the MBTA.

  • People scream when fares go up because the MBTA can’t keep costs under control. People scream when the MBTA takes measures to save money. You have to choose one or the other. To me, privatization and efficiency is clearly the right choice.

  • Aeroguy

    Ditto to Aerys’ comment. The MBTA inherited by the Baker administration was an *incredibly* badly managed agency. Privatization was needed both to bring in outside, cheaper sources of services and to coerce the T unions. It has accomplished both, and there’s more to do. Auditor Bump simply wants the ability to block privatization; forget that.