T warehouses called management failure

Oversight board confronts politics of privatization

MBTA OFFICIALS ON MONDAY described a massive management failure at the agency going back decades that has left the authority with a costly and inefficient warehouse system that often leaves mechanics waiting days for repair parts.

T officials say they want to fix the warehouse system by outsourcing the operation to a private vendor, which could result in the displacement of some 34 union workers who all sides agree were not the cause of the problem.

The politics of privatization moved front and center at the T’s Fiscal Management and Control Board on Monday as union and elected officials pushed back against efforts by the T to privatize non-core operations of the agency. Gov. Charlie Baker and the Legislature in July 2015 granted the T’s oversight board broad powers to privatize services under a three-year suspension of the so-called Pacheco law, which restricted outsourcing efforts.

A parade of officials urged the oversight board to invest in the T’s operations rather than farming them out to private companies. Sen. Kenneth Donnelly of Arlington said he voted against suspending the Pacheco law precisely because of situations like this. “The problems are not from the workers,” he said. “The problems are from management, or mismanagement.”

Sen. John Keenan of Quincy said the board should consider the broader societal ramifications of privatization, which he said would lead to the hiring of vendors who will not pay their workers fair wages or benefits. “The key here is not to find the cheapest route, but the best route,” he said.

Jeanne Breare, who works in the stockroom at the T’s Quincy bus yard, said she works hard in an effort to make a dysfunctional system operate the best it can. “We are incredibly understaffed. Management has neglected the stock room for many, many years,” she said. “Please keep public transportation public.”

A handful of officials and groups spoke in favor of privatization efforts. Eileen McAnneny, who heads the Massachusetts Taxpayers Foundation, distributed a letter supporting privatization efforts from the group Fix Our T, which is made up largely of business groups. The letter was also signed by 15 mayors, including the mayors of Salem, Haverhill, Waltham, and Lawrence.

Gregory Sullivan, the research director at the Pioneer Institute think tank, urged the T to explore privatization efforts, but his comments were drowned out as union officials in the audience heckled him and then booed him when his time began to run.

Gerard Polcari, the T’s chief of procurement, painted a dire picture of the warehouse and parts operation, which he blamed on management. “It’s very much a management failure,” he told reporters prior to the board meeting.

Polcari said the warehouse system is broken on just about every level. For example, the industry standard for parts delivery is 12 hours; at the T, the process takes 82 hours, which means a part ordered on Monday morning is not likely to arrive until Thursday. Worker productivity at the T’s warehouses is a tiny fraction of industry standards, in part because the warehouses are retrofitted repair facilities. And the T’s system for tracking parts is so bad that the agency’s inventory records rarely match what’s on the shelf. “We simply don’t know what parts we have,” said Polcari, who estimates the T has $22.7 million worth of inventory that it doesn’t need.

Part of the problem is that the warehouse operation works an eight-hour shift, while repair services at the T run 24 hours a day, seven days a week. The warehouse operation doesn’t have any of its own delivery vehicles; all parts deliveries go out on operation vehicles, so if those vehicles aren’t running or they are full, the parts don’t get delivered. “That happens more often than we’d like to admit,” Polcari said.

Polcari said the inability of the T to deliver parts quickly hinders the ability of mechanics to make repairs and means fewer buses and train cars are available for service.

Ernest Miller, a managing partner at Optio Tempore LLC in Hudson, Ohio, who was brought in to analyze the T’s warehouse operation, said he couldn’t find anything up to industry standards. “There wasn’t one single process that was functioning well,” he said. “I’ve never seen numbers like these.”

Polcari, who was recruited from the private sector by Baker and his staff, sees privatization as the only way out for the T’s warehouse operations. He estimates the T would need to spend $14.5 million just to bring the warehouse physical plant up to snuff; on top of that, the agency would have to invest in delivery vehicles and additional staff. He predicted a private warehouse operation could offer 24-hour service every day for less than the $4.2 million a year the T is currently spending.

Polcari also noted that many major companies, including Ford, Caterpillar, Honda, and General Electric outsource their warehouse operations.

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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.

Brian Shortsleeve, the T’s chief administrator, said the agency needs to focus on its core mission and relinquish operations that can be done better and more efficiently in the private sector. Shortsleeve is pushing for privatization of the T’s warehouse, money-counting, and marketing operations.

Polcari said he is preparing a request for proposals that could lead to a private warehouse vendor being selected in August if the oversight board gives its approval. He said any private vendor would have to demonstrate that it could do a better job at less cost.