T’s privatized warehouse system falling short of promises

Union rep: ‘The public was sold something that they’re not receiving’

THREE YEARS AGO, the MBTA made the case for privatizing the transit authority’s inventory management system by arguing that the existing staff-run operation had broken down on almost every level.

One of the biggest problems was that parts could take around three days to arrive at work benches, far longer than the industry standard of 12 hours. The T also didn’t have a very accurate measure of what exactly was in its stores. And inventory gathered dust sitting on warehouse shelves for two years, which is longer than the transit industry standard, T officials said. One T official estimated the agency was sitting on $22.7 million worth of inventory it didn’t need.

The causes were many – a poorly maintained warehouse in Everett that was not designed for the task, a deficient parts-tracking system, and employees who worked eight-hour weekday shifts while repair staff worked around the clock seven days a week. On top of that, the warehouse workers had no delivery vehicles of their own so they needed to piggyback their deliveries on other T trucks.

The Boston Carmen’s Union, which represented the warehouse workers, claimed T officials exaggerated the problems and contended that, with a few upgrades and more shifts, they could vastly improve parts management.

Instead, the MBTA’s Fiscal and Management Control Board moved to remedy the situation in January 2017 by voting unanimously to approve a five-year, $28.4 million contract with Mancon, a Virginia-based logistics company. The contract offered projected savings of about $5 million per year in operating costs, and additional capital savings on facilities and parts.

But Mancon’s service levels have fallen short of what T officials promised when they hired the company. Mancon is not making good on the maximum 10-hour-turnaround guarantee for parts that T officials made when the firm was hired, according to a union official who represents Mancon workers. The company is not providing the 24/7 staffing many workers expected it would based on the promise of 24/7 coverage. An internal audit found Mancon is not using its own logistics software, as the contract had specified, and is instead relying on the T’s old system. And the system’s ability to accurately track inventory hasn’t met expectations.

Frustrated with Mancon’s inability to provide parts on a timely basis, some T mechanics have been resorting to a workaround – tracking down the parts they need at other repair shops, and then retrieving the parts themselves.

“As with any major change, there is always a learning curve for all of the parties involved, especially during a large and complex transition such as this one,” MBTA spokesman Joe Pesaturo said in an email. “Workarounds and deviations from policies and procedures are what contributed to poor past practices.  These prior poor practices also led to inaccurate inventory, which the T and its vendor are working hard to correct.”

But Mike Vartabedian, a top official at the International Association of Machinists and Aerospace Workers Local 264, which began representing the roughly 35 Mancon workers about a year ago, described the privatized inventory management as a far cry from what was promised.

“It was sold to the public as this great service that was going to be a dramatic improvement with the MBTA and it really hasn’t been,” Vartabedian said. “The public was sold something that they’re not receiving.”

In addition to the contract shortcomings, there have been other bumps in the road with Mancon. Eight months after signing the contract in February 2017, the T and Mancon agreed to a change order that spelled out some new responsibilities and bumped up the contract cost to $29.3 million. Within a year of the deal with Mancon, the T brought on another vendor to improve inventory management – not to replace Mancon, but to supplement its work.

“Due to challenges with the implementation of the new agreement, MBTA has requested support” from Alvarez & Marsal, a consulting firm whose initial responsibilities included facilitating meetings between Mancon and T officials and tracking orders, according to a copy of the T’s December 2017 agreement with that firm. Over the course of six months, the costs laid out in agreements between the T and Alvarez & Marsal added up to at least $1.5 million, which would eat into some of the projecting savings from hiring Mancon.

Pesaturo described the T’s relationship with Alvarez & Marsal as part of a “holistic approach to address several past and ongoing challenges within its system-wide supply chain operation,” and said the bulk of the consultant’s work was to help with internal T processes.

There has not yet been a follow-up discussion at the control board about the Mancon agreement since it was approved, but board members recently have started asking for information. An update has been scheduled for Monday. The state’s inspector general is also looking into the Mancon contract, although the precise focus of the investigation is unclear, according to an individual with knowledge of the situation.

This image was contained in materials presented to the MBTA Fiscal and Management Control Board on January 9, 2017. It shows an existing MBTA warehouse next to a photo taken by MBTA staff during a tour of a Mancon facility.

The inventory operation is an important cog in the overall transit system. It keeps repair shops stocked with the equipment needed to keep buses and trains up and running for the hundreds of thousands of commuters who rely on the T every day. There have been some warning signs about how that process is working under the new vendor.

Last September, an internal audit turned up one area in which Mancon was not living up to its contract.

“According to the contract, Mancon should be performing all logistics operations with the use of their own equipment and inventory software system,” read the internal audit. “There is no inventory software in place. The overall process is being performed by Mancon employees without Mancon’s inventory software system.”

One of the faults that T officials identified with the in-house inventory system years ago was its inability to track the parts in stock. By switching to Mancon, the T’s inventory tracking system was supposed to improve from about 60 percent to 95 percent accuracy in its records, according to a presentation made to the control board on the day it approved the contract.

While Mancon has improved in that area, it fell far short of the 92 percent accuracy rate that T officials set for the first year of the contract. According to a report the T made to the Legislature last year, which doesn’t specifically mention the missed goals, inventory accuracy was about 57 percent one year into the contract, and 80 percent as of last May. Pesaturo said Mancon’s inventory accuracy has subsequently improved to 89 percent.

One MBTA worker who interacts with Mancon on a regular basis and did not want to be identified said Mancon workers are unfamiliar with the parts they are handling. “It’s easy to deliver parts on time. It’s more difficult to deliver the correct parts on time,” said the worker, who said the Mancon employees “have no clue.”

In one instance, a box Mancon shipped out from the warehouse that was supposed to contain an electric motor had a paint roller inside instead, according to that worker.

T mechanics have developed a workaround where rather than going through Mancon, they call around to other repair shops to find out who has a needed part and then drive to pick it up themselves, according to the worker. Vartabedian acknowledged that is “happening fairly frequently,” but he said that sort of workaround was used before Mancon took over as well.

Vartabedian also said that Mancon isn’t providing the 24/7 staffing that had been touted and the company is not following through on the maximum 10-hour turnaround for parts orders that T officials claimed it would deliver. Vartabedian said he has a good relationship with Mancon, and he points blame at the MBTA, not the vendor.

The MBTA said Mancon is providing 24/7 coverage at its warehouse, which is located in Stoughton, and varying degrees of coverage at stockrooms located throughout the system. Mancon is meeting its contractual obligations for overnight deliveries on standard part requests, Pesaturo said.

There have been a couple of troubling issues with Mancon personnel. In October 2017, George Halley, a temp staffing employee who was working for Mancon, and Michael Frisoli, who was known to work for Mancon, were caught outside a Medford bus garage with a trunk full of bus wiring harnesses, which Halley told police he was planning to sell as scrap. Their cases were continued without a finding, but the incident helped sully Mancon’s reputation among other T employees.

In March 2018, a female MBTA worker at the Wellington railyard reported that a Mancon employee told her to go back to work and right afterwards that Mancon employee said, loud enough for her to hear, “She can suck my dick.”

That incident was addressed by the MBTA, Mancon, and the Massachusetts Department of Transportation Office of Diversity and Civil Rights, which investigated it, according to Pesaturo, who said the offending person is no longer employed by Mancon.

Mancon’s personnel have undergone another change since the contract began. A little more than a year ago, the roughly 35 Mancon employees working on the MBTA contract voted overwhelmingly to unionize and Local 264 negotiated a five-year contract for them, according to Vartabedian. The union chief would not disclose the new wage rate, but he said it is about two thirds of what the in-house T employees made and more than the Mancon employees made before unionization.

Brian Shortsleeve who was the T’s top executive when the contract was signed and now sits on the control board, said the T’s partnerships with private contractors in recent years have helped reduce bus maintenance materials and supplies by 40 percent since fiscal 2016, generating annual savings of $8 million.

“Every dollar counts and these savings are helping to drive the T along the path to long-term fiscal sustainability,” Shortsleeve wrote in an email.

Meet the Author

Andy Metzger

Reporter, CommonWealth magazine

About Andy Metzger

Andy Metzger joined CommonWealth Magazine as a reporter in January 2019. He has covered news in Massachusetts since 2007. For more than six years starting in May 2012 he wrote about state politics and government for the State House News Service.  At the News Service, he followed three criminal trials from opening statements to verdicts, tracked bills through the flumes and eddies of the Legislature, and sounded out the governor’s point of view on a host of issues – from the proposed Olympics bid to federal politics.

Before that, Metzger worked at the Chelmsford Independent, The Arlington Advocate, the Somerville Journal and the Cambridge Chronicle, weekly community newspapers that cover an array of local topics. Metzger graduated from UMass Boston in 2006. In addition to his written journalism, Metzger produced a work of illustrated journalism about Gov. Charlie Baker’s record regarding the MBTA. He lives in Somerville and commutes mainly by bicycle.

About Andy Metzger

Andy Metzger joined CommonWealth Magazine as a reporter in January 2019. He has covered news in Massachusetts since 2007. For more than six years starting in May 2012 he wrote about state politics and government for the State House News Service.  At the News Service, he followed three criminal trials from opening statements to verdicts, tracked bills through the flumes and eddies of the Legislature, and sounded out the governor’s point of view on a host of issues – from the proposed Olympics bid to federal politics.

Before that, Metzger worked at the Chelmsford Independent, The Arlington Advocate, the Somerville Journal and the Cambridge Chronicle, weekly community newspapers that cover an array of local topics. Metzger graduated from UMass Boston in 2006. In addition to his written journalism, Metzger produced a work of illustrated journalism about Gov. Charlie Baker’s record regarding the MBTA. He lives in Somerville and commutes mainly by bicycle.

Mike Keller, a top official in the Boston Carmen’s Union, which represents the employees who used to handle inventory, said that problems with Mancon are widely known but have been ignored.

“They’re willing to admit nothing. They think nothing’s wrong. But the internal talk is it’s a disaster in all areas,” Keller said. “I’m hearing from all areas saying that this thing is a joke.”