MBTA Outsourcing is Not Paying Off
IT’S A simple equation. Whenever we privatize or outsource public services, we as a state and as taxpayers lose control. Case after case has shown that when we hand over control of core services like vehicle repair, it does not serve the interests of the public in the long-term.
Yet, here in Massachusetts, full-blown privatization continues to be lifted up by a small but influential cadre of libertarian leaning think tanks and government officials as the solution to the MBTA’s financial woes, as seen in the recent private report commissioned to explore outsourcing opportunities – a report that came with its own hefty cost of $1 million taxpayer dollars to Florida-based consulting firm TransPro and the controversial outsourcing advocates at McKinsey & Company.
This also comes on the heels of efforts to renegotiate a contract with the Maine Military Authority to overhaul 32 Silver Line buses that will now cost the state an additional $2 million.
Many Greater Boston residents may not even be aware that repair of a fleet of Silver Line buses was outsourced to the Maine Military Authority (MMA) in late 2014, or that those repairs were suddenly halted last November by order of Maine’s erratic Gov. Paul LePage because of gross cost overruns, despite only 11 of the buses being completed. Now the fate of the remaining buses hinges on the Maine legislature approving an appropriation of $6 million to cover the debt already incurred by the project. Meanwhile, jobs that could have been done in the Bay State were instead sent out of state.
If it seems bizarre that the control of our public resources lies in the hands of another state, it should. This is yet another example of the underbidding and cost overruns that routinely occur when Massachusetts surrenders control of its public transit responsibilities and operations to outside companies or, in this case, to another state.
The 32 Silver Line buses were sent to the Maine Military Authority for midlife repair. Midlife repairs are generally seen as a reliable, cost-effective way to extend the life of buses. The state-controlled MMA was originally founded to rehab military vehicles and employed 500 people at its height. But with the troop draw downs in Iraq and Afghanistan, it has turned to repair contracts for municipal or school buses and its workforce has dwindled. When the MBTA put out an invitation for bid (IFB) in 2013, the MMA was the sole bidder, coming in 17 percent under the independent cost estimate, or ICE.
This contract departed from past midlife repair projects in a number of ways. Midlife repairs have typically been done 50 percent in-house and 50 percent contracted out, but this project was contracted out entirely and awarded to the only bidder. At a recent meeting of the MBTA’s Fiscal and Management Control Board, T staff stated that there was “no opportunity to evaluate the assumptions or rationale that determined the MMA pricing proposal.”
After the first bus took 10,000 hours to overhaul it became clear that MMA had significantly underestimated the technical challenges posed by the repairs and had underbid for the job. In November, Gov. LePage stopped work on the buses out of concern that it would cost Maine taxpayers money, laying off 35 of the 65 workers employed by the MMA. The contract has been in the process of renegotiation since.
The current proposal for work to move forward is for Maine to approve a $6 million appropriation to cover the cost overruns to date and for the MBTA to approve $2 million to secure necessary parts. Now, the project is essentially held hostage, as the MMA remains currently the best positioned group to finish the project without extending the timeline by another one to two years. As a result, the MBTA control board agreed to approve $1 million up front and another $1 million once the Maine legislature has approved the $6 million appropriation.
Board members expressed trepidation, however, with approving more money for a contract that has already been so problematic. Board member Monica Tibbets-Nutt said, “I’m concerned that we’re fronting money to a company that otherwise wouldn’t exist.” Fellow board Steve Poftak echoed that concern and went a step further. “This is a state of Maine economic development exercise, and on some level I feel we’re being taken advantage of,” he said.
Poftak is right. The outsourcing hawks have once again put Massachusetts in a situation where an underbidding third party has caused delays and cost overruns for Massachusetts taxpayers and riders.
While it’s clear that the MBTA has little choice but to continue in this case with another failed outsourcing gambit, this should be seen as a cautionary tale of the ways in which outsourcing nearly always carries severe hidden costs for riders and taxpayers. Going forward we need to make it clear that what’s best for the public is to keep control local and public, to keep jobs in Massachusetts, and to understand that every time we outsource another service we lose our safety net and our state-based capacity to address problems in the future.
When we outsource public services, we risk not only losing control, but also transparency as public information becomes proprietary to outside companies or even other states.
Remember, while we can work to improve bidding and oversight processes, there are always hidden and unpredictable costs to privatizing public services – whether it’s the ramp up time that will be needed each time we take on managing work with a new vendor, the loss of internal capacity for addressing future problems, the ability of the contractor to continually raise prices because they have captured the work while the T lost the skill base, or the less tangible but arguably more important right to democratic and civic control of our state’s own public services.
Craig Hughes is the business representative of the International Association of Machinists Local 264, which includes mechanics, machinists, fuelers, and other frontline MBTA bus maintenance and repair workers.