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MBTA privatization deal faulted in audit

The agency hasn’t yet reaped an expected $5 million in savings from an outsourcing contract because of mishaps and oversights.

A contentious contract that outsourced work overseeing MBTA repair and maintenance supplies to a private company has been marred by poor performance and management and not achieved cost-saving targets, according to an audit by the state inspector general’s office.

Issued earlier in May, the audit centered on the privatization of the T’s warehouse functions, which manages and distributes supplies for bus and train maintenance to various vehicle facilities. The work was privatized in 2017 to Virginia-based Mancon Inc., at a time when the transit agency was exempt from a state law that increased regulation of outsourcing contracts.

The MBTA estimated at the time that the contract would save the agency about $5 million a year, reducing warehousing costs from $12.1 million to $7.1 million. It also promised to create a more efficient operation getting parts to and from various garages and repair facilities.

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But the MBTA has yet to reap millions of dollars in savings, according to the audit. Conducted by a special transportation-focused unit inside the inspector general’s office, it found that “the MBTA’s original cost estimate understated the cost to privatize.”

The contract has also come with its own expenses that further undermine the project savings, including the $2 million cost of hiring another contractor to help the agency oversee the Mancon work, as well as hiring other consultants and staff for related work. The agency may have also overstated the projected savings because some workers who were expected to be replaced were transferred to other positions.

All-in, the auditors found the MBTA’s annual costs to run the warehouse were still as high as $10 million in 2018. Meanwhile, the report said it could not verify that it cost the T $12 million to run the warehouse operation itself.

The audit noted that another justification for the contract — that the T could increase cash-flow by selling off excess parts — would have been possible regardless of whether the warehouse work was outsourced or done in-house.

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It also faulted some of the work of Mancon. For example, it said, Mancon did not conduct a full inventory of bus and rail parts upon taking over operations and moving to a new centralized warehouse in Stoughton, as required by the contract.

The company also did not live up to promises to integrate the T’s inventory management software with its own, forcing the agency to spend more money. Meanwhile, some Mancon workers misidentified parts, forcing MBTA workers to spend time searching for the right ones and took shortcuts in logging supplies that lead to poor record keeping. The audit also questioned whether Mancon should be held accountable for parts that arrive damaged, and if the company should be expected to distribute supplies more quickly.

Some of the issues surfaced in the audit had already been discussed publicly about a year ago. However, the agency also said at the time that the conditions were still better than under the prior in-house system, citing better organized warehouses as an example.

MBTA spokesman Joe Pesaturo said that “with appreciation” for the audit, the T has begun holding more regular meetings with Mancon about meeting its goals. “Today, Mancon is meeting the performance metrics of the contract and, through a collaborative partnership with the T, the firm will continue to be held accountable,” he said.

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Mancon did not immediately respond to a request for comment.

Since the audit began, MBTA workers have also begun more directly training Mancon staff to identify parts, according to the report.

Fiercely opposed by labor unions, the privatization window has since expired at the MBTA. The Baker administration outsourced a handful of functions at the MBTA during the three-year period, including the warehouse and cash-counting roles, but officials have suggested its greatest effect was essentially as a threat to public employee unions, who made a series of financial concessions in contract negotiations.


Adam Vaccaro can be reached at adam.vaccaro@globe.com. Follow him on Twitter at @adamtvaccaro.