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MBTA will pay $66m more over 6 years to commuter rail operator

Timothy Tai for the Boston Globe/File

Passengers boarded a Keolis-run MBTA commuter train at South Station last month.

By Nicole Dungca Globe Staff 

The Massachusetts Bay Transportation Authority decided Monday to pay its commuter rail operator at least $66 million more than planned over the next six years, after the company lost more than $30 million last year and continues to struggle with on-time performance.

Keolis Commuter Services will get more money to add locomotives and coaches, take care of the new equipment, and operate under recently revised train schedules. But the changes renewed questions about whether the original Keolis deal, the largest operating contract in the state’s history, was sustainable over time.

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On Monday, Transportation Secretary Stephanie Pollack characterized the contract changes as necessary to improve service for customers.

“It shows that we have learned in the first two years of the contract that the amount that we were paying Keolis, particularly to maintain and take care of our locomotives and coaches, was not producing the performance that we wanted to,” she said. “We are convinced that without investing more money in taking care of the locomotives and coaches, which is the T’s responsibility, we’re not going to see the performance we think our customers deserve.”

Keolis, a French company, is struggling to stanch continued losses related to its $2.68 billion contract with the state. Franck Dubourdieu, deputy general manager for Keolis Commuter Services, said the new arrangement will help the company’s performance, but also “lose less money.”

“For the time being we are still in the red, but we are absolutely dedicated to turning this business around, and it looks like we have the support of the MBTA to do so,” he said.

But one fiscal watchdog said she worries about the precedent. Mary Connaughton, a director at the Pioneer Institute, said Keolis needs to demonstrate it can run its current operations better before increasing the contract.

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Connaughton said the change to the contract “compromises the fairness of the bid process and may negatively impact future procurements.”

The plan approved Monday gives Keolis nearly $15 million in additional payments in the coming year, including:

 $4.2 million to add nine locomotives and 12 coaches, increasing the locomotive fleet by 11 percent and the coach fleet by 3 percent.

 $3.7 million to pay for maintaining 40 new locomotives purchased and brought into service over the past two years, which Keolis officials say requires more money to maintain. MBTA officials say this price is likely to be lowered after the authority conducts its own review.

 $3.1 million for changes in the schedule, which includes running 10 more trains.

 $4.3 million to test a more aggressive maintenance program so the trains can operate for longer periods before they need repairs. If the program works, the payments could become an annual expense.

The additional payments in future years will amount to about $11 million annually.

The T will also allow the company to continue using the penalties it incurs for late trains and subpar performance to pay for additional employees, including $3.1 million for more conductors, as well as $1.9 million for more customer service staff. The MBTA allowed the company to start diverting the fines to staff in July 2015 — a move that Connaughton criticized, saying the T was essentially subsidizing Keolis.

Joseph Aiello, chairman of the fiscal control board that oversees the MBTA, said some of the changes were needed because the T’s older equipment is “less reliant than ever.” He said the T had requested some specific service improvements, and the contract changes reflect the financial consequences.

“With more locomotives, we expect there to be improved equipment availability, and with improved equipment available, we expect there to be continued improvement of on-time performance,” he said.

He also said the contract will give the MBTA better leverage over Keolis, since officials have added stronger language about a transition plan if the T decides to fire Keolis.

Several of the contract changes will be accompanied by the potential for new penalties, which Pollack described as a “carrot-and-stick” approach.

For example, Keolis can be fined up to $780,000 a year if it doesn’t have enough locomotives available; up to $520,000 a year if it doesn’t have enough coaches for seating; and up to $500,000 a year if it fails to increase the average number of miles its locomotives run without breaking down.

The T and Keolis are negotiating still other possible changes to the contract, which could funnel more money to the company if new fare gates can help it collect more in fare revenue.

This month, commuter rail riders experienced a big hit to their pocketbooks: The MBTA raised its fares, and commuter rail riders — some of whom pay nearly $400 a month for passes — were among those who saw the biggest increases.

The increased payments were approved during a precarious moment for the T, which is making its case to privatize its cash-counting and warehouse operations. James O’Brien, president of the Boston Carmen’s Union, told the board Monday that Keolis represented a “glaring example of privatization gone wrong” as he spoke against outsourcing.

Keolis Commuter Services, the Boston subsidiary of the international company that is backed by the French national railroad, was granted an eight-year, $2.68 billion contract in 2014. The company took over from the Massachusetts Bay Commuter Railroad Co., a longtime — and oft-criticized — operator.

In appeals and a lawsuit, afterward, Massachusetts Bay accused Keolis of submitting a bid that was too low, and the T of coaching the company so it could win the contract. A judge eventually refused to block the transition.

(On Monday, T officials pointed out that Massachusetts Bay’s bid was still millions of dollars higher than the revised Keolis agreement.)

After taking over in 2014, Keolis had a fairly rocky start, particularly when record-breaking snowstorms hobbled the transit system.

The storms contributed to the company’s massive losses but did not account for all of them: In 2014, the company lost about $10 million. It also reported a net loss of $30.4 million in 2015, and expects another loss this year.

After newer locomotives were put into service, the company improved on-time performance substantially after the 2015 winter. But the progress was tempered by new schedules designed by the MBTA and released in May: After operating 92 percent of trains on time in April, the company operated 89 percent of trains on time in May.

That number dropped to 87 percent in June, though Keolis and T officials blame some of the decline on ongoing work on the Worcester/Framingham Line.

Officials said they expect performance to improve in July and plan to announce still more schedule tweaks so more trains can operate on time. Those changes, which will affect about 9 percent of 511 weekday trains, will probably go into effect in October, Dubourdieu said.


Nicole Dungca can be reached at nicole.dungca@globe.com
Follow her on Twitter @ndungca.