The so-called “no excuse” contract between the MBTA and Keolis, the French company in charge of commuter rail operations since July 1, 2014, allows the T to fine the operating company as much as $12 million a year for poor performance. Simply put: The contract provides financial incentive for the cash-strapped T to hope that Keolis – which has been fined more than $2 million for poor service already – continues to fail to achieve monthly performance goals.

Last week, The Boston Globe reported that the T had slapped Keolis with a total of $1.6 million worth of fines for poor performance during November and December. Before that, in November, Keolis was fined $804,000 for late trains and other service issues during the month of October. In total, in less than eight months as commuter rail operator, Keolis has racked up a total of $2.4 million in fines.

Keolis was put in the spotlight Wednesday, when MassDOT Secretary Stephanie Pollack joined Governor Charlie Baker at a 10 a.m. press briefing on Winter Storm Juno. The T, which had cancelled its Tuesday service because of the blizzard, resumed operations Wednesday; commuter trains struggled more than any other mode with residual delays during the morning rush hour.

“We understand the challenges that our operator Keolis faces in operating the system,” Pollack told reporters. “They signed on to a no-excuses contract and we’re going to be looking for a better performance this afternoon and on an ongoing basis over that contract.”

On January 8, 2014, MassDOT’s board of directors unanimously approved T General Manager Beverly Scott’s recommendation to award the commuter rail operator contract to Keolis. The deal includes eight years guaranteed, and would be worth $4.26 billion if the T extends the contract’s length to 12 years.

Keolis was chosen over a contract bid submitted by the Massachusetts Bay Commuter Railroad, which had served as commuter rail operator until its contract expired July 1. MBCR’s 10-year deal cost the T $4.51 billion; by choosing Keolis over MBCR, the T saved $254 million.

At a January 8 MassDOT board hearing, MBCR President James O’Leary questioned the motives behind the decision to award the contract to Keolis. MassDOT’s own notes from the hearing (embedded below) show O’Leary commented:

That [MBCR] have produced a superior proposal in both the technical and financial areas, but were only given a 45 minute interview to review all of this information, amounting to only 11 questions. MBCR felt they did not have anywhere near enough input to this decision, and they are unhappy to have found out about everything from the Boston Globe. They expected full length discussions which, he said, did not happen. He feels the process must be stopped and re-examined.

Additionally, according to MassDOT’s notes, O’Leary highlighted MBCR’s ability over 10 years to meet “many well-defined obligations” and that the company’s “responses to all MBTA requests have all been exemplary.” Further, O’Leary pointed to MBCR’s “95% on time performance record among other things.”

Here are the full notes from the Jan. 8 hearing.

MassDOT Board Meeting – Jan. 8, 2014

If MBCR’s 10-year tenure was as successful as O’Leary argued, what made Keolis a more attractive option?

According to MassDOT, after O’Leary spoke, the T’s GM delivered a presentation to the board, highlighting the following terms of the Keolis contract:

• “Sets a no excuses expectation that the operator will run trains on time”;
• “Stringent performance and NO Automatic relief”;
• “There are no incentive payments and if performance standards are not met, it sets disincentives payments”; and
• “Currently the MBTA is limited in performance penalties to $3MM. Now, performance failure payments are greater, with a new cap of $12MM per year.”

Scott also stressed (see: pg. 19 of MassDOT’s notes) that she did not want on-time performance incentives provided in the contract.

In short: Keolis signed a deal that allows the T to issue as much as $12 million worth of fines each year for poor performance, while providing zero incentives for good performance.

Why would a company agree to such a one-sided deal? For the T, which plans to pay $424 million of its $5.45 billion pile of debt this year, there are obvious benefits: a) it saves the T money; and b) it allows the T to levy financial penalties against the commuter rail company when it doesn’t do its job well. Both are fair, and both should provide incentive for Keolis to provide excellent service.

Thus far, that does doesn’t seem to be the case. Pollack’s statements on Wednesday affirmed MassDOT’s disappointment with the commuter rail operator.

But considering that $5.45 billion pile of debt, one could argue that the T might not be so eager to see Keolis’s performance improve. According to the Globe, half of the $2.4 million in fines levied against Keolis have been for late trains. But, since many of the T’s existing commuter trains are old and prone to breakdowns, there may only be so much Keolis can do provide more timely service.

The T had planned to have a new fleet of 40 commuter rail locomotives in service by the end of 2014, but recently reported maintenance issues have delayed the full rollout until late 2015.

“The longer they have to wait for reliable vehicles, the more unfair it is that they’re penalized for having to use equipment that they thought was going to be replaced,” Paul Regan, the executive director of the independent MBTA Advisory Board, told the Globe.

When asked by BostInno over email if the T has done enough to help ensure that commuter rail service improves, Keolis spokesperson Mac Daniel, “politely declined comment.”

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