Overview
According to Section 8 of Appendix 7 of the Amended and Restated Project Agreement, the Massachusetts Bay Transportation Authority (MBTA) has a certain time frame to respond to each submittal that Cubic sends to the MBTA for review before project work can proceed. As part of our audit procedures, we tested the MBTA’s submittal review process, noting that—while Appendix 7 of the Amended and Restated Project Agreement contains deadlines for the MBTA to respond to Cubic’s submissions and resubmissions—Section 8.2 of Appendix 7 of the Amended and Restated Project Agreement also states that such deadlines can be overridden by mutual agreement between the two parties through letters sent by electronic transmission. We noted that deadlines could be waived by specific, key personnel members in the MBTA. We note that many organizations use a process to consider such requests for deadline extensions, especially in such a large and complex contract. As such, none of the postponed deadlines that we found during fieldwork could be characterized as exceptions because they were extended consistent with the requirements of the contract. However, proper contract management should ensure that this type of override is rarely used, only in cases where absolutely necessary. Proper contract management should include, and should enforce, repercussions for failing to meet deadlines. It should include and enforce penalties for the contractor if it is unable to satisfy deadlines.
By not having controls in place to verify and report on timely delivery of the projects’ milestones, the MBTA risks encountering significant delays related to contract delivery of the Automated Fare Collection System (AFC) 2.0 project. This affects the public by delaying their use of a more efficient system that will lead to quicker service and results in overspending of public funds because of change orders, price escalation because of inflation, and other cost pressures. Overuse of contract extensions may render project timelines meaningless and can have significant impacts on the timely delivery of such a large, complex project.
Authoritative Guidance
The Amended and Restated Project Agreement includes contractual deadlines, and as a matter of best practice, these deadlines should be used to ensure that the contract is completed on time.
Reasons for Issues with Contract
The MBTA told us that rejecting submittals can lead to additional delays as the two parties resolve the differences in the submittals. In the MBTA’s opinion, therefore, it may have prevented additional delays by agreeing to override the deadlines.
Recommendations
- The MBTA should adopt an approach of a rigorous review and consideration before management makes the decision to override deadlines to ensure that this decision is used sparingly and only when necessary.
- The MBTA should establish policies and procedures to ensure that public works projects are subject to strong controls, allowing for effective monitoring to prevent excessive delays and cost overruns.
Auditee’s Response
The MBTA disagrees with the [Office of the State Auditor’s (SAO’s)] conclusions with respect to this finding. The Draft Report fails to provide sufficient evidence for the SAO’s basis for this finding or the conclusions drawn from this finding. As discussed, the Draft Report’s characterization of the MBTA’s review periods prescribed by the [Amended and Restated Project Agreement (ARPA)] is incomplete and inaccurate. Furthermore, the report conflates the concept of the Parties agreeing to an alternative submittal review deadline, characterized as “overriding deadlines,” with the concept of extended review periods prescribed by Section 3.3.1 of Appendix 7. If a submittal is (i) not listed on the Submittal Schedule, (ii) added to the Submittal Schedule less than 15 days prior to the submittal’s delivery, or (iii) delivered after the date listed on the schedule as of 15 days prior to its delivery, the MBTA review period is automatically extended by ten business days from the date of delivery. The Draft Report fails to account for these extended review procedures of Section 3.3.1 of Appendix 7.
The majority of the sampled submittal response letters reviewed by the SAO that had a review period other than the standard review period were subject to the extended review periods prescribed by Section 3.3.1. The MBTA’s adherence to these review periods was consistent with the MBTA’s contractual right for extended review periods and does not result in “overridden” deadlines. The Draft Report also inaccurately describes such instances of extended review periods being “approved” by the MBTA when these extended review periods are automatically applied per the terms of Section 3.3.1 of Appendix 7. The Draft Report also fails to account for submittal responses that were provided early, before the expiration of the review periods afford to the MBTA under Appendix 7. Any perceived “delay” resulting from overridden deadlines or extended review periods should, in effect, be offset by responses that were sent early. Several early responses were included in the group of the letters sampled by the SAO.
Finally, page 12 of the Draft Report states, “[the SAO] noted no exceptions in our testing; therefore, we concluded that, during the audit period, the MBTA followed the Submittal review period stated in Section 8 of Appendix 7 of the Amended and Restated Project Agreement to determine that the AFC 2.0 project contracts were in compliance.” This statement conflicts with the SAO’s conclusion that the MBTA has only “partially” satisfied Objective No. 1 of the report. . . .
The Draft Report also admits “none of the postponed deadlines that [the SAO] found during fieldwork can be characterized as exceptions because they were approved consistent with the requirements of the contract.” Finally, the Draft Report fails to identify any actual delays it can attribute to “overridden deadlines” yet claims the MBTA does not have “controls in place to verify and report on timely delivery of the project’s milestones.” As provided above, the MBTA has extensive controls in place that are outlined in the ARPA and the SAO’s statement otherwise contradicts the SAO’s own findings in the Draft Report.
Auditor’s Reply
We disagree with the MBTA’s claims that this report’s characterization of the MBTA’s review periods is incomplete and inaccurate. We thoroughly explained the process in the Overview section of this report and in the Audit Objectives, Scope, and Methodology section of this report. The MBTA claims that we are conflating the concepts of agreeing to an alternative submittal review deadline with overriding deadlines. This is not true. We understand the occasional need to agree to an alternative submittal review deadline, but we suggest that the MBTA and Boston AFC 2.0 OpCo LLC do so only when absolutely necessary to prevent extraneous delays. We also did not ignore the extended review procedures. In fact, we indicated that the Amended and Restated Project Agreement allows the two parties to override deadlines, but we are reiterating the need for the MBTA to ensure that these deadlines are only overridden, or extended if you will, when absolutely necessary. It is in the best interest of the public for a project, especially one as large, complex, and lengthy as the AFC 2.0 project, to adhere to its deadlines as much as possible; otherwise, taxpayers may foot the bill for unnecessary delays.
In its response, the MBTA suggests that the majority of the sampled submittal response letters were subject to the extended review period consistent with the contract. Further, the MBTA states that it is inaccurate to suggest that it approved these extended review periods or overridden deadlines. The MBTA could be misunderstanding our finding, or it could be distorting it by suggesting our audit team found something it did not, potentially to avoid addressing our actual finding. Regardless, the MBTA should get clear on our audit finding and recommendations. We clearly stated that the contract allows for deadlines to be overridden or extended; however, this ability to extend review periods can be abused, potentially resulting in financial loss to the taxpayers. Finally, the MBTA notes that we did not discuss the submittals that were provided early, before the expiration of the review periods. These are examples of the MBTA and Boston AFC 2.0 OpCo LLC adhering to the deadlines set forth in the contract. The MBTA suggests that delays from overriding deadlines should be offset with these early submittals. However, we do not believe it is appropriate to minimize potential deadline delays by offsetting those delays with instances in which the two parties of the contract were able to meet deadlines early, just as we would not consider it appropriate to ignore employees arriving to work late two days per week because they report to the office on time three days per week. Similarly, one would not consider late trains acceptable because other trains were on time.
The MBTA further asserts in its response that it believes that the draft report provides a conflicting conclusion related to Objective 1. Our conclusion listed for Objective 1 is “partially” for several reasons. We agree that our audit testing did not find any exception using the criteria cited, the Amended and Restated Project Agreement, and we conclude as such. The audit finding is related to the fact that the contract allows deadlines to be overridden, and we believe this could contribute to significant delays related to contract delivery of the AFC 2.0 project. The Office of the State Auditor’s mission is to make government work better, and it is our duty and responsibility under generally accepted government auditing standards to provide recommendations to address issues we note in our audit. The weaknesses in the MBTA’s systems and processes related to contract extensions are what led to a determination of “partially” meeting our objective. The MBTA is following a process, but it is weak and insufficient.
Further, the MBTA states that the audit report fails to identify any actual delays it can attribute to overridden deadlines and that it claims that the MBTA does not have controls in place to verify and report on timely delivery of the project’s milestones. We would point out to the MBTA that New York City’s mass transportation authority, which, according to the American Public Transportation Association, is multiple times larger than MBTA on all metrics,9 entered into a contract with Cubic in 2017, only three months before the AFC 2.0 project began, for a similar project intended to upgrade its AFC. Yet, that contract was completed by 2021 at a cost of $590 million, while the AFC 2.0 project was still underway in 2024 at a cost of over $960 million. To suggest that we could not identify any delays would be an incorrect statement. In fact, 44 of the 93 submittals in our sample (47%) included some type of delay. The chart below summarizes this information.
Submitted Delays in Our Sample
| Date published: | January 16, 2025 |
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