Overview
We found the Amended and Restated Project Agreement to be an unwieldy contract. It contains over 1,300 pages and includes over 20 articles and more than 15 appendices. Additionally, there were at least 10 change orders or amendments that modified the terms of the contract. Some sections of the contract include five subsections or contain numerous references to other sections of the contract. The length of the contract with so many appendices, amendments, and references, each of which can modify or be modified by the other, could make this contract more difficult for the Massachusetts Bay Transportation Authority (MBTA) to manage. Further, we noted that the Inspector General stated in the Massachusetts Office of the Inspector General’s (OIG’s) MBTA Privatization Review #4 report issued November 21, 2024:
I remain deeply troubled by the MBTA’s poor contract management practices, especially since the MBTA knew in advance that these contracts would face increased scrutiny by the OIG under the provisions of Chapter 46. It certainly raises questions about the state of hundreds of other routine MBTA procurements and contracts.
I understand that the three remaining contracts procured under the privatization waiver (pertaining to inventory, cash management, and automated fare collection) are already underway and that it is not possible to re-do the procurements. Although the contracts were procured under previous MBTA leadership, it is possible for the current leadership team to manage them appropriately. As such, current senior leadership must ensure that contract administrators, mid-managers, and staff are doing their jobs. It is critical that the MBTA hold vendors to performance standards.
We agree with the Inspector General’s observations. The Automated Fare Collection System (AFC) 2.0 project is a large undertaking by the MBTA. With over $900 million in public funds being used for this project, it is imperative that this contract is managed properly to prevent waste or abuse. Such an unwieldy contract can lead to issues with contract oversight. Some of these issues could include an unfulfillment of certain contract obligations or unnecessary delays or costs.
We recommend that MBTA management identify solutions to streamline future contracts to ensure that the contracts are more efficient, clear, and manageable.
Auditee’s Response
The MBTA appreciates the [Office of the State Auditor’s (SAO’s)] commentary with respect to contract management. However, as noted in the Draft Report, in the SAO’s testing of the submittal process, of which there were 1,001 distinct submittals during the audit period, the SAO found no exceptions. Further, even putting aside the MBTA’s disagreement with characterizations of the SAO’s finding regarding deadlines, the SAO states that “none of the postponed deadlines . . . can be characterized as exceptions because they were approved consistent with the requirements of the contract.” If anything, this audit has demonstrated that, despite the “unwieldiness” of the [Amended and Restated Project Agreement (ARPA)], the MBTA, specifically the AFC 2.0 team, has done an excellent job in managing this contract. Finally, MBTA notes that the OIG, in its publication MBTA Privatization Review #4, issued November 21, 2024, did not review the ARPA or the AFC 2.0 project as part of its review.
Auditor’s Reply
The MBTA is correct when it states that we did not find any exceptions in our testing for the first audit objective. An exception would mean noncompliance with the test we ran—in this case, noncompliance with the MBTA’s contract. Compliance with a contract may occur for multiple reasons, including good management to a strong contract or poor management to a weak contract. In this case, we believe the MBTA’s contract provisions regarding postponement of deadlines is weak and the lack of exceptions relates more to compliance with weak contract terms than to good management to strong contract terms.
That said, we do not see the relevance of this response to the Other Matters section. In this section, we highlight to the MBTA the importance of contract management. We also highlight issues identified by OIG in its report that were specific to automated fare collection. There have been multiple reports over years from different offices and agencies that highlight issues and challenges with the MBTA, including contract procurement and management. We urge in the strongest terms possible that the MBTA take seriously both this audit report and the report issued by OIG. We also urge the MBTA to adopt the changes outlined in both reports for the benefit of the public. Unnecessary delays and increasing costs of poorly managed or structured contracts directly affect the citizens of the Commonwealth, who share the burden of poor contract management through tax dollars and/or who rely upon public transportation.
| Date published: | January 16, 2025 |
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