- Office of the State Auditor
Media Contact
Andrew Carden, Director of Operations
Boston — Today, State Auditor Diana DiZoglio’s Office released an audit report of the Massachusetts Bay Transportation Authority - Keolis Contract, reviewing the period from June 1, 2020 through December 31, 2023.
This audit is one of a series of reports that the Office of the State Auditor is issuing as part of a performance audit of the Massachusetts Bay Transportation Authority (MBTA).
In February 2014, the MBTA entered an eight-year contract (worth $2,686,344,294) with Keolis Commuter Services, Inc. to maintain and operate the commuter rail system on behalf of the MBTA. This initial contract covered the period July 1, 2014 through June 30, 2022. In June 2020, the MBTA and Keolis added an extension to their contract, expiring June 30, 2026. This extension included the option for an additional one-year extension through June 30, 2027, which the MBTA exercised in April 2024.
Under this contract and its amendments, Keolis is responsible for operating, managing, and staffing the MBTA’s commuter rail services. Keolis also inspects, maintains, and repairs commuter rail trains, tracks, station facilities, and other infrastructure owned by the MBTA. In addition, Keolis is responsible for collecting fares from all customers along the MBTA commuter rail system.
Among the audit’s findings is the MBTA did not accurately assess performance-based incentives and penalties for Keolis. The MBTA did not assess approximately $3,324,126 worth of performance-based penalties for Keolis; inappropriately assessed approximately $257,724 worth of performance-based penalties against Keolis; overpaid Keolis by approximately $105,810 in performance-based incentives; and underpaid Keolis by $105,210 in performance-based incentives it had achieved.
Performance-based penalties and incentives are designed to incentivize vendors to achieve certain quality or timeliness standards and to hold them accountable for meeting agreed-upon service levels. Failing to accurately assess these penalties and incentives undermines accountability and reduces the incentive for vendors to meet expectations. It also diminishes the overall quality and reliability of the MBTA’s commuter rail services. In this instance, the MBTA failed to assess millions of dollars of financial penalties that could have helped improve service for MBTA customers. This represents a financial loss to the MBTA and could lead to other financial losses, as poorer service may result in fewer riders. Failure to properly assess incentives and penalties could also reduce the public’s trust in the MBTA and harm its relationship with a vendor that relied on the MBTA’s calculations of incentives and penalties.
Additionally, the audit found the MBTA did not maintain sufficient documentation of certain inspections designed to evaluate Keolis’s performance.
The MBTA and its customers are exposed to safety risks if the MBTA fails to properly manage resolution of issues at commuter rail stations and with regard to snow and ice. This can result in avoidable injuries or accidents and financial loss. Failure to properly document the management of ADA inspections can result in unnecessary inconvenience or denial of service to residents and can create avoidable financial risk for the MBTA. Failure to appropriately oversee the fare collection efforts of its contractor and coach and locomotive availability can result in the perception of unfairness for riders, reduction in service levels during peak times, and the loss of ridership and contractor-penalty revenue for the MBTA.
Proper documentation of inspections is crucial for evaluating performance and ensuring that agreed-upon service levels are met. Without these records, it can be impossible for the MBTA to properly manage its operations and challenging to address any potential shortcomings or hold the responsible parties accountable.
Moreover, the MBTA did not always enforce the monthly and annual performance incentive payment caps. As a result, the MBTA is paying Keolis more than is permitted under contract, for monthly and annual performance incentives.
The MBTA also did not ensure that Keolis submitted required reports relating to fare collection revenue and fleet maintenance on time and did not penalize Keolis for noncompliance.
Not requiring Keolis to submit Operator Deliverable Requirement List (ODRL) reports in a timely manner deprived MBTA operations and management personnel members of information needed to make decisions and monitor performance. Because the MBTA also failed to assess an estimated $255,000 in penalties, this also resulted in a loss of revenue that must be compensated for through additional funding from riders or the Commonwealth and its taxpayers.
Furthermore, the MBTA did not ensure that Keolis employees who had access to the Train Resource Management System (TRMS) completed annual cybersecurity awareness training.
If the MBTA does not ensure that its contracted service provider’s employees with access to the MBTA’s information technology systems complete annual cybersecurity awareness training, then the MBTA exposes itself to an increased risk of cybersecurity attacks and financial and/or reputational losses. In addition, the integrity and security of information in TRMS, which is used to monitor all aspects of commuter rail performance, may become compromised.
The audit also found the MBTA does not have an internal control plan. Without a sufficiently developed internal control plan, based on a department-wide risk assessment, the MBTA is limited in its ability to identify vulnerabilities which could prevent it from achieving organizational goals and objectives. This also exposes the MBTA to heightened risks in its operations.
In addition to these findings, the MBTA did not effectively monitor Keolis’s compliance with disadvantaged business enterprise (DBE) requirements that are designed to provide DBEs with an equal opportunity to compete for federally funded contracts and confidentiality language was used to potentially hide challenges regarding this issue. Without a formal review process in place, the MBTA is limited in its ability to evaluate the effectiveness of its efforts—in this instance, executed under contract with Keolis—to support contracting with DBEs.
The report also notes the audit process was constrained by delays and inconsistent and inaccurate information provided by the MBTA. Auditors faced delays in the MBTA’s identification of the appropriate officials responsible for the programs under review, prolonged waits for requested information, and instances of inconsistent and inaccurate data provided by the MBTA.
“The MBTA must increase coordination & communication among departments to address inefficiencies,” said Auditor DiZoglio. “Our report revealed significant issues that need to be remedied around the MBTA’s contract with Keolis. We will be revisiting the MBTA’s actions in regard to our recommendations in roughly six months as part of our post-audit review.”
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