Subcommittee on Housing and Transportation


Hearing to Examine the FTA's Approval of Extending the Amtrak Commuter Rail Contract


Prepared Testimony of Ms. Nuria Fernandez
Acting Administrator
Federal Transit Administration


2:00 p.m., Tuesday, July 11, 2000 - Dirksen 538


SUMMARY OF TESTIMONY



FTA APPROVAL OF MASSACHUSETTS BAY TRANSPORTATION
AUTHORITY'S EXTENSION OF THE AMTRAK CONTRACT

FTA's determination to approve MBTA's request is consistent with all appropriate federal procurement principles and represents a reasonable time frame for MBTA to prepare for and enter into a new contract for these servicesFTA has reviewed MBTA's justification for the amount of time needed to resolicit all three contracts. MBTA believes that additional delay in awarding a new contract is inevitable due to the number of issues that frequently arise in any procurement of this complexity. These issues frequently include the need for additional clarifications and addenda; extended negotiations and negotiations, discussions with proposers; and resolution of bid protests or other legal issues. FTA believes that given the planning and solicitation for just one of the three contracts took approximately four years to complete, it is not unreasonable to believe that a more complex transaction could take three years, even accounting for the potential use of the existing procurement documents.

Ms. Fernandez is committed to ensuring that all contracts for these services are ultimately awarded in a manner that will provide for full and open competition and comply with all Federal requirements. In order to ensure that the future solicitation meets FTA's approval, certain conditions have been imposed on MBTA. These conditions include requiring MBTA to perform a cost analysis, that will support the reasonableness of the cost and the profit that Amtrak will make on this extension, as well as requiring MBTA to submit quarterly progress reports beginning August 30. In addition, FTA has made it clear to MBTA that the failure to properly procure these services may result in a loss of federal funding and that it should not assume that any additional extensions will be granted by FTA.

FTA will closely monitor MBTA's progress and ensure that all of the appropriate actions necessary to recompete these contracts occur in a timely manner with no disruption of service to the riding public. With this direct oversight MBTA can avoid any future reoccurrence of the problems that were encountered with the previous contract.



FULL TEXT OF TESTIMONY



INTRODUCTION

Mr. Chairman and members of the Committee, I appreciate the opportunity to be here today to testify about the Federal Transit Administration's (FTA) decision to approve the Massachusetts Bay Transportation Authority's (MBTA) request for a waiver from FTA's five-year limitation on contract length that would allow a three year extension of the agreement with the National Railroad Passenger Corporation (Amtrak) to provide mechanical, transportation, and engineering services. FTA's determination to approve MBTA's request is consistent with all appropriate federal procurement principles and represents a reasonable time frame for MBTA to prepare for and enter into a new contract for these services.

Recipients of federal assistance are required to conduct contracting and procurement activities involving FTA funds in conformance with the fundamental principles of competitive procurement which require full and open competition, as stated in the Office of Management and Budget Circular A-102, Grants and Cooperative Agreements with State and Local Governments, and its implementing common rule which is codified by the Department of Transportation in 49 CFR Part 18. This is a guiding principle in all federally funded procurements and is intended to ensure that a grantee obtains its minimum needs at a fair and reasonable price and that all responsible sources have an opportunity to compete.

FTA's role in reviewing grantee procurements reflects the principles of Executive Order 13132, Federalism, as well as the recommendations of the National Performance Review Team, which direct federal agencies to refrain from substituting their judgment for that of their recipients and defer, to the maximum extent feasible, to the States to establish appropriate procurement standards rather than setting national standards. FTA incorporates these principles in our "Third Party Contracting Guidelines," otherwise known as FTA Circular 4220.1D and, in FTA Order 4225.1, which establishes the internal process for reviewing a grantee's third party contract actions. FTA's review of MBTA's request is consistent with these principles.

MBTA currently has an operating agreement with Amtrak that contains three distinct contracts for mechanical, transportation, and engineering services. MBTA originally attempted to competitively procure the mechanical service contract under this operating agreement. MBTA stated that this contract was ultimately awarded to Bay State Transit Services (Bay State) and then was subsequently terminated because of Bay State's inability to implement the contract.

On May 26, 2000, MBTA submitted a request and justification to FTA for a waiver of the five-year limitation on contract length that would allow a three-year extension of all three contracts under the operating agreement with Amtrak. The total cost of the extension for all three contracts under the operating agreement is approximately $476 million.

I should note here that on September 16, 1999, MBTA had previously requested permission for a waiver of the five-year limitation to extend the transportation and engineering contracts under the operating agreement for three years. These two contracts are valued at approximately $323 million and represent approximately 2/3 of the total cost under the operating agreement. That request was still pending and awaiting additional justification from MBTA when this current request was submitted covering all three contracts and effectively superseding the original submission.

MBTA submitted its request for a waiver in order to comply with FTA's policy on contract length, which is contained in FTA Circular 4220.1D, and states that "grantees shall not enter into any written contract with a period of performance exceeding five years without prior written FTA approval." This policy than is intended to balance the advantages of long term partnering between grantees and their contractors with the statutory requirement for the use of a competitive procurement process.

In accordance with FTA's procedures, MBTA's request was submitted to our Office of Procurement where staff reviewed the justification and determined that a waiver, under these circumstances, was appropriate. The procurement office also determined that the request for a three-year extension appeared reasonable given the information submitted by MBTA regarding the complexity of the procurement and the issues that needed to be resolved before a new contract could be awarded.

FTA's decision to grant the waiver is based primarily on two determinations. First, MBTA's need to resolicit these services was not the result of poor procurement planning. At the urging of FTA, MBTA had undertaken a four-year planning and solicitation process that resulted in an award of a contract. MBTA has stated that the ultimate need to resolicit these services was due to the determination, by MBTA, that the selected contractor was unable to perform the services requested. Second, the failure to allow the extension would result in a discontinuance of commuter rail service that MBTA indicated could cost as much as $250,000 in daily revenues, as well as potentially impact 132,000 daily riders, resulting in a severe increase in congestion and disruption of business operations in the Boston area.

FTA has granted previous waivers based on appropriate justification to other grantees. For example, over the past few years FTA has granted waivers for a 10 year contract to the Los Angeles County Metropolitan Transportation Authority for advertising services, a 10 year contract to Southern Ohio Regional Transportation Authority for communications management and maintenance services and has authorized individual two year extensions to both Alameda-Contra Costa Transit District (AC Transit) and Southeastern Pennsylvania Transportation Authority for engineering and construction management services resulting in a contract term of seven years and eight years, respectively.

FTA has also reviewed MBTA's justification for the amount of time needed to resolicit all three contracts. MBTA believes that additional delay in awarding a new contract is inevitable due to the number of issues that frequently arise in any procurement of this complexity. These issues frequently include the need for additional clarifications and addenda; extended negotiations and negotiations, discussions with proposers; and resolution of bid protests or other legal issues. Mr. Chairman, I have brought an exhibit that shows the process MBTA went through in order to compete and select a provider for the solicitation of only one of the contracts. Given that the planning and solicitation for just one of the three contracts took approximately four years to complete, it is not unreasonable to believe that a more complex transaction could take three years, even accounting for the potential use of the existing procurement documents. Finally, it is also worth noting that the decision to consolidate all three contracts under a single competitive procurement falls within the MBTA's discretionary operational decisionmaking. FTA has historically, in accordance with existing law, not substituted its judgment for that of the local transit provider in this level of decisionmaking. (49 U.S.C. 5324(c)).

Mr. Chairman, as you know, I am committed to ensuring that all contracts for these services are ultimately awarded in a manner that will provide for full and open competition and comply with all Federal requirements. In order to ensure that the future solicitation meets FTA's approval, I have imposed certain conditions on MBTA. These conditions include requiring MBTA to perform a cost analysis, that will support the reasonableness of the cost and the profit that Amtrak will make on this extension, as well as requiring MBTA to submit quarterly progress reports beginning August 30. In addition, FTA has made it clear to MBTA that the failure to properly procure these services may result in a loss of federal funding and that it should not assume that any additional extensions will be granted by FTA.

FTA will closely monitor MBTA's progress and ensure that all of the appropriate actions necessary to recompete these contracts occur in a timely manner with no disruption of service to the riding public. I believe that with FTA's direct oversight during this next solicitation we can avoid any future reoccurrence of the problems that were encountered with the previous contract.

CONCLUSION

I would like to thank you again, Mr. Chairman, for the opportunity to testify today, and I look forward to continuing to work with you and your Committee. I am pleased to answer any questions you may have.



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