Sen. Phil Gramm, chairman of the Senate Committee on Banking, Housing and Urban Affairs, made the following statement today at the opening of a hearing of the Subcommittee on Housing and Transportation on the decision of the Federal Transit Administration to approve a three-year contract extension between Amtrak and the Massachusetts Bay Transit Authority:

"The Federal Transit Administration has a policy that recognizes that America benefits from competitive bidding.

"In the case we're looking at, the Massachusetts Bay Transit Authority entered a process of soliciting competitive bids for services related to maintenance of the authority's commuter rail cars. The winning bidder actually ended up bidding $116 million less than Amtrak, which had previously held the maintenance contract. The winning bidder was deemed not only to be cheaper but also deemed to be better in terms of capacity to fulfill the contract.

"We then enter an extraordinary process, which we explored in a hearing April 25, in which the Labor Department in essence said that the winner of the MBTA contract not only had to fulfill severance agreements for any workers who lost their jobs but had to guarantee jobs for those workers in perpetuity. The winning bidder, as we know from our previous hearing, went to great lengths to try to satisfy employees of the previous contractor, Amtrak.

"In the end, there was a decision to set aside the results of the competitive bidding process and extend the MBTA contract with Amtrak for three years. I might have understood, if everything couldn't be worked out, that MBTA would extend the contract for six months or nine months or a year. But to give this contract to the highest cost bidder and the lowest quality bidder for three years is something that I have a very difficult time understanding.

"What is even more mind-boggling is that not only did Amtrak get a three-year extension of a contract they lost in competitive bidding, but they got improvements in the contract to the benefit of Amtrak. For example, the contract extension changes the reimbursement system so that Amtrak will be reimbursed for fuel and utility costs that were previously covered by Amtrak. And the MBTA expanded its agreement to include an exclusivity clause, under which it will not contract out any work to any third party unless it is work that is not customarily performed by Amtrak employees.

"That's almost unbelievable to me. I think people where I'm from would have a hard time understanding how you lose a contract by having the highest cost bid and lowest quality and then you get a three-year extension where the terms of the contract are dramatically improved.

"This is something I just do not understand.

"I've got to conclude, first, that the Labor Department is a wholly owned subsidiary of the AFL-CIO. I think that's obvious.

"Second, I don't believe that the acting administrator of the FTA, who approved this contract, is standing up for the transit authority or the people who ride the transit or the people who pay taxes.

"Finally, it seems to me that Amtrak and its unions have managed to get not only a three-year extension of their contract with the MBTA, but they got improvements in the contract.

"Having been in Washington 22 years, I have seen a lot of things. But this is one of the most extraordinary things that I have seen. It is something that this committee, with jurisdiction over mass transit, intends to continue to examine on behalf of commuters and on behalf of taxpayers."