In January 2018, D.C. Metro officials issued a formal request for information on outsourcing station operations and track maintenance for Silver Line Phase II, expected to be completed by 2020. The potential to improve operations through a public-private partnership (PPP) is a positive move, considering the poor track record of the Washington Metropolitan Area Transit Authority (WMATA)—commonly referred to as Metro.
In 2016 alone, rail line segments shutdown for weeks at a time, which highlighted Metro’s “dire” need for $1.3 billion a year in additional funding. Ridership was down 4.3% in the three years prior. Other areas of concern include performance, liabilities, revenues, and most notably, safety.
In April 2017, Metro General Manager Paul Wiedefeld proposed a plan to increase capital spending that included outsourcing station operations and track maintenance. Part of Wiedefeld’s plan is “to open those functions to competition that Metro has the ability to outsource where efficiencies can be gained.”
The idea has already encountered union opposition that cited this proposal as an attack on workers. Competitive contracting, unions claim, will result in higher costs in the long run. This opposition comes despite the Metro Board of Director’s June 2017 overwhelming vote (14-1) in support of Wiedefeld’s plan.
Through this procurement process, private contractors could potentially offer better value for services through performance-based contracts that stipulate on-time performance, increased safety/reduction of injuries, reliability, increased ridership and customer satisfaction. If successful, there’s potential by improving management and operations for the Silver Line Phase II to have a positive spillover influence on Metro’s performance, safety record and dire financial situation overall.
Metro could truly benefit from improving its operations. For starters, Metro saw a 14% drop of rail riders between 2015-16, resulting in a 0.3% national drop of total subway riders. According to budget documents, in Fiscal Year (FY) 2016, WMATA’s total rail and bus ridership dropped to 321 million trips, a decrease of 20 million or 6% from 2015, continuing a larger pattern of total ridership declines since 2011. These figures were derived before the beginning of the SafeTrack maintenance program, which has recently caused delays and rerouting.
Reduced reliability, combined with the increased use of bike and ridesharing, contributed to declines in Metro use. In 2016, biking to work represented 0.6% of D.C. commuters, up 20% since 2010, according to the US Census Bureau. As another alternative, commuters choose ride-sharing services such as Uber or Lyft because of system unreliability. Uber claims it has 1.9 million active riders in the Washington region and 42,000 drivers, up from 30,000 in 2016. Lyft tripled ridership between 2015 and 2016.
According to financial statements from FY 2016 and FY 2017, the difference between WMATA’s liabilities and assets worsened by $173 million, which mirrors a reduction in total value from $10.5 billion to $10.3 billion. In 2017, its revenues dropped $353 million, an 11.9% drop, while it’s liabilities increased by $215 million, a 28.0% increase. Metro had current liabilities of $984 million but had only $821 million in current assets to pay it.
In 2015, prior to the SafeTrack repair program, Metro failed to meet its targets for on-time service, employee/customer injuries, rail car reliability and customer satisfaction. Metro has also had an extensive history of ignoring safety concerns raised at public hearings by federal experts, civic groups, business groups, Metro board meetings, crash investigators, peer-reviewed studies and even senior Metro management.
In a 2016 article, Reason Foundation’s Baruch Feigenbaum cited several points when writing that Metro could operate much more successfully if operations were outsourced. First, with a private entity operating transit service, WMATA would be “free from political constraints to do things fast instead of right.” As a result “it would make rational long-term capital decisions.” Second, it’s more efficient to have the customers and a general manager run the system, not the unions that presently control it. Third, “a professional board would oversee WMATA, not elected politicians” who are more concerned with political grandstanding than addressing issues such as basic maintenance.
Abroad, states Feigenbaum, “many of Europe’s great transit systems are privately run or contract service and pay their workers more than their U.S. counterparts.” Plus, contracting services can transfer important operating and maintenance-related risks from government—and thus taxpayers—to a private entity.
Wiedefeld hopes to borrow the Massachusetts Bay Transportation Authority’s (MBTA) successful approach toward contracting out its transit operations such as cash maintenance (cash-counting operations), parts warehousing and bus maintenance.
As previously written in Reason Foundation’s Annual Privatization Report 2017, the MBTA voted unanimously to approve outsourcing cash operations of their “T” transit system and awarded a five-year, $18.7 million contract to the Brink’s Corporation.
In December 2017, MBTA also released a request for proposal for the T’s customer service operations and recommended contracting with Global Contact Services (GCS) in May 2017. All told, the MBTA is expecting to save $8.5 million over a five-year period, while expanding weekday and weekend hours. In addition, the contract holds GCS to performance-based metrics with regard to average call answering speed, abandonment rates and customer feedback.
There have been several recent developments in the contracting transit arena:
- New Jersey Transit rail service has experienced a backlog of repairs and parts shortages, and consequently plans to outsource repair work.
- Capital Metropolitan Transportation Authority (Cap Metro) in Austin, TX, contracted out services to private firms MV Transportation and McDonald Transit Associates Inc. in 2012 to handle the bulk of bus and paratransit services. According to a Cap Metro FY 2018 report, they have seen improvements in both bus and paratransit operations: replacing/upgrading vehicles, expanding services, improving safety standards and testing autonomous vehicles for bus operations. The system experienced a 0.4% decrease in total operating expenses from FY 2016 to FY 2017.
- The Metropolitan Atlanta Rapid Transit Authority outsourced paratransit operations in November 2015. The authority has saved money and improved on-time performance by contracting services to MV Transportation for fleet maintenance and for operations. MARTA’s poor on-time performance at 80% resulted in legal action. The contract with MV Transportation would not allow dips below 90%. MV Transportation has been operating services in Atlanta since the spring of 2016. However, since outsourced operations began there has been opposition by the Amalgamated Transit Union leading an arbitration board to give the agency 100 days to bring operations back in-house.
- Miami-Dade’s Metrorail has been experiencing “chronic breakdowns” and shortages in working cars due to “years of deferred maintenance,” resulting in an increase in rush hour headway from five minutes to seven-and-a-half minutes. The 2018 budget planned on outsourcing bus routes along with other measures in an attempt to use the money to improve Metrorail.
If WMATA’s pursuit of a public-private partnership for Silver Line Phase 2 can allow potential contractors to improve operations, maintenance and WMATA’s bottom line, then it would make sense to pursue that option. Under the right management Silver Line Phase 2 could help to restore public confidence and improve Metro’s sinking budget.
(Reprinted from Reason Foundation’s April 2018 “Privatization and Government Reform Newsletter.”)