Contracting Commuter Rail Services, Volume 1: Guidebook (2018)

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73 This chapter provides an assessment of trends in contracting commuter rail and summarizes opportunities for future research. Agency Operated New Starts Until recently, legacy systems were the only commuter rail systems that were agency operated. Of the legacy systems, PATH, LIRR, Metro-North, NJ TRANSIT, SEPTA, and South Shore Line are agency operated, and Metra directly operates seven of 11 lines (the other four lines are contracted to the host railroads). Between 2008 and 2017, four new start commuter rail systems opened with all or some functions directly operated by the public agency—FrontRunner, WES, Northstar, and SMART. FrontRunner and SMART are agency operated. Northstar and WES are mixed agency operated and contracted. The public transit agency for Northstar and WES provides mainte- nance of equipment. Table 21 illustrates the approach for delivery of commuter rail service for the four new start agencies. The following subsections describe how each agency made the decision to operate some or all functions for commuter rail. FrontRunner The Utah Transit Authority operates FrontRunner. UTA planned commuter rail in a corridor following UPRR track. UPRR was not willing to host commuter rail service on shared track but was willing to sell the parallel right-of-way. UTA purchased the parallel right-of-way from UPRR and built fully separate track and facili- ties. Most of the FrontRunner rail line is single track. UTA decided to operate FrontRunner with its own staff. By obtaining FRA approval for one hours-of-service employee per train on agency- owned track, UTA can deliver a more cost-effective service than a traditional two-person crew deployed by either the host railroad or a private contract operator. UPRR owns 4.8 miles of track from Ogden to Pleasant View. UTA entered into a TRA with UPRR for a limited, peak-hour commuter service on this segment of track. The service requires a traditional two-person crew for this extension. UTA made a decision to discontinue service on the extension in 2018 because of the operating and capital cost required to provide positive train control for operation on an active freight railroad. UTA decided early on to use its own staff for equipment maintenance for the rail coach cars and cab cars. UTA recruited experienced rail mechanics from its own light rail maintenance staff C H A P T E R 8 Trends to Watch

74 Contracting Commuter Rail Services, Volume 1: Guidebook and from the outside and subsequently trained a fully FRA-qualified skilled mechanical work- force. Due to the additional complexity of maintaining diesel-electric locomotives, UTA decided to contract locomotive vehicle maintenance. In 2017, UTA assumed responsibility for maintain- ing locomotives with UTA-qualified personnel. UTA contracts major overhaul or repairs on UTA-owned and UTA-maintained track. UTA employees are not subject to RRTA and RUIA. The FrontRunner commuter train engineers belong to the same bargaining unit as bus and light rail operators and earn the same hourly wage rate. WES WES is a commuter rail line sponsored by TriMet, the regional transit authority in Portland, Oregon. WES shares tracks with P&W, a short-line freight railroad. Since the initial planning for WES, the TriMet vision was that most of the primary operational functions would be contracted to P&W. TriMet decided to establish and staff its own WES maintenance facility because P&W did not have other passenger rail experience, and thus had no qualified mechanics for passenger train equipment. TriMet contracts with P&W to operate the trains and maintain the track. P&W dispatches WES trains and prioritizes them over freight trains. TriMet is responsible for maintenance of rail vehicles. WES equipment includes DMUs and rail diesel cars. TriMet owns a dedicated WES maintenance facility located adjacent to the southern terminus of the commuter rail line at Wilsonville. TriMet recruited skilled workers from the existing labor pool of mechanical staff from the bus and light rail divisions and then trained the mechanics to meet the FRA-mandated qualified maintenance person certification. The TriMet employees are not subject to RRTA and RUIA. WES employees are covered by the same retirement/state-based unemployment plan as all other TriMet employees. P&W employees assigned to WES are full-time employees of the railroad who are covered by RRTA and RUIA. TriMet personnel also provide other support functions for WES (e.g., station operations and maintenance, security services, risk management assessment, customer service functions, marketing, communications, and ticket/sales and revenue accounting). TriMet contracts to a third party for selected major track reconstruction projects with the approval of P&W. System Dispatch FrontRunner 2008 Northstar 2009 WES 2009 SMART 2017 Agency Operated Host Railroad Year Opened Train Operations Maintenance of Way Maintenance of Equipment Table 21. Agency-operated new starts.

Trends to Watch 75 Northstar Northstar is sponsored by NCDA. Under the cooperation agreement between NCDA, the State of Minnesota, and BNSF Railway signed in 2007, the Metropolitan Council is in charge of overseeing Northstar operation, and Metro Transit manages day-to-day operations. A pur- chase and sales agreement between the State of Minnesota and BNSF gives the state the right to use BNSF track for commuter rail in perpetuity. A joint use agreement between BNSF and the Metropolitan Council outlines track use, and a service agreement identifies terms by which BNSF provides train operations and dispatch. Under the service agreement, BNSF provides locomotive engineers and onboard train crews and is responsible for train dispatch and infrastructure maintenance. Metro Transit owns and maintains Northstar rolling stock, stations, and maintenance facilities. In addition, Metro Transit handles Northstar marketing, ticketing/sales, revenue collection, and information technology systems. Metro Transit and BNSF share many operational responsibilities, includ- ing management and oversight services, safety management, accident investigation, security services, customer service functions, and communications. Metro Transit maintains Northstar train equipment with transit agency personnel. FRA stipulates safety and operational regulations of both Metro Transit and BNSF. SMART The SMART District opened service for commuter rail with public agency staff providing all functions. The transportation division is responsible for train operations, dispatch, field super- vision and response, onboard fare inspection, and customer service. The vehicle maintenance division handles maintenance, repairs, and servicing for SMART vehicles. The SMART fleet comprises FRA-compliant DMUs. The SMART signal and way division includes a signal crew in charge of signal inspection, maintenance, response, and repair; and a track crew is in charge of inspection, maintenance, and repair for track and switches. This division also maintains pas- senger station platforms. Public–Private Partnerships Denver RTD is developing a four-line commuter rail system (A, B, G, and N Lines) through a P3 as part of an FTA P3 pilot program. Denver Transit Partners is the RTD selected concessionaire for the partnership called Eagle P3. DTP comprises partners Fluor Enterprises, Inc.; Denver Rail (Eagle) Holdings, Inc., a unit of John Laing Group plc, and Aberdeen Infrastructure Investments (No. 4) USA LLC, a unit of Aberdeen Global Infrastructure Partners LP; Balfour Beatty Rail Inc.; Alternative Concepts, Inc.; Ames Construction; and HDR. RTD awarded the Eagle P3 project to DTP on July 9, 2010. Under the concession agreement, DTP designs, builds, finances, operates, and maintains the University of Colorado A, B, and G lines, the commuter rail maintenance facility, and the Denver Union Station’s signals and power systems. DTP electrifies over 36 miles of commuter rail and 15 stations, including the Denver Union Station. DTP finances certain design–build elements. The total capital cost of the Eagle P3 project is $2.2 billion. RTD awarded a design–build contract to the Regional Rail Partners in 2013 to complete the N Line to the Eastlake and 124th Station, with options to extend as funds become available. Regional Rail Partners is a joint venture consisting of Balfour Beatty and Graham, with Stantec Consulting as the lead designer and Parsons Brinckerhoff as the sub-designer.

76 Contracting Commuter Rail Services, Volume 1: Guidebook Under the Eagle P3 project, DTP purchased 66 vehicles from Hyundai-Rotem to serve the four commuter rail lines. DTP will operate and maintain rail vehicles and infrastructure for all four Denver RTD commuter rail lines. In 2016, Denver RTD opened the University of Colorado A Line to the Denver Airport and the B Line to Westminster. The G Line is anticipated to open in 2018, and the N Line will open in 2019 or later. Procurement Practices Part of the case study research included documentation of recent procurements for different commuter rail systems for bundled and unbundled services. Competition Commuter rail agencies that contract for services look for a strong marketplace for com- petitive proposals and pricing. A 2016 procurement for Tri-Rail train operations, dispatch, and maintenance of equipment generated six proposals. This may reflect an increase in the number of competitive contractors for future procurements. Historically, however, similar procurements have been less competitive. While several ven- dors may show interest in a specific procurement, typically only two or three proposals are submitted. Contract Term Commuter rail agencies are looking at setting contracts with longer performance periods, as a base period or a combination of the base period and options. The objectives for longer performance periods are to provide the time to establish an effective working relationship with contractor, increase pricing stability, and reduce transactional costs for re-procurement. Con- tracts have historically been 5 or 7 years to 10 years with options. Recent procurements among the case studies reflected terms up to 20 years: • MBTA—8-year base plus 4-year option = 12 years. • MetroRail—7-year base plus two 4-year options = 15 years. • VRE—5-year base plus two 5-year options = 15 years. • GO Transit—5-year base plus three 5-year options = 20 years. Evaluation of the benefits for longer performance periods must be weighed against the increase in risk for a fixed-price contract with set escalation rates. Pricing Case studies reflected a move to fixed price or unit price procurements with set escalation rates to increase predictable costs for financial planning. Another purpose for fixed price con- tracts is to shift some of the financial risk to the contractor. Selected examples from the case studies include the following: • Tri-Rail. Bundled operating services required the contractor to provide a price for each of 10 years. The price is based on unit prices for the following functions: – Mobilization phase services One-time price – Train operations Cost per train mile – Station maintenance Unit price per station

Trends to Watch 77 – Facility maintenance Unit price per facility – Maintenance of equipment Unit price per vehicle by category/manufacturer – Dispatch Unit price per month • MetroRail. The basis for the contractor’s cost for MetroRail includes annual fixed costs divided by 12 months and variable costs based on vehicle hours. Although the contract is based on two cost items (fixed costs and variable costs), the proposers were required to present a detailed line-item breakdown of costs for evaluation. – Fixed costs—includes annual costs divided by 12 months for monthly payments for man- agement, administration, support services, dispatch, maintenance of signals and commu- nication, maintenance of infrastructure, maintenance of the railroad right-of-way, and maintenance of DMU vehicles. – Variable costs—includes train operations costs that vary by the vehicle hours of service. Payments are based on actual vehicle hours per month. • Metrolink. Metrolink’s 2015–2025 Strategic Plan identified a number of strategies to employ in reducing contractor costs as contracts are renewed, competitively rebid, and/or renegotiated, including: – Develop documentation defining how annual labor rates are negotiated and include in contract procurement packages for contractor compliance. – Focus on upcoming renewal of contracts for primary functions and automatic annual increases. – Improve benchmarking of costs to understand better where Metrolink underperforms. – Eliminate contingency fees on operating contracts that do not reflect actual expenditures in the performance of the services. – Enforce the liquidated damages associated with not meeting the performance elements outlined within each contract to help improve overall system performance. Performance Metrics While some contracts do not include performance metrics with either penalties or incentives, some case study procurements reflected efforts to link financial risk or benefit to performance. The following section provides two examples of performance metrics in contracts for Tri-Rail and MetroRail. More detail is available in the case studies documented in Appendix A. • Tri-Rail. South Florida Regional Transportation Authority lists primary and secondary key performance indicators (KPI) for the recently bundled operating services contract. SFRTA uses these KPI as an indicator of contractor performance. SFRTA will pay incentive pay- ments to the contractor for successful achievement of the primary KPI, and charge liquidated damages for failure to meet any primary KPI or secondary KPI. – Primary KPI Examples ▪ Safety ▪ On-time performance (end to end) ▪ On-time performance (station to station) ▪ Customer satisfaction per complaints and survey ▪ Employee availability to perform operating services ▪ Vehicle availability as required per daily operating plan ▪ Vehicle cleanliness per daily cleaning requirements – Secondary KPI Examples (not an inclusive list) ▪ No repeat failures at the same Tri-Rail station or on the same rolling stock (vehicle) during each calendar month. ▪ The mean time between failures for the fleet calculated on a monthly basis. ▪ Heating, ventilation, and air-conditioning performance: 100% of all cars in all trains must maintain a temperature of 72°.

78 Contracting Commuter Rail Services, Volume 1: Guidebook ▪ Vehicle door failures: no more than two doors may be inoperative in any dispatched train. ▪ Stock failure: trains must be stocked with 100% of passenger amenities. ▪ Communications systems on the rolling stock (trains) and at stations: must be opera- tional at all times. • MetroRail. Capital Metro identified several performance standards in the contract for bundled services. Capital Metro applies incentives and disincentives to the total monthly invoiced amount based on performance according to metrics defined in the contract. Incen- tives are additional compensation for meeting or exceeding the performance requirements. Disincentives (performance deficiency credits) are credits against amounts owing to the contractor for failure to meet performance requirements. Examples (not an inclusive list) of contract performance requirements include the follow- ing categories and minimum performance criteria: – Safety ▪ Vehicle accidents not to exceed two annually. ▪ Passenger accidents not to exceed 0.25 passenger accidents per 10,000 passenger miles. – Mean distance between failures at least 15,000 vehicle miles subject to annual adjustment by Capital Metro. – On-time performance at least 96% of the number of trains arriving at a designated station 0 minutes early and no more than 5 minutes and 59 seconds later than scheduled. Perfor- mance is measured from time points at five stations. – Vehicles in service must not have service failures that do not affect the on-time performance of the train or mean distance between failures calculations but affect the passengers. ▪ Heating or air-conditioning system failure ▪ Door failure ▪ Lighting system failure ▪ Cleanliness failure ▪ Communication system failure ▪ Ride quality failure – Right-of-way maintenance ▪ Remove all trash and debris within 24 hours of discovery or notice. ▪ Remove scrap rail and relay rail within 30 days of removal from the track. ▪ Remove vegetation and trees identified by Capital Metro as a nuisance or safety hazard with due diligence but not more than 5 days of notification by Capital Metro. ▪ Remove graffiti at any location on the central subdivision within 24 hours of discovery or notice. – Signal maintenance must ensure the reliability of signal equipment at crossings and wayside signals. ▪ No more than five defects within seven consecutive days. ▪ No more than three repeat defects within 30 consecutive days of the original defect. ▪ Correct reported defect within 30 days of the date reported. Additional Research The purpose of this guidebook is to provide an easy-to-use reference to assist public agen- cies and other key stakeholders with contracting commuter rail services. As noted previously, there are no current guidelines or generally recognized practices to consider in determining how to best approach commuter rail service (e.g., agency operated and/or by contract). This guidebook presents decision trees for use about how to approach the primary functions and dispatch.

Trends to Watch 79 In addition to the information presented in this guidebook, the authors identified a few gaps in knowledge that were beyond the scope of this project but that may warrant further research. • Effectiveness of attaching financial benefit or risk to specific performance metrics in con- tracted services. Does use of incentives and penalties or liquidated damages result in improved performance? What is the impact on total operating costs of commuter rail service? • Documentation of the successes and lessons learned for P3s. Are commuter rail projects implemented faster through P3 agreements? What is the impact on total cost (operating and capital) of the commuter rail system? • Assessment of how capital investment can be funded through a contract for operation and maintenance of a commuter rail system. Capital costs are typically available through fed- eral grant funds or may require extensive local government involvement to arrange funding. Improvements to infrastructure may take years to plan and schedule. How can capital invest- ments be incorporated into a long-term contract to provide commuter rail? • Extensive research to document and understand the various elements of the costs of commuter rail service by contract versus agency-operated service. – Total service costs. Examples include base contract for primary functions, additional con- tracts for support functions, payments to right-of-way owners for track access, agency labor and administrative expenses for contractor oversight, cost to monitor and assess incentives and penalties or liquidated damages, capital project management, FRA fines, extra work and additional service, special events management, etc. – Contract transition costs. Examples include industry research, stakeholder consultation, legal fees, asset condition and inventory documentation, mobilization payments, provid- ing information to potential and actual proposers, contractor facility space, procurement documentation, procurement challenges, closeout and handover audits, and so forth.