Contracts Thread FMCB Readout 09/14/2015 Draft for Discussion & Policy Purposes Only 0 DRAFT

Draft for Discussion & Policy Purposes Only1 Contracts Working Group Efforts. DRAFT  Strategic-Sourcing:  Key Focus: Identify Opportunities to Develop Flexible Contracting Approaches.  Discussion on Prioritization, Development of Methodology for Evaluating Sourcing Opportunities.  Public-Private Partnerships:  Bus Services RFIs.  Existing Bus Services at Capacity, Third-Party Partnerships Could Enable MBTA to Expand Service.  Vendor Spend Analytics:  Research Different Product and Service Areas with Focus on Cost Reduction.

The legislation creating the FMCB lays out 13 distinct areas on which the FMCB is to report on monthly and annually: 1.capital planning 2.separation of capital and operating budgets 3.own-source revenue 4.review of expansion proposals 5.procurement and contracting improvements 6.emergency preparedness 7.internal reorganization 8.customer-oriented performance management 9.best practices for workplace productivity 10.reducing employee absenteeism 11.public-private partnerships 12.the sale and lease of real estate assets 13.development of performance metrics across organization 2 FMCB deliverables Draft for Discussion & Policy Purposes Only Contracts Working Group Team Deliverables DRAFT

In addition, there are 6 additional powers and responsibilities of the FMCB: 1.to develop 1 and 5 year operating budget beginning with FY 2017, balanced thru own-source revenue and cost control, which will facilitate the transfer of capital employees to the operating budget 2.to establish 5 and 20 year capital plans 3.to establish a performance management system 4.to review any service contract 5.to change fares consistent with chapter 46 6.to reorganize internal structure of the MBTA (pending MassDOT board approval) 3 Additional FMCB mandates Draft for Discussion & Policy Purposes Only DRAFT

4 Contracts Team Process and Timeline. Draft for Discussion & Policy Purposes Only Phase 1 9/20 report Phase 2 12/15 report Phase Create Strategic Sourcing Working Group. Key focus – identifying opportunities to develop flexible contracting approach to Strategic Sourcing and Public- Private Partnerships. Prioritization Discussions Development of Methodology for Evaluating Sourcing Opportunities. Developed and issued RFI # for moderate-ridership, express bus service routes, and RFI# for late-night bus service routes. Initiate Vendor Spend Analysis. Present Wave 0 RFIs. Response Results to FMCB with goal of converting to possible RFPs. Initiate Wave 1 RFI processes. Initiate Operating Model Changes: Build Strategic Sourcing Capability Category Management. Spending/Data Analytics. Fleet Procurement Contract Management CPO Management Support to Enhance Service Delivery. Control Costs More Effectively through Reorganization of Central Stores Warehouse and Base Locations/Processes. Implement Wave 0. Continue Wave 1 and Wave 2 RFIs. Continue Operating Model Changes. Non-Core Category Management. Fleet procurement. Staff Skill Building. Warehouse Rehabilitation. Tighten Spending Controls: Initiate shift from Vouchers to Purchase Orders payments. Build partnership with Operations. Implement efficiency changes to Warehouse Operations. Initiate Vendor & Supplier Development Plan. DRAFT

Draft for Discussion & Policy Purposes Only5 Contracts Team: Objectives & Philosophy. DRAFT Objectives  Improve Service. Existing Services. New and Enhanced Offerings.  Increase Value. * Higher Revenues. Cost Reduction. Capital and Asset Efficiency. Lower Administrative Cost.  Innovate.  Reduce Risk. Philosophy for Change Focus on Core Capabilities: “Do What We Do Best.” Leverage Existing Assets: “Better Use What We Have.” Engage the Right Partners: “Capitalize on Others’ Expertise, Assets, and Market Position.” Build-Up Our People: “Make The MBTA a Great Place to Work.” * Materials Management is developing a robust Lifecycle Cost framework (LCC) in collaboration with the CFO’s, COO’s and CAO’s offices.

Draft for Discussion & Policy Purposes Only6 Leverage Public-Private Partnerships and Vendors – Create Public-Private Partnerships that Complement MBTA Capabilities. – Structure and Manage Vendor Contracts More Effectively. – Pursue Alternative Funding Models. Collaborate with Operations – Improve Supply Chain Management. – Use Spend Analytics to Target Efforts. – Build Procurement Relationships with Other Transit Organizations. DRAFT Contracts Team’s Deliverables Share the Same Solutions. FMCB Priority Areas:Contracts Team Solutions: 1.capital planning 2.separation of capital and operating budgets 3.own-source revenue 4.review of expansion proposals 5.procurement and contracting improvements 6.emergency preparedness 7.internal reorganization 8.customer-oriented performance management 9.best practices for workplace productivity 10.reducing employee absenteeism 11.public-private partnerships 12.the sale and lease of real estate assets 13.development of performance metrics across organization

Draft for Discussion & Policy Purposes Only7 Contracts Working Group Efforts. DRAFT  Public-Private Partnerships:  Bus Services RFIs.  Existing Bus Services at Capacity, Third-Party Partnerships Could Enable MBTA to Expand Service.

Draft for Discussion & Policy Purposes Only8 MBTA has Historically Partnered with a Variety of Private Firms to Improve Service Delivery. DRAFT Business PartnerService Area KeolisCommuter Rail Operations Greater Lynn Senior Svc.Paratransit Services Veteran’s Transp.Paratransit Services National Express Transit Co.Paratransit Services LAZ ParkingParking Facility Operations Nolan AssociatesFerry Operations KONE, Inc.Elevator & Escalator Maintenance S.J. ServicesStation & Railcar Cleaning ABM JanitorialStation Cleaning Empire CleaningRailcar Cleaning Paratransit, Inc.In-Person Assessment of Paratransit Applicants Paul Revere Transp.Local Bus Service Routes (selected) Joseph’s Transp.Local Bus Service Routes (selected) Mass. Realty GroupReal Estate Consulting

Draft for Discussion & Policy Purposes Only9 DRAFT Aggressive Pursuit of Public-Private Partnerships. I.Develop and Issue “Wave 0 * ” RFIs (#118-15, #119-15). 1)RFIs Written, Received FMCB Approval. 2)RFIs Issued 8/28, Manage Vendor Responses. 3)RFI Respondent Conference. (9/8) 4)Develop Evaluation Criteria. (9/21) 5)Review Submissions. (10/1) 6)Prepare Recommendations for RFP Opportunities. (11/3) II.Prepare Wave 1 and Wave 2 Sourcing Opportunities. 1)Collect List of Additional Sourcing Opportunities. A.Working Group Reviews Wave 1 & Wave 2 List. B.New Opportunity Suggestions. 2)Prioritize Opportunities for Steering Committee & Executive Oversight Review. 3)Stage Selected Opportunities: A.Wave 1: Top 2-4 Opportunities. B.Wave 2: Next 3-7 Opportunities. III.Manage Wave 1 Process. IV.Manage Wave 2 Process. * NOTE: “Wave 0” opportunities – Low-Ridership, Express, and Late-Night Bus Service – were not evaluated using new criteria; they represent specific areas prioritized by the FMCB. ✔ COMPLETED

Draft for Discussion & Policy Purposes Only10 DRAFT Wave 0 Private-Public Partnership Targets: Moderate, Express & Late-Night Bus Services riders/bus % 1.42% 0.06% Avg. Riders per Bus Fraction of Total Weekly Bus Rides RFI # RFI # Improve Service in Existing System by Redirecting Resources. Capitalize on Third-Party Provisioning Capabilities to Provide Existing Services Efficiently & Innovatively.

Draft for Discussion & Policy Purposes Only11 DRAFT Moving Aggressively to Pursue Wave 0 Opportunities. 8/178/248/319/79/149/219/2810/510/1210/1910/2611/211/9 Develop and Approve RFI Issue RFI and Manage Responses Evaluate Responses and Develop Recommendations for FMCB (potential RFPs) FMCB RFI Review 8/24 Issue RFIs 8/28 Respond to Q&A 9/21 RFI Response Deadline 9/30 Assemble Evaluation Team 8/28 Begin RFI Review 10/1 Send Clarification Questions to Vendors 10/5-9 Identify Vendors for Interviews 10/14 Vendor Interviews 10/19-23 Finalize Recommendations for FMCB 11/3 FMCB Review of Findings 11/9 Actions Key Events Important Future Dates: Potential RFP Process 11/16/15- 2/15/16 Possible Contract Award mid-April 2016 TODAY Vendor Conference 9/8 Finalize Evaluation Criteria 9/21 Q&A Deadline 9/14

Draft for Discussion & Policy Purposes Only12 DRAFT Timeline for Public-Private Partnerships. 7/1/1510/11/1/164/17/110/11/1/17 Prepare RFI (2-4 wk.) Issue RFI (3-5 wk.) Evaluate RFI responses (3-6 wk.) RFP Process -- drafting to contract award (20 wk.) Wave 0: RFI-# & RFI # Wave 1: 2-4 RFI maximum Wave 2: 3-7 RFI Define & Prioritize Target Areas TODAY

Draft for Discussion & Policy Purposes Only13 DRAFT Systematic Approach to Evaluating Sourcing Opportunities. Strategic Sourcing Ideas from All Sources: Evaluate Using Specific Criteria: Service Impact Economic Operational Prioritize and Manage: FMCB/ Governor’s Panel Report Internal Ideas External Suggestions Wave 1: 2-4 opportunities Wave 2: 3-7 opportunities Postpone or Drop from Consideration Pursue Using Alternative Approaches (e.g., Telecom) Possibly Recycle Based on Additional Information

Draft for Discussion & Policy Purposes Only14 Contracts Working Group Efforts. DRAFT  Vendor Spend Analytics:  Research Different Product and Service Areas with Focus on Cost Reduction.  Vehicle Suppliers.  Transportation Services.  Vehicle Parts and Maintenance.  Other Services – e.g., Engineering, Station and Vehicle Cleaning.  Contract Review:  Positive Train Control (PTC).  CNR Orange & Red Line Railcars.

Draft for Discussion & Policy Purposes Only15 DRAFT Important Categories of Spending with Major Suppliers (not complete). KEOLIS (Commuter Rail) $297.7 National Express Transp. (RIDE) $28.0 Greater Lynn Senior Svc. (RIDE) $31.1 Veteran’s Transp. (RIDE) $37.9 Nolan Assoc. (Ferry) $13.7 Motive Power -- Locomotives $89.7 Hyundai Rotem – Commuter Rail Coaches $32.7 CNR MA Corp. – Orange & Red Line Cars $20.6 CAF USA – Light Rail Vehicles $12.5 New Flyer Industries Canada -- Buses $43.2 Alstom Transp. (GL #7 rebuild) Midwest Bus Co. (Bus overhaul) $18.5 $19.3 Bus Parts: Midwest Bus Co.: $0.2 Dennison Lubricants: $0.8 Gillig LLC: $0.9 Muncie Reclamation: $1.2 Michelin NA: $2.0 Smith Intl.: $2.2 Power Products Sys.: $2.4 New Flyer Ind.: $2.7 Cummins Northeast: $3.9 NABI Parts: $4.0 Rail Parts: Progress Rail: $0.9 Plasser American: $1.5 Cleveland Track: $1.6 Ray Jurgin, Inc.: $1.6 Swiger Coil: $1.8 Bombardier Transp.: $1.9 GE Transp.: $2.2 Wabco: $2.7 Wabtech Global: $4.9 Arthur J. Hurley: $5.9 KONE, Inc. – Elevator Maintenance $7.1 Empire Cleaning – Vehicle Cleaning $2.3 ABM Janitorial – Station Cleaning $6.4 S.J. Services – Station & Bus Cleaning $15.0 Engineering Svc.: STV-PB America JV: $1.4 LTK Engineering: $2.2 Parsons Brinkerhoff: $2.2 STV Inc.: $3.4 Ch2M Hill: $4.3 $408.4 $198.7 $83.1 $44.3

Draft for Discussion & Policy Purposes Only16 DRAFT PTC Contract Positive Train Control (“PTC”)  PTC is an Federal Railroad Administration (“FRA”) mandate (October 2008), with a December 2015 deadline for implementation. – Efforts underway to modify deadline and implementation criteria  PTC Core Requirements: – Protection from train-to-train collision, over-speed derailment, train incursions into work zones, etc.  PTC Status: – MBTA has been working on its PTC initiative since early – MBTA complied with FRA requirements to develop and present a PTC Implementation Plan by April 2010 and provided updated plans in – Progress since 2010 has been impacted by several factors including: o MBTA expansion of the commuter rail network; o Protracted negotiations with Pan Am (Private Freight Network); and, o Capital funding constraints (MBTA PTC is an unfunded Federal mandate with an estimated cost to implement of $489.6 M).  PTC System Integrator Contract Procurement Status: – September 2015 – Seek FMCB approval to enter into Contract with Preferred PTC System Integrator. – September / October 2015 – Negotiate Contract with PTC System Integrator. – December 2015 – Anticipated Notice To Proceed (“NTP”)

Draft for Discussion & Policy Purposes Only17 DRAFT PTC Contract (p. 2) Positive Train Control (“PTC”)  PTC Implementation Schedule: – Feedback received from RFA indicated that the MBTA needed to do a better on the delivery schedule. The preliminary MBTA PTC Implementation Schedule of 2021 would put us last of the major passenger rail operators. They are considering granting individual extensions to the existing 12/2015 required date. The FRA was looking at extensions to 2018 preferred or possibly 2020 at the outside.  Revised PTC Implementation Schedule: – The MBTA will proposed a “revised” PTC Delivery Schedule that will deliver PTC Implementation in three completion phases: South Side PTC – Milestone Goals 4/2017: Design Complete 7/2018: Installation Complete 12/2018: Testing Complete / FRA Approved / PTC System Operational North Side PTC – Milestone Goals 1/2018: Design Complete 1/2020: Installation Complete 3/2020: Testing Complete / FRA Approved / PTC System Operational Freight Corridor – Milestone Goals 4/2018: Design Complete 4/2020: Installation Complete 8/2020: Testing Complete / FRA Approved / PTC System Operational

Draft for Discussion & Policy Purposes Only18 DRAFT CNR MA Contract (“CRRC”) CNR MA (In the Future the Company will be known as CRRC):  CNR is the largest carbuilder in the world has recently merged with CSR the second largest carbuilder in the world to form a new firm, CRRC.  MBTA Purchases: – Overall Contract Value of the Base and Executed Options is $565.2 M. – 152 Orange Line Cars (Replacing the current Orange Line Vehicle Fleet) – 74 Red Line Cars (Replacing the Red Line Number 1 Vehicle Fleet) – Additional Option Exercised – 58 Red Line Cars (Replacing the Red Line Number 2 Vehicle Fleet)  Current Project Status: – The Overall Project is currently on schedule. – The Contract with CNR requires the submission of a Critical Path Method (“CPM”) Master Project Schedule every thirty (30) days during the life of the contract. – The Chief Procurement Officer has requested a new position, “Fleet Procurement Contract Manager,” to support this project and other major vehicle systems and integration projects.