MBTA Signs $723m Automated Fare Collection P3

MBTA Signs $723m Automated Fare Collection P3

In a first-of-its-kind P3 procurement in the U.S. and probably worldwide, the Massachusetts Bay Transportation Authority (MBTA) signed a $723-million P3 agreement on Nov. 20 with automatic fare collection system integrators Cubic/John Laing.

The 13-year DBFOM contract promises “transformative” improvements for Boston-area rail and bus riders. So says Joseph Aiello, who chairs the authority’s Fiscal and Management Control Board (FMCB), which was formed in 2015 to modernize management of the agency.

Cost savings predicted during the initial 10-year operational phase to 2031 include:

  • Cashless boarding is predicted to reduce bus stop dwell times by 25%, and increase bus speeds by 10%.
  • Lifecycle savings to MBTA of $65 million over 10 years,
  • Fare evasion savings of $35 million over that time.

The all-electronic AFC system will replace MBTA’s existing CharlieCard and CharlieTicket and allow riders to use smart phones, bank cards, and/or a new MBTA fare card to access all MBTA services.

Passengers will be able to board buses or trains under the revamped system by tapping their credit cards or smartphones to fare readers installed at all of the doors on buses and trolleys. Commuter rail passengers would be required to tap both entering and exiting trains to measure distance traveled and assign fares accordingly.

Commercial and financial close are targeted to be completed by next March. A draft RFP was issued a year ago. Of three shortlisted teams, two bid and finalist Cubic/Laing was selected over Conduent Transport Solutions and Infrared Capital Partners by a wide margin in a best-value competition. Price proposals included committed pricing for the initial 13-year term, plus two five-year option terms, and unit prices for unplanned expansions.

Bidders were required to obtain financing commitments from lenders, who independently verified Cubic/Laing’s ability to complete the installation on schedule and at its bid price.

All components of the fare payment system are required to be operational by May 2020. The agreed-upon contract price is split almost equally—$357 million in capital to be funded privately and $366 million in operating expenses. Both will be financed with availability payments from MBTA.

Milestone and monthly availability payments begin only after acceptance, and up to 50% of payments can be withheld by MBTA in the event of poor system performance, including the work of subcontractors. Cubic/Laing will have the opportunity to earn back 75% of deductions by providing “exceptional service.”

The strict terms of the pay-for-performance contract gives MBTA leverage to enforce system requirements, giving it some protection against technology obsolescence, a key concern in a long-term contract, says Aiello.

MBTA’s Chief Technology Officer David Block-Schachter developed the technical requirements and managed the procurement with advisory backup from Eric Petersen and Joe Sullivan from Hawkins Delafield and Wood; Tom Rousakis and Jon Goldmark of Ernst & Young; and a host of technical consultants including CH2M and Jacobs.

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About Bill Reinhardt

Editor of Public Works Financing newsletter

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