MTA looking to farm out ESA maintenance, terminal management

In an interesting solicitation posted to the MTA website last week, the agency is seeking information and proposals from service providers to operate and maintain East Side Access infrastructure after LIRR begins revenue service to its new terminal on the East Side.  If the MTA moves forward with this, the operation and maintenance of both the public station facilities being built as part of ESA and the related rail infrastructure could be contracted out to a third-party.  

A rendering of the 45th Street Corridor, management
of which could be contracted out (MTA)

Contracting out master tenant or facility cleaning/maintenance responsibilities to a third party isn't a completely new concept in the MTA world (there aren't that many examples, but it has been done), but contracting out responsibility for rail infrastructure maintenance would be a first for the MTA, which has traditionally turned new projects over to its operating agencies to directly maintain their facilities (often at great expense).  In 2018, the LIRR spent over $475,000 in operating maintenance costs per track mile, which is more than quadruple the national average of $110,479 and about 25% higher than Metro-North.  Contracting out these types of work to a third-party could offer a significant cost savings.

The solicitation says that the MTA "intends to create a new subsidiary agency that will be responsible for the oversight and management of the service provider".  The agency is seeking service providers that will handle one or more of the following scopes of work:

• Master tenant that would manage all of the retail and other leasable spaces throughout the GCT East Midtown Terminal (LIRR's new portion of NY-Grand Central), effectively being the building's landlord and real estate agent, identifying and securing potential tenants, leasing and fit-out of retail spaces, and coordination with facilities management.
• Maintenance of the GCT East Midtown Terminal, effectively serving like a property manager you might find in an office building, operating and maintaining the systems and facilities that serve and make up the public and retail portions of the terminal facilities itself (e.g. the terminal facilities that are not rail infrastructure, though this isn't explicitly divided up in the RFI/RFP).
• Maintenance of rail infrastructure form HAROLD Interlocking in Queens through the new tunnels and the existing 63rd Street tunnel, into the GCT East Midtown Terminal and through to the tail tracks.  The service provider would operate and maintain facilities such as the track, drainage, structures, signals, communications, traction power and substations, facility power systems, and the ventilation plants and associated mechanical systems.

According to the RFI/RFP, the LIRR will remain responsible for the railroad operations itself, including the actual operation of the trains, maintenance of the rolling stock, provision of data related to certain systems, crewing/scheduling/service planning, dispatching and staffing of the new Terminal Operations Center, and other "customer service" functions (ticketing, etc.).  Metro-North would remain responsible for the operation and maintenance of all of the existing GCT terminals and facilities.

The stage is consistent with "Phase 1" of the MTA's typical RFP process, where interested providers are asked to provide their qualifications, which the agency evaluates and selects which firms it thinks are qualified to proceed to the second phase for more detailed proposals and negotiations (this wouldn't be a low-bid contract).  Responses for the first phase are due on March 18.

This is an interesting but not totally unexpected move form the MTA, which has for the better part of a decade or more been setting up to use ESA as a mechanism for pushing new frontiers of operating practices like this (which is a shame, considering how long the construction has dragged out).  If this concept proves economical and successful (not impacting or even delivering above-average reliability), then it could pave the way for expansion along these lines to other parts of the system (the Atlantic Branch west of Jamaica seems like a good next step for this type of concept, especially if the LIRR wants to separate it operationally from the rest of the system).

There are pros and cons to separating operational and maintenance responsibilities.  Having everything under one roof theoretically improves coordination and communication, and provides a single point of responsibility (though under this type of arrangement, as the MTA is letting the contract, it ultimately remains solely responsible for the performance of the contractor and responsible for any impacts to passengers resulting from failures), and ensures that everyone is working towards the same goal.  Having an entire railroad managed by a singular entity should also come with economies of scale—in theory, though that is something that has never really been true on the LIRR, which despite being the largest railroad in the country often has far and away the highest costs.

But divvying up responsibilities introduces competition, allowing rail operators to hire and fire third parties on the basis of performance, which provides much more of an incentive to keep everything in working order and the trains running on time than the current structure, where everyone gets paid regardless of how often trains are delayed, and there aren't any real consequences for poor reliability.  Separation of operation and maintenance is common in much of Europe, with EU Directives 91/440, 95/18, and 95/19 requiring at a minimum a separate accounting of infrastructure and operations expenses.  Some countries separate the two into completely separate entities with one or both being privatized but regulated (e.g. regulated TOC's and Network Rail in the UK), keeping two separate entities but they are both still state-owned (e.g. Renfe and Adif in Spain), or keeping everything under the control of one entity that has two distinct subsidiaries (e.g. SNCF Mobilités and SNCF Réseau in France). The intent of enforcing this separation was to promote competition and improve interoperability and expand access for cross-border services (a later directive 2012/34 would go on to require EU countries to grant non-discriminatory trackage rights to independent operators).

For more on the pros and cons of "unbundling", check out this report by the EU DG for Internal Policies published in 2011.

In the US, this could be one potential path forward towards harmonizing the current hodgepodge of state DOT's, Amtrak, private rail carrier(s), commuter railroads, and freight railroads that currently own, operate, and maintain this nation's mainline rail network.  It could also pave the way for better harmonization and interoperability among several carriers in a region, enabling things like through-running or the simplification of clumsy multi-state operational agreements.  But for now we can see how it goes with these first 3 or so miles coming online as part of ESA.