Austin, Texas, Capital Metro fires rail contractor

Capital Metro, embroiled in a contract and insurance dispute with rail contractor Veolia Transportation, on Dec. 9 cancelled its five-year contract with the company to operate freight and passenger rail, the Austin, Texas, American-Statesman reports.

The Capital Metro board,
under emergency procedures that allow awarding a contract without soliciting
bids, voted 5-0 to hire two other contractors for $94.9-million to run rail
operations over the next five-plus years. Gord Ryan, Veolia’s Austin general
manager, asked the board to defer action to give his company a chance to make
its case, to no avail.

Elaine Timbes, Capital
Metro’s chief operating officer, said the new commuter rail contract –
exclusive of the freight contract, in other words – will be $3.1 million less
than what the agency would have paid Veolia over the next five years under its
current contract. And Timbes said that it would be $10.7 million below what
Veolia was asking in the contract re-negotiation that spurred the jettisoning
of the company that has been Capital Metro’s partner through a troubled two
years of commuter rail delays.

That savings, however,
does not include any payments Capital Metro might have to make to close out the
Veolia contract, Timbes said. Capital Metro, which had paid Veolia about $32
million over the past two years for its freight and commuter rail activities,
will be liable for unspecified startup and transitional costs, said Alan
Moldower, Veolia’s general counsel.

Capital Metro officials
said the startup of its 32-mile commuter line would not be further delayed
because of the switch. Agency officials said this fall that the passenger rail
line would open some time before March 31, about two years later than
originally scheduled.

Herzog Transit Services
Inc. will handle Capital Metro’s passenger rail operations and rail maintenance
under a $61-million contract for five years, and Watco Companies Inc. will
handle freight operations for $33.9 million over the next five years and nine
months. Watco was already a subcontractor to Veolia for freight operations.

Under the new contracts,
the first-year operating cost of $8.5 million for commuter rail is about $2
million more than what Capital Metro had listed in its 2009-10 budget, but that
was because maintenance of the line and some other operating costs were
allocated to freight rail under the Veolia contract.

Capital Metro Chief
Executive Officer and President Doug Allen said Herzog currently operates the
Trinity Railway Express commuter line between Dallas and Fort Worth, the New
Mexico Roadrunner between Albuquerque and Santa Fe, and passenger rail lines in
Stockton, Calif., and Oceanside, Calif.

In addition to assisting
Capital Metro as it attempted over the past year to de-bug its track signal
system and balky crossing gates, Veolia had trained supervisors, engineers,
dispatchers and maintenance workers for the line between Leander and downtown
Austin. Herzog will attempt to hire those Veolia workers, Timbes said. If some
of them don’t come aboard, however, Allen said Herzog "is well-equipped to
get it done."

Veolia officials said
that the majority of its Austin rail employees had been hired here. "We’re
going to do whatever is right for them," said Ron Hartman, head of
Veolia’s rail division.

The break occurs in the
wake of a dispute over liability between the transit agency and Veolia as the
two sides discussed contract modifications. Capital Metro had been listed as a
"named party" on insurance that Veolia purchased for the rail line,
meaning Capital Metro would be equally covered for any mishaps, regardless of
who was found to be at fault.

Hartman said he found out
Capital Metro was severing the contract about five minutes before the agency
issued a news release Wednesday morning.