State watchdogs take aim at Keolis management of commuter rail
Photo | Eric Casey
A MBTA train arrives at Union Station in Worcester.
A pair of government watchdogs warned Tuesday about issues with the MBTA's management of commuter rail operator Keolis, calling for renewed focus on collecting fares and charging penalties for lackluster performance.
In separate publications, Inspector General Jeffrey Shapiro and Auditor Diana DiZoglio each detailed overlapping concerns with the relationship between the T and Keolis, which for more than a decade has been under contract to run the commuter rail network.
Shapiro penned a public letter to MBTA General Manager Phil Eng urging action to improve fare collection on commuter rail trains. Less than an hour later, DiZoglio's office published a 70-page audit report that the Methuen Democrat said found "significant issues that need to be remedied" in the contract with Keolis.
The two warnings issued Tuesday could increase scrutiny on the T as the agency's leaders weigh the future of commuter rail operations. After several extensions, the contract with Keolis is set to expire in mid-2027.
Commuter rail, which runs 12 lines and special services to Gillette Stadium, posted average weekday ridership of 97,625 people in January, according to the MBTA.
Shapiro said he believes the scale of uncollected fares on commuter rail trains, and the revenue lost as a result, "has been greatly understated over the years." He reported that, anecdotally, staff in the inspector general's office tracked how often their fares were collected while riding trains to and from South Station in 2024 and found significant fluctuation.
Every rider from the inspector general's office took at least one commuter rail trip during which a conductor did not collect a fare, Shapiro said.
"In many ways, the MBTA has not prioritized fare collection, as demonstrated by the lack of infrastructure to achieve that goal and the treatment of fare collection as an element of the passenger experience rather than the necessary revenue driver it should be," he wrote. "The MBTA incorrectly focuses on fare evasion, when it should instead enforce the contract requirements of active fare collection by its commuter rail operator. While the lost revenue from uncollected fares would not close the MBTA's projected budget gap, the impact of uncollected fares is significant. How the MBTA leadership and staff treat one public dollar is as meaningful as how they treat a million dollars. Each dollar must count."
The contract allows the T to impose penalties on Keolis if the company fails to collect fares at expected levels. However, Shapiro argued that the penalties are too low at $500 per failure, compared to $1,000 fines for poor vehicle performance or $2,000 fines for station cleanliness issues.
Shapiro noted that a 2017 agreement between the T and Keolis called for installation of fare gates at South Station, North Station and Bay Bay Station, which officials at the time said would increase the T's revenue by $24 million.
"We are now in 2025, and the only commuter rail station with fare gates is North Station," Shapiro wrote. "The MBTA's thinking about fare gates and fare collection needs to change."
T officials last year said fare gates have not yet been installed at South Station because of ongoing construction in air rights above the station. At the time, MBTA General Manager Phil Eng said scans for mobile mTickets increased more than 200 percent from September 2023 to September 2024.
DiZoglio's probe, which her office says will be part of a series of audits into the MBTA, found that the T mishandled performance-based incentives and penalties outlined in its contract with Keolis. The errors diminish "the overall quality and reliability of the MBTA's commuter rail services," the audit said.
"In this instance, the MBTA failed to assess millions of dollars of financial penalties that could have helped improve service for MBTA customers," the audit continued. "This represents a financial loss to the MBTA and could lead to other financial losses, as poorer service may result in fewer riders. Failure to properly assess incentives and penalties could also reduce the public's trust in the MBTA and harm its relationship with a vendor that relied on the MBTA's calculations of incentives and penalties."
Across the audit period from June 1, 2020 through Dec. 31, 2023, the MBTA failed to assess more than $3.3 million in penalties and "inappropriately assessed" another roughly $258,000 in penalties, based on metrics such as on-time performance, seat availability, fleet maintenance and passenger comfort and amenities, the report said.
The MBTA overpaid Keolis $105,800 in performance-based incentives, with the majority of that amount tied to an "inadvertent clerical error," the audit found. Keolis was also underpaid $105,210 for train staffing incentives.
In its audit response, the MBTA said it has started to implement some of the auditor's recommendations to ensure the correct penalties and incentives are doled out to Keolis. The MBTA also said it disagreed "with some of the SAO's calculations and interpretations of contract language."
"We look forward to working with the SAO on how the MBTA can continue to improve to provide safe, reliable, and accessible service to the MBTA’s customers and employees," the MBTA said.
DiZoglio's office said the MBTA did not properly oversee Keolis's fare collection efforts and maintain inspection documents.
The audit further faulted the MBTA for not ensuring Keolis submitted required reports on time dealing with fare collection revenue and fleet maintenance. The MBTA didn't charge Keolis $255,000 for the tardy reports, the audit claimed.
"The MBTA disagrees that it failed to ensure the Keolis submitted reports relating to fare collection revenue and fleet maintenance on time and as such disagrees that any penalties were appropriate to be assessed to Keolis," the agency said in its response to the audit.
Keolis criticized the audit, with a spokesperson saying Tuesday night that the company "fully rejects the summary findings."
"The MBTA's response to the preliminary findings, beginning on page 32 of the report, clearly refutes the initial conclusions that were drawn in error. The documentation that the MBTA provided proves that the actual discrepancy for incentives and penalties from 2020 to 2023 is just over $100,000 rather than the $3.3 million that appears in the executive summary of the report," the spokesperson said. "In light of the documentation presented, the conclusions were drawn in error, following an audit investigation that actually revealed nothing to the scale that was stated. Keolis is confident that we have followed all required protocols related to this matter. Always mindful of our role as financial stewards of the Commuter Rail on behalf of the MBTA and the Commonwealth, Keolis works closely with the MBTA to ensure accuracy in all of our contractual requirements."
Keolis's reputation in Massachusetts has fluctuated over its 11 years operating the commuter rail network.
The company faced hefty scrutiny in the first few years of the contract, drawing fines in 2014 for performance issues and -- like the rest of the T -- experiencing major disruption during the winter of 2015.
At one point, Baker administration officials said publicly they expected to let the contract expire. But the T changed course, extending Keolis's role in 2020 and then again last year.
Commuter rail has been a bright spot for the MBTA lately, enjoying the best ridership recovery after the COVID-19 pandemic.
Officials are now weighing whether to keep the same contract model in place, where one entity operates the commuter rail and the MBTA retains responsibility for system modernization and procuring new trains, or if they want instead to pursue a different approach.
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