CapMetro ends rail contract with Veolia

AUSTIN (KXAN) - Capital Metro terminated its rail operations and maintenance contract with Veolia Transportation Wednesday.

"The responsibility is to open up the system and to watch out for the financial interest of the community," said Capital Metro President and CEO Doug Allen. "We're willing to make the tough decisions and get this thing going, and that's what we're doing today."

The announcement comes just after MetroRail testing resumed this week after it had stopped operations the week of Thanksgiving following an insurance question that came up during contract negotiations with Veolia.

"We just received the notice minutes ago," said Veolia spokeswoman Valerie Michael just before 11:30 a.m. Wednesday. "We will have a statement later today."

Gord Ryan, local General Manager for Veolia, also spoke in front of the Capital Metro Board Wednesday afternoon, asking the agency not to fire his company.

The agency has contracted with Veolia to run its commuter and freight rail service since 2007, and the contract would have run five years after the start of the MetroRail's start of the revenue service for commuter rail. CapMetro was working with the company on a contract negotiation for more work on the MetroRail line that would have fixed the faulty train control system that is in place for the agency.

During recent contract negotiations, CapMetro said Veolia demanded changes to the terms of the existing contract as a condition for completing the remaining work.

"They presented a take-it-or-leave-it approach," said Allen.

However, CapMetro said it would not agree "to these changes because they would have exposed the authority and the community to additional costs and risks."

"It really did come down to this requirement that said, 'If you want to open up this system, you have to comply with these requirements,'" said Allen.

The agency said the contract change will not affect the estimated timeline for beginning passenger service in the first quarter of 2010.

"The service is still on schedule for a first-quarter 2010 start date," said Capital Metro spokesman Adam Shaivitz. "There's a transition plan ready. It will be seamless."

The MetroRail has been delayed multiple times and is two years behind schedule, originally slated for an official opening earlier this year.

They were set to go with a ribbon-cutting ceremony but scrapped those plans.

This summer, train-crossing systems failed the company and came down when they were not supposed to.

Former Capital Metro CEO Fred Gilliam also stepped down earlier this year. The company is in line now to pick a new contractor for the rail line.

CapMetro's board members approved two new contracts at Wednesday afternoon’s Board of Directors Work Session and Board Meeting:

• Herzog Transit Services, Inc. for MetroRail operations and rail maintenance
• Watco Companies, Inc. for freight rail operations.

The agency has been in the middle of a nearly $1 million reprogramming of its train-control system for the delayed MetroRail project. The reprogramming came as a result of Federal Railroad Administration testing that found errors in the system in early 2009.

Herzog Transit Services has said it is prepared to begin work immediately to complete the remaining steps in the MetroRail project, according to a Capital Metro press release.

Faced with a complete retool of its "vital logic" system, Capital Metro officials said the reprogramming should be complete by January, which will allow for a full retest of the system. The "vital logic" system controls trains along the 32-mile line from Leander to Downtown Austin.

The organization said it ended its contract with Veolia to ensure the timely completion of the MetroRail project and a successful launch of the system. Existing freight obligations were also factors in the decision.

Herzog has been in the railroad industry for 40 years and operates passenger rail systems in Dallas-Fort Worth, New Mexico and California.

Meanwhile, Watco has been operating Capital Metro’s freight line since October 2007 and runs 22 short line railroads on more than 3,500 miles of track in the United States.

Asked why Capital Metro did not vet the new contract with Herzog through a public procurement process, Board Member Chris Riley said, "There were conversations with board members. And my understanding is that Herzog had applied previously for in response to the RFP that was ultimately awarded to Veolia."

Allen said the transition between Veolia and Herzog will be a 10-day period.