Railroaded? Cap Metro vs. Veolia

Cap Metro fires its rail contractor, and Veolia strikes back

Capital Metro has hired a new rail contractor to get its delayed MetroRail on track.
Capital Metro has hired a new rail contractor to get its delayed MetroRail on track. (Photo by John Anderson)

Depending who you ask, Capital Metro either took swift, decisive action to protect the public's investment or stabbed a loyal contractor in the back. Either way, Veolia Transportation is no longer charged with completing the much-delayed Leander-to-Downtown MetroRail commuter line.

Last week, Cap Metro management issued a stunning press release announcing that, due to a dispute over insurance coverage in contract negotiations, Veolia had been axed from its duties relating to MetroRail and would immediately be replaced by Herzog Transit Services. Also, Watco Companies (which had been subcontracting under Veolia to run freight operations on the same track) was given a direct contract to continue that work. Within hours of the announcement, the Cap Metro board of directors gave its approval to the decisions.

Cap Metro CEO Doug Allen said that the last piece of work to be done to launch MetroRail is the programming of changes to the rail line's signaling system. That work, originally to be contracted directly by Capital Metro, was to be transferred to Veolia, which required a contract change.

"On November 20, we were presented with basically a take-it-or-leave-it type of arrangement where we had to agree to certain concessions to the contract that we were not willing to make because it would put this agency, and therefore the community, at risk financially," Allen told reporters. "So on the 22nd, I contacted my counterpart with Veolia and said, 'Are you sure this is what you want to do?'" Veolia wouldn't back down, he said.

As Allen explained it, the changes would have required Cap Metro, in the event of an accident or other incident, to sort through who was at fault and which insurance to pursue – something Allen said Cap Metro has neither the skills nor the liquidity to do. He also said that on Nov. 10, Cap Metro had been dropped from insurance that was supposed to cover both it and Veolia, and Veolia – responsible for the insurance – had failed to notify the agency.

Veolia's version of events is quite different. Calling Cap Metro's statements "untrue," the company said, "Capital Metro asked Veolia Transportation to assume responsibility for completion of the remaining signal work, which Veolia Transportation was prepared to do, but at the same time wanted Veolia Transportation to assume all liabilities for that system, beyond Veolia Trans­porta­tion's proposed scope of work, including potential defects in the design and construction of that system."

Concerning the insurance dispute, the company responded, "At no time has Veolia Transportation lacked the insurances required under the contract and at no time has Capital Metro been dropped from those coverages." Veolia also complained that Cap Metro has not paid fees owed – some $45,000 per month – since March.

On Monday, Veolia went further, sending an official letter of protest charging that Cap Metro's action constituted an illegal, no-bid contract. Cap Metro spokesman Adam Shai­vitz said the protest letter is under review by agency attorneys. As for the original Veolia response, he would only say: "Capital Metro has paid all management fees due under the contract. Although the Authority disagrees with Veolia's characterization of events and issues, we see no point in continuing to rehash the positions of the parties. Instead, we have moved forward with the next steps in the implementation of MetroRail service."

Cap Metro Chief Operating Officer Elaine Timbes said that in addition to clearing up the insurance issue, the switch from Veolia to Herzog would save the agency about $10.7 million over the life of the contract and that Herzog has a strong safety record. Allen said Herzog has an established record running rail lines in Dallas, New Mexico, and California, and that bringing the company on board would help meet the agency's goal of starting the line during the first quarter of 2010. Cap Metro said it expects minimal financial hardship to Veolia employees, as all 40 or so MetroRail workers would be offered re-employment under Herzog.

This isn't the first time Veolia has been the whipping boy for delays in the MetroRail project. This past spring, Cap Metro announced it would be delaying the launch of MetroRail, which at the time was scheduled for March, after Veolia had been flagged for violations by the Federal Rail­road Administration. Veolia's response at that time was muted, saying only that it was working with the FRA to comply – but others denounced Cap Metro's finger-pointing. Austin Mayor Pro Tem and Cap Metro Board Member Mike Martinez said the real problem was that Cap Metro's management scheduled a launch date before it had worked out problems with the line's signaling and crossing gate system and said Veolia was "scapegoated."

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