Metro News Release

For immediate release: October 29, 2004

Statement by GM/CEO Richard A. White about the paratransit program audit review and WMATA’s proactive intervention efforts

Good afternoon. Today I’m here to talk with you about two issues. First, the status of an ongoing audit review of our paratransit program that provides curb-to-curb service for a segment of our disabled customers. And second, how that audit review fits into an ongoing, broader effort by Metro management to identify and implement any necessary intervention actions to address any shortcomings and to strengthen our organizational performance. Of course, the third important component of this more pro-active approach is to discuss our findings with you in a timely, accurate way. In this case, we are providing you with an interim report.

It shouldn’t be news to any of you that we’ve taken our share of lumps during the past year. Much of the criticism directed at this organization, the WMATA management team, and, frankly, at me personally has been deserved. We’ve done some things that, to this day, still don’t make much sense to many people. Either we’ve misfired badly, or we’ve done a totally inadequate job of providing the entire context or rationale for what we’ve done.

More importantly, those highly publicized missteps are not a true reflection of the dedicated work that gets done throughout the Metro system every day -- most of which goes unnoticed or unappreciated. The vast majority of our employees are hard- working, committed men and women. We collectively forget, or take for granted, the positive reputation Metro enjoys throughout the world as a safe, clean transit system whose rail system carries more people each day than the BART (San Francisco-Oakland bay area), MARTA (Atlanta), and SEPTA (Philadelphia) subway systems combined.

With that said, I’ll be the first to admit we have some serious public perception and organizational accountability challenges facing us. But I also want to make it abundantly clear to you, and to our customers and stakeholders, that we have already taken several steps in recent months to strengthen our organizational performance and accountability. And, we’ll be announcing some additional measures soon that will address key challenges that we face in two primary areas: improving service reliability and providing a better quality of customer service and outreach.

There’ll be more time to talk about those kinds of things in the weeks ahead. Today, I want to focus on some organizational improvements that we’ve already implemented that brought us to this point this afternoon.

As we began -- and ultimately completed -- our audit investigation into some areas of our parking program, we also made a commitment to work harder and smarter to detect and shore up any weaknesses that we may have had in other high risk areas of our organization. We enhanced our internal oversight capabilities by adding six new audit and transit police staff to our existing level of staff resources to "drill down" into our major areas of expense and revenue controls. This comprehensive review process supplements our normal organizational management and monitoring, and is designed to look for and identify risks and vulnerabilities, and then take any necessary actions.

In the recent past, and for at least the past four budget cycles, we had become extremely focused on cost containment, as the growth in our operating budget began to exceed the capability of our state and local government funding partners to keep pace with their subsidies. We’d created several internal "cost containment teams" to evaluate how we could limit the growth of our costs without reducing services to our customers. One such team was formed to examine and evaluate our paratransit program. Just by way of background, a firm known as LogistiCare was awarded a contract in January 2000 to operate our paratransit service. The contract term was for a base of four years, with two one-year options. LogistiCare is a large, national provider of specialized paratransit and other transportation services, and is headquartered in Atlanta, Georgia.

A WMATA paratransit "cost containment team" report was reviewed and discussed with our Board of Directors during the summer and fall of 2003. This report included an examination of how other transit systems across the country were fulfilling their ADA paratransit responsibilities.

The cost containment review, together with ongoing feedback we received from our customers, triggered some nagging concerns on the part of WMATA management. These concerns led us to request a full scale audit review, beginning in November 2003. Today, I’m here to discuss the interim results of this ongoing review.

AUDIT RESULTS

This internal audit uncovered concerns in three general areas: accuracy of "on time" performance reporting, trip reservation patterns by some users of our paratransit service, and potential program abuse.

1. Accuracy of "On Time" Performance Reporting

As we conducted our review, we became concerned about the accuracy of "on-time" performance data reported to us from the contractor. The "on time" levels in FY 2003 as reported to us were showing very good results, yet the levels of customer complaints had once again begun to increase.

The contractor had been consistently meeting thresholds for incentive payments since the establishment of incentive provisions were established in March 2002. Incentives were established for contractor performance in the areas of on time performance, customer complaints, and compliance with certain testing requirements, and were designed to provide financial incentives from improving our paratransit services for a company that was losing money on our contract.

We had conducted several internal audits during the course of the contract and, as a result, ascertained that LogistiCare lost $1.5 million during the first year of the contract (CY 2000) and $1.2 million during the second year (CY 2001). Those financial losses were in the context of WMATA’s procurement actions and resulting contract award, where LogistiCare’s six-year base proposal was approximately $30 million lower than the second proposer.

In 2001, LogistiCare began to ask WMATA for contractual relief, but we were reluctant to remove them from their responsibilities. In all honesty, we saw this incentive-based approach as a "win-win" for all parties, in that it we would be able to retain a contractor that was incented to improve its service delivery to our customers, while our customers would see more dependable, reliable service. The maximum amount of incentives which could be received by the contractor in any given month was $110,000.

When questions arose with "on time" accuracy, WMATA auditors chose two separate months to review, and requested detailed records from the contractor which were not otherwise required under the contract. The auditors reviewed trip manifests for those months. A trip manifest is the documentation used by the driver to record each trip that is provided. From those two months, we chose to examine approximately 60% of the total number of manifests; a total of about 115,000 separate manifests were individually reviewed.

We found that approximately 10% of the manifests had entries that required further explanation. Data recorded on approximately1% of the 115,000 manifests raised a higher level of concern. It’s worth noting that 1% represents roughly 1,100-1,200 of the total of 115,000 manifests we examined. As a result of what our review found, we were concerned that the contractor reported on-time performance results that may not have been fully supported by the detailed documents.

Due to these uncertainties, we have suspended incentive payments since August of this year while we complete our audit review. The CEO of LogistiCare, John Shermyen, has committed his firm to fully cooperating with us to reconcile these manifests and work on any necessary corrective actions.

2. Trip Reservation Patterns

The second area of the audit review that concerned us pertains to trip reservation patterns by some users of this service. WMATA auditors reviewed in detail individual trip reservation data by customers for a three-year period: Fiscal years 2002, 2003 and 2004. We examined trip reservation frequencies and the extent to which customers made late cancellations of their trip reservation, or where they did not appear for the trip at the reserved time.

Again, by way of background, WMATA had implemented a Board-approved policy in the fall of 2003 which addressed any questionable use of the service by suspending service privileges of customers based on excessive patterns of late cancellations and no-shows for service. Since each trip reservation costs WMATA $2.95, and since services need to be scheduled based on trip reservations, serious program inefficiencies occur when inappropriate trip reservation patterns take place.

The audit review confirmed a total of approximately 2% of customers who had very high late cancellations and/or "no shows" during FY 2003 (250 persons out of a customer base of 12,000). That total was dramatically reduced, to approximately 1% for FY 2004 (150 persons out of a registered base of 14,800) as a direct result of the policy that we implemented. The result of our own in-depth review confirmed that LogistiCare and WMATA had already been enforcing its 2003 late cancellation/no-show policy with these individuals. Over 100 persons have had their traveling privileges suspended under this policy.

However, one by-product of our audit review was the finding that some number of customers had commented about the accuracy of the data pertaining to their no show and/or late cancellation. We are concerned about whether all of our customers are being properly attended to under our contract, and these differences are another item now under joint review by WMATA and LogistiCare executive management.

3. Potential Abuse

Our review also identified a handful of persons whose trip patterns went beyond any reasonable level of explanation. In other words, they reserved or ordered more trips than it would have been reasonably possible for them to make. This information was handed off by WMATA auditors to WMATA’s police department in March 2004 for further evaluation, which is currently ongoing with the Maryland State’s Attorney Office in Montgomery County and the Virginia Commonwealth’s Attorney for Arlington County. We are not at liberty to provide any further information at this time because we don’t want to jeopardize this ongoing criminal investigation.

CONTRACTUAL ACTIONS

WMATA has identified a number of areas under the existing contract that should be strengthened and LogistiCare executive management has agreed to accept these changes to our existing contract. A high level summary of these changes is attached to this statement.

Just last week, WMATA staff received Board authorization to initiate a new Request For Proposal (RFP) for paratransit contract service. The RFP will include numerous improvements for tightening and strengthening oversight of the contract, including those resulting from a special evaluation conducted by an outside panel appointed by our Board of Directors, known as the Regional Paratransit Task Force.

In the interim, in order to ensure a continuity of service, WMATA has elected to continue with LogistiCare by exercising the final contractual option. A transition will be made to the successful new bidder at the earliest possible time.

MANAGEMENT ACTIONS

Although WMATA continually strives to ensure that our paratransit services are of the highest possible quality and are delivered in the most cost-effective manner, it is apparent that certain inappropriate or questionable activities have occurred. We have tightened up several areas of our contract while we complete our review of these actions with LogistiCare.

In the meantime, WMATA requested that LogistiCare re-assign its two managers from its WMATA Silver Spring, Maryland, field office, and LogistiCare has agreed to do so. In addition, WMATA has placed one of its management employees on paid administrative leave, pending the outcome of the investigation.

CONCLUSIONS

From our perspective, here’s the bottom line: WMATA itself identified certain shortcomings in our paratransit program and has moved aggressively to correct them. Some of these problem areas were the result of a well-intended, incentive-based program to improve service quality to our customers -- who are so dependent on this service that we and Logisticare provide -- while assisting a contractor that was suffering major financial losses.

We remain committed to fulfilling our responsibility to provide quality paratransit services to eligible disabled persons, and to do so in a cost-effective manner. If there is any wrongdoing that has taken advantage of our paratransit customers, or of the taxpayers dollars that are used to subsidize those services, I can assure you we will proactively pursue remedies and right any wrongdoings.

The audit review of our paratransit program, and our announcement of the findings today, are further signals of our ongoing, serious, and aggressive efforts to "re-engineer" the performance of this organization. Frankly, you can expect to see more reviews and reports of this type. We take seriously our commitment to be responsible stewards of our customers’ and taxpayers’ dollars, and to deliver the kind of quality service the residents of this region deserve. I look forward to talking with you further in the days and weeks ahead about some additional initiatives that will further strengthen our performance in several areas.

News release issued on October 29, 2004.