01 October 2009

MOU, Part Deux

Back in April, the CHSRA and the Peninsula Corridor JPB (also known as Caltrain) entered into a Memorandum of Understanding that laid out a sparse outline for collaboration between the two agencies on the peninsula HSR project. This MOU is not a binding contract, since it can be canceled by either party upon 30 days notice, but it provides an increasingly detailed framework for agreement--so long as it lasts. A new MOU amendment, approved by the CHSRA on October 1st and likely to come before the PCJPB in November, is just as interesting to read as the newly released preliminary alternatives analysis that has drawn most of the media's attention.

A New Organizational Structure

The joint project, known as the Peninsula Rail Program, is structured as shown in the organizational chart at right.

The PRP director, Caltrain's Bob Doty, reports 50 - 50 to the respective chief executive officers, Mike Scanlon at Caltrain and Mehdi Morshed at CHSRA. A horizontal relationship is envisioned between Doty and Tony Daniels, the CHSRA's statewide program manager. That places Dom Spaethling, the CHSRA's regional manager, one tier below alongside the PRP discipline managers. The HNTB team that is currently doing most of the preliminary engineering and environmental work, under Tim Cobb and John Litzinger, reports to Spaethling and not to the PRP director.

The dual reporting structure, embedded deep into the hierarchy, will be challenging to manage whenever the differing needs of high-speed rail and Caltrain come into opposition, as they surely will. The 15 or so people represented by blue boxes will have their work cut out for them when the two agencies don't see eye to eye. While the MOU does not indicate how labor costs are burdened with overhead, the PRP director is listed on page 13 at $547,413 per year, with an average of $392,331 per year for PRP personnel. When the going gets tough, they will have to prove that their mettle at least matches their financial compensation. [UPDATE 10/5: it turns out that the labor figures are about 3.5x the salary paid to the employees. For example, the director makes about $170k per year.]

Five Focus Areas

Under the PRP director, the program is organized into five major functions, each of which is assigned FTE (full-time equivalent) personnel as listed below. Each functional area is further described in pp. 7-11 of the amended MOU.
  • Engineering (infrastructure, rolling stock, systems) - 3 FTE
  • Operations planning - 2.4 FTE
  • Project controls & contracts administration - 3 FTE
  • Program management / administration - 2.3 FTE
  • Public participation and community involvement - 1 FTE
It is refreshing to see operations planning staffed to nearly the same level as engineering. Operations planning can establish early on how best to provide efficient and integrated service on the peninsula, which drives all the ancillary questions of engineering such as the choice of rolling stock or the number of tracks required in each location. Operations should drive engineering, and not the other way around--as is sadly and often the case throughout the history of Bay Area rail transportation projects. Work smarter, not harder.

Clash Of The Standards?

The amended MOU includes the following statement:
Until an operator for CHSRA has been identified, PCJPB will provide engineering standards developed by and for the Peninsula corridor, which must be compatible with Caltrain and HSR.
Caltrain's extensive library of engineering standards will continue to rule on the peninsula, despite a growing collection of closely held technical standards, memoranda and directive drawings produced by Parsons Brinckerhoff to ensure statewide technical compatibility and interoperability among all sections of the high-speed rail system.

Caltrain will need to evolve its standards to attempt a complicated feat, without precedent in the United States: the gradual transition from legacy diesel trains to the modern, lightweight electric trains commonly seen in Europe and Japan. Do they have what it takes?


  1. Interestingly, UPRR doesn't appear to have so much as a liasion on the org chart. Not convinced that's a wise decision.

  2. As I just commented over on Robert's blog, I speculate this is the beginning footprint for a merger of CalTrain into or being taken over by the Authority. That will be a battle in itself.

    No PRR means plenty of problems ahead on this corridor. One more week before the hearing on the lawsuit.

  3. a) Are these new positions or this is just cost-shifting to CHSRA?

    b) Is this how CHSRA gets around salary cap issues of state hires?

    c) Is this how CHSRA moves responsibility from PB subcontractors to govt employees?

    d) All of the above

  4. FOR IMMEDIATE RELEASE October 2, 2009 2:32 AM

    Contact: Richard Tolmach, President CRF 916-443-1529

    High-speed rail proposals will apparently be the only Track 2 ARRA Stimulus projects submitted by California after the High-speed Rail Authority successfully convinced the Governor's office on the afternoon of Thursday October 1 to block about $3 billion of conventional rail proposals under development by Caltrans. Lobbying was apparently carried out both by HSRA staff and board members following the HSRA meeting in Sacramento. The packages are due to be submitted to the Federal Railroad Administration on Friday October 2.

    HSRA is believed to have asked the Governor to block the Caltrans submissions because most of the Caltrans projects were shovel-ready, and therefore had a better chance of obtaining funding than did the Authority's less defined projects.

    The Governor's decision means that California would discard most projects that could actually go out to bid in the near-term, to benefit $4.5 billion of high-speed rail applications that have much longer timelines, and are unlikely to meet the 2012 deadline. It is yet to be seen whether California's gambit for over half the Federal ARRA stimulus funds will be at all successful.

    Most severely hit are Los Angeles County, Orange County, and San Diego County, which had expected major improvements along the popular LOSSAN corridor served by Amtrak and Metrolink trains.

    Norwalk, Santa Fe Springs, La Mirada, Fullerton, and other cities on the LOSSAN route had incurred HSRA's antagonism by recent negative press comments concerning the vagueness of high-speed rail plans for high-speed elevated trains through their communities, which would consume the majority of statewide funding.

    Also hard-hit are the Capitol Corridor, which would lose an improvement project on its Oakland-San Jose leg and the San Joaquin Route, where track doubling projects would be cancelled. At the same time, programs to upgrade conventional rail equipment would cease, leaving California with insufficient train capacity.

  5. At these salaries, the PRP staff had better have what it takes! I am assuming pension and benefit costs are rolled into these compensation numbers, but these salaries could attract the very best railroad professionals in the world. If the current PRP staff isn't up for it, it would be easy to find a more competent replacement.

  6. Caltrain is going to need to update their engineering standards no matter what: they're going to need to allow higher cant deficiency, they'll probably need designs for high speed turnouts and higher speed track, and then of course there's the electrification and signal systems. All things that the current Caltrain train and track operator, Amtrak, already does in the Northeast. Maybe they should bring over some track, power, and signal people from the Boston Division to spend some time in California and explain how it's done.

  7. Maybe they should bring over some track, power, and signal people from the Boston Division to spend some time in California and explain how it's done.

    And what exactly is their expertise in this area?

    Avoiding Justice Dept. prosecution for massive cost overruns?

    Not being able to run Acela on time, even after padding the schedule?

  8. And what exactly is their expertise in this area?

    Knowing how to build modern electrification systems?

    The Acela's cost overruns weren't because of the electrification. They were because of FRA regulations, which are not going to be applicable to Caltrain. The trainsets were the problem more than the tracks.

  9. @ Alon Levy -

    if Caltrain and CHSRA need expertise on supervised track geometry to support very high cant deficiencies or, on vendor selection criteria for high-speed turnouts on tracks designed for UIC-compliant rolling stock or, on positive train control, whom should they turn to for advice?

    JR, SNCF, RENFE - or Amtrak?

    Amtrak, of course, because USA is always number one! USA! USA! USA!

    Except when it isn't.

  10. The Acela's cost overruns weren't because of the electrification.

    The electrification project went almost $200 million over budget. The mismanagement was so bad that eventually some 40 FBI agents raided offices of the primary contractor.

  11. Adirondacker1280003 October, 2009 13:05

    whom should they turn to for advice?

    JR, SNCF, RENFE - or Amtrak?

    Amtrak, of course, because USA is always number one! USA! USA! USA!

    Except when it isn't.

    Has anyone suggested that Amtrak does it better than JR, SNCF, RENFE or anybody else?

    Why not Amtrak and JR or Amtrak and SNCF or Amtrak and...

    Amtrak, the current operator of trains in California, has experience running those scary electric trains at speeds over two digits. They have experience operating with big bad scary freight trains. They even have experience operating with the almighty Union Pacific. Commenters here love to go on and on and on about how special California is. Other commenters then point out that Amtrak, Amtrak mind you, runs trains with electricity on grade separated track using positive trains control at speeds exceeding 100 miles an hour all the while coping with electric commuter trains that go as fast 125. They aren't pointing out that Amtrak does a good job. They are pointing out that even Amtrak can do this.

    The electrification project went almost $200 million over budget

    And a big chunk came from finding all sorts of unpleasant surprises along the 100 year old track.

    The mismanagement was so bad that eventually some 40 FBI agents raided offices of the primary contractor.

    And how many prosecutions where there? And how many convictions? How many of those prosecutions and convictions were of Amtrak employees?

  12. Rafael, so far CHSRA seems uninterested in even moderate cant deficiencies.

  13. @ Alon Levy -

    yeah, but their world-class consultants are only at the 2-4% engineering level right now.

    They work for planning/construction companies looking to maximize revenue and profit, not transportation value. CHSRA board member David Crane is obsessed with keeping CHSRA staff overheads as low as possible, so right now there is limited actual oversight or cost escalation containment going on.

    Penny wise, pound foolish.

  14. @Rafael

    Crane is the only guy that understands this project is in deep financial trouble.

    The third leg of the financing, private equity, which was counted on for 1/3 the funding, is not going to be there, certainly not during the construction phase.

    Crane was the big advocate for the private equity involvement, not only on this project but other infra structure projects needed for the State. As he now says, don't count on private money. We haven't been though an ordinary financial down turn. This was a major event, and it is not over and the recovery will be slow, especially for California.

    so the question really boils down to, will the Feds pony up 30 billion, or will another ballot measure be necessary to raise another 15 billion or so.

    And that is using the $40 billion price tag.

  15. California is not going to stay bankrupt forever; the economy is not going to stay depressed forever.

  16. Do you think our recovery will be faster than Japan's?

  17. I have no idea.

    But it's worth noting that Japan kept building Shinkansen lines in its lost decade.

  18. The private sector's lack of interest in lending money to buildout the system is NOT because of the downturn.

    It is a greenfields project with a lot of hair on it. There are plenty of other deals with much less risk.

  19. I have made a clarification to the salary figures in this post. It turns out they are burdened at about 250%, i.e. the figure listed in the MOU is three and a half times the salary of the employee. For example, the director makes about $170k, not $547k.

  20. Clem, why the inflated figures then? Why list such large labor cost numbers with the associated hour amount? What's going on?

  21. Nothing's going on. In an any organization, the fees charged for labor hours pay not just for those labor hours but also for support staff, office computers & IT, the janitor, the heating bill, employee benefits, etc.

    Those overhead costs add up to much more than a base salary. The missing link was what the overhead rate is, and it's a lot higher than I thought.

    The listed figures are the fully burdened cost of the labor hours. That's how someone who pays for them would want them listed.

  22. I like the creative accounting. Helps out Caltrain during a tough time.

  23. Clem, you've got to admit. That's some overhead! The overhead is far greater than the ostensible salaries. Something's amiss.

  24. It's not. A commenter I know on another blog just explained how, a few years ago, when he quit his finance job his boss said that it would reduce the department's labor costs by $400k/year. The person in question was only making $110k/year, but together with benefits, 401k contributions, and overhead allocated by payroll like janitors, it added up to $400k.

  25. I am not convinced that this can reasonably considered acceptable overhead, especially when they list the associated hours of labor.

    Pensions and benefits can be substantial, but that should be properly considered part of total compensation. With a plush pension and benefits on top of a salary, this staff is still extremely well compensated. Will their performance justify it? If they achieve elegant, cost-effective, and functional designs, they are worth every penny, but a strong track record has not been established to date.

    How much can other overhead be? Janitors are cheap and often outsourced. Computers and other office equipment is a very marginal cost. How many support staff are really necessary? It is possible that Caltrain is trying to cover other non-related labor costs with this salary package, but that is deceitful accounting.

    In finance jobs, often a substantial part of the income can be the annual bonus, which can sometimes eclipse the nominal salary. Regardless, the finance sector is hardly a model industry for accountability and honesty.

  26. Tolmach is a liar, or possibly just very stupid. He's already cast shame on the entire calrailnews operation.

  27. Tolmach will likely get the last laugh after this megaproject repeats the well established trend of previously misconceived megaprojects. Too bad billions in scarce rail transit dollars will have to be wasted to prove him correct.