U.S. Report Questions MTA Bonuses

Safety shortcomings on Los Angeles’ problem-riddled rail project have prompted federal transit officials to begin developing first-time guidelines on how public agencies nationwide use controversial “bonuses” to dole out extra millions of dollars to their contractors.

The move is recommended in a new congressional report that offers a decidedly mixed review on the strategy of using taxpayer-financed bonuses to spur better on the job safety by contractors building subways, rail lines, highways and the like.

Although the bonus tactic offers some benefits, agencies may effectively be padding the already lucrative paychecks of contractors by establishing “too easy a mark” for safety goals, investigators for the House Committee on Transportation and Infrastructure found.

Their report came in response to a Times investigation last fall that disclosed a troubling paradox: Despite a history of high worker injury rates and several spectacular accidents on Los Angeles’ mammoth subway and rail construction, a few contractors stand to earn nearly $10 million in little-known “safety bonuses.”

As prescribed in their contracts, firms doing rail and subway construction work for the Metropolitan Transportation Authority are paid incentives of up to $500,000 per job if they surpass certain national workplace safety averages.

To date, contractors have earned more than $3 million in bonuses. This, despite the fact that many of these same firms have logged accident rates well above national norms and have been cited repeatedly for safety violations, leading to incidents such as runaway trains, underground fires, and the burning and entrapment of workers in accidents.

The House report said the Los Angeles rail project’s safety program appears to have been “deficient,” particularly in the early stages of the ongoing subway work, and questioned whether the agency had emphasized safety enough.

The MTA’s accident rate today remains “higher than average,” the report said. But it noted that the agency has seen a “marked improvement” in safety in its more recent stages and is now largely comparable with other projects of its size and complexity.

MTA officials saw the report as an endorsement of the safety bonuses.

“Basically, it said we were in the ballpark [in meeting national safety standards], and it was acceptable and normal to use this type of approach, so I think it was sort of a vindication that what we did was right,” said MTA construction chief Stanley Phernambucq.

“In capitalism, the best way to get people to do what you want is to put dollars and cents in front of them, so this is a very cost-effective approach,” he said. “I’ve scraped bodies off the ground, and if I can spend [1% of a job’s value on bonuses] to keep people from getting killed, I’ll spend that.”

But the House report was skeptical as to whether the bonuses accomplish that end.

Despite the many testimonials of public transit administrators who use bonuses, the report said no clear evidence exists to support their main assertion: that the financial incentives produce safer construction.

Comparing data from four major transit authorities--in Los Angeles, Atlanta, San Francisco/Bay Area and Washington--congressional investigators found that rates of workplace accidents were “relatively comparable,” even though Atlanta does not use bonuses and the other three do.

“There are people who feel passionately about these bonuses, but the evidence is equivocal,” one committee staff member said. “I can see no statistically significant difference between those programs like [Atlanta] that do not have a safety incentive program and those like Los Angeles that do.”

After the issue was raised in September, Rep. George Miller (D-Martinez) threatened to try to cut off federal funds to any transit agencies using the bonuses. He said he found it “ludicrous” that contractors were paid extra to run a safe workplace.

But Miller tabled his motion after leaders of the House transportation committee agreed to investigate the issue. The results of that probe, as detailed by staff investigators in their report, probably will be considered by the transportation panel at hearings beginning June 18 on federal transit grants.

The Federal Transit Administration, which oversees billions in funding to the MTA and other agencies, has decided to take up the House investigators on a key recommendation: issuing guidelines on how best to use the bonuses.

House investigators said they were surprised that the FTA’s guidelines “contain no mention, whatsoever, of safety incentive programs.”

The FTA plans to close that gap by issuing guidelines, as recommended, FTA spokeswoman Donna Aggazio said Wednesday. She could not say when that will happen or what they would say.

FTA engineers received the report last week, she said, and “they’re presently reviewing it very carefully. As you can imagine, we’re going to take the report very seriously, and we’re interested in anything that can make transit construction safer.”

By linking payouts to safety, the bonuses can be a useful and potentially cost-effective component in developing owner-controlled insurance programs for transit agencies.

But at the same time, the House investigators faulted bonus programs for setting their safety targets by relying almost exclusively on national data that tracks “time lost” on projects in accidents.

The lost-time standard may “present too easy a mark,” the House report said. “Most competent large contracts should be able to achieve that level of lost time injury without too much difficulty . . . and the incentive amount may become, in effect, an automatic contract bonus. If that is the case, then the safety incentive program quickly loses its financial incentive function and becomes a de facto contract enhancement.”

In Los Angeles, transit officials used the lost-time standard exclusively until toughening it last year--but only after giving out nearly $3 million in bonuses under the old system.