MTA Continues to Reduce Costs
The MTA's business transformation continued this week with the announcement that it had successfully renegotiated contracts with 43 vendors and suppliers, saving $18 million in 2010 and more than $70 million over the life of the contracts. The latest savings comes one week after the MTA said it was saving more than $40 million, without impacting service, by removing more than 50 percent of projects from its 2010 operating budget.
Faced with a nearly $800 million budget shortfall in 2010 due to state budget cuts and deteriorating tax revenues, these are just two examples of the aggressive action the MTA is taking to drive out costs and operate more efficiently.
"Companies in financial distress often go back to vendors and ask them to renegotiate contracts and that's exactly what we're doing here," MTA Chief Operating Officer, Charles Monheim said. "We took a new approach asking our suppliers if they could do better and in many cases, the answer was yes."
The biggest savings, $15.9 million, came from renegotiated contracts with paratransit providers. Monheim said there was an opportunity for savings through paratransit because of increased competition among vendors. Renegotiated contracts with IT vendors, parts and other suppliers resulted in $2.6 million in savings.
As part of the process of overhauling how the MTA does business, the agency reached out to vendors who benefit tremendously from its business and asked them to pitch in during this difficult economic time. The result was renegotiated contracts with 43 vendors that will yield more than $70 million in savings over the life of the contracts.
A significant deficit remains and Chairman Walder has acknowledged that addressing this hole will be difficult, but the MTA continues to make progress each month. Previously, the MTA identified $49 million in savings through a 15 percent reduction in administrative payroll and the $40 million announced last week from the removal of non-essential projects from the operating budget. Targeted areas moving forward include: controlling overtime, consolidating redundant functions and modernizing inventory processes.