Chinese Company Hopes MBTA Contract Will Be U.S. Launching Pad

(Massachusetts Office of Travel & Tourism via Flickr)
(Massachusetts Office of Travel & Tourism via Flickr)

Over the objections of rival bidders and human rights advocates, a Chinese rail car manufacturer on Wednesday won a lucrative state contract to supply the MBTA with 284 new Red Line and Orange Line cars to be assembled in Springfield.

The Massachusetts Department of Transportation Board unanimously awarded a $566.6 million contract to CNR MA, a subsidiary of the world’s largest manufacturer railcar manufacturer in China who plans to use the MBTA project as an entry point to the North American manufacturing market.

“Simply put, this board vote will ensure we get people to work in Massachusetts and put people to work in Springfield,” outgoing Transportation Secretary Richard Davey said, attending his final MassDOT board meeting before he plans to resign next week.

The MBTA in January turned to another international company, the France-based Keolis, to take over operations of the state’s commuter rail network with an eight-year, $2.69 billion contract.

The selection of CNR MA, who significantly under-bid other competitors for the contract, drew criticism during a board meeting Wednesday related to concerns about doing business with a company controlled by the Chinese government, which has a questionable record on worker and human rights.

Officials said no American companies currently manufacture subway cars.

Three of the bidders not recommended for the contract – Bombardier, Kawasaki Rail Car, and Hyundai Rotem – also urged the MassDOT board to delay awarding to the contract to CNR MA, and to seek “best and final” offers from all the bidders.

The competitors questioned CNR’s lack of experience building and delivering rail coaches in the United States, and an attorney with Hyundai Rotem also raised a question about “impropriety” in the process after Gov. Deval Patrick volunteered this week that he met in Hong Kong with CNR officials in December 2013 in the middle of the bidding process.

Davey also attended the meeting in Hong Kong last December. “The governor met with CNR while he was on a trade mission last year. The governor has been public about that meeting and his interest in learning more about the company,” MassDOT spokeswoman Cyndi Roy said. “The details of the procurement were not discussed at that meeting nor did the Governor play a role in deciding which company the MBTA recommended to the board.”

MBTA General Manager Beverly Scott said moving to a “best and final” offer was “unwarranted” because the agency did not need to seek clarity on any portions of the bids. “It’s not an auction. I’m not trying to be glib,” Scott said.

The bid from CNR MA came in significantly lower than any of the other bids, with the closest coming from Hyundai Rotem for $720.6 million. Bombardier bid $1.08 billion, and Kawasaki $904.9 million.

Board member Janice Loux called it “hypocritical” for Hyundai Rotem to question CNR MA’s experience in North America after the MBTA awarded Hyundai its first contract in the United States for commuter rail cars. Hyundai Rotem has been criticized by transportation officials for falling behind schedule and delivering trains that needed to be fixed once they arrived in Massachusetts.

“This is a win for our riders. It’s a win for our financial bottom line. And it’s a win for the authority,” Loux said.

The board did not discuss the concern over human rights violations in China, and offered praise of the procurement process.

Robert McGinn, the former chair of the state Republican Party, testified against doing business with China, which he described as a repressive regime. McGinn is married to Chai Ling, one of the student leaders in the Tian’anmen Square protests of 1989 and the founder of All Girls Allowed, a humanitarian organization that aims to stop the human rights violations related to China’s One-Child Policy.

“I believe the governor will likely live to regret this decision should he ever decide to seek another public office,” McGinn said, suggesting the contract decision would likely “follow him like a dark cloud.” Ling also testified against doing business with China.

MBTA officials said nothing in their background checks found human rights violations by CNR.

“We will abide all the laws and we pay much attention to our employees. We care (about) our employees. They are the real creators of value for us,” CNR MA President Xiwei Lu said after the vote. “We are the leading rail car manufacturer in the world. We are the biggest one. We cannot be this if we are tough to my employees.”

The contract requires senior level executive engagement, a Massachusetts-based project team, and wages and benefits for employees comparable to the region and prevailing wages in the trades.

Lu said CNR pays its employees in China a “very nice wage,” equal to two or three times the Chinese average, which he estimated at $3,000 a year. “It’s a hard life. We have 1.3 billion population,” he said.

CNR has supplied rail cars for more than 13 countries, including Brazil, Argentina, Australia, New Zealand and Hong Kong. Lu said he was able to under-bid the other companies because CNR hopes the MBTA project will be the start of a larger expansion into the North American market.

“We are committed to be here. I want to enter this market. So I don’t calculate all the investment in one project,” Lu said.

CNR MA plans to build a $60 million manufacturing facility on Page Boulevard in Springfield to serve as the company’s U.S. headquarters with assembly and office space and a test track for the new MBTA cars. The company estimates creating 100 construction jobs in the city and 150 new manufacturing jobs that will remain after the MBTA project is complete as CNR seeks additional domestic contracts. Work on the new plant will begin in the fall of 2015.

The contract also calls for 60 percent of all parts to come from the United States.

James White, from the Access Advisory Committee to the MBTA, testified in support of the contract and the specifications of the new subway cars, which include larger doors and passenger capacity. “These will be the most accessible vehicles in the T’s history,” White said.

The MBTA will purchase 152 new Orange Line cars to replace the 32-year old fleet and 132 new Red Line cars that haven’t been upgraded for over four decades. The design process is expected to take three years for the Orange Line and an additional 15 months for Red Line cars, with pilot cars expected to be delivered on the Orange Line in early 2018 and Red Line cars a year later.

All new cars, including an additional 58 optional Red Line cars included in the contract, are expected to be in service by 2023. The total cost of the project is $1.3 billion, including $800 million for the purchase of the cars, design, engineering, testing and legal costs and $500 million for signal system upgrades and expanded subway car maintenance facilities at Wellington Station in Medford and the Cabot facility in Boston.

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