SEPTA cancels $185M contract for rail cars

SEPTA has “terminated for cause” a contract with the China Railway Rolling Stock Corp. for 45 doubledecker passenger cars, the authority said in a statement Friday.

The project was about four years behind schedule, and the first vehicles, intended for Regional Rail, were long overdue. The Regional Rail system is a commuter rail network serving the Philadelphia Metropolitan area.

CRRC, owned by the People’s Republic of China government, performed shoddy work and repeatedly failed to meet production deadlines, according to SEPTA officials familiar with the project.

“Having worked closely with SEPTA’s project team beginning with rail car design through initial vehicle production, CRRC MA remains committed to completing the project and continues to seek further discussions to resolve SEPTA’s concerns,” company spokesperson Lydia Rivera said.

In 2017, SEPTA ordered 45 cars to be built by the company at a cost of $185 million. So far the transit agency has spent more than $50 million, it said.

“The authority is assessing its options for recouping funds that have been spent on the project,” the statement said.

CRRC’s price was $34 million below its nearest competitor, the Canadian company Bombardier, which had more than a decade of experience building railcars in America. The Chinese company had not completed a similar project for U.S. clients. (Bombardier has merged with Alstom.) The Chinese firm, the largest railcar manufacturer in the world, has been trying to break into the U.S. market.

In addition to SEPTA, it struck deals with Los Angeles, Chicago, and the MBTA in Boston.

Along the way, those deals have become embroiled in tensions between the United States and China over trade issues and national security. American officials — and rival companies — complain that CRRC’s government ownership enables it to underbid competitors for public contracts by setting artificially low prices.

The federal Buy America Act requires that 70% of components in railcars built by a foreign-owned corporation be made in the United States and that final assembly be done here. Last year, the inspector general of the U.S. Department of Transportation said it was conducting an audit of SEPTA’s contract to check compliance with the law.

Cars are partially built in China then shipped to a Springfield, Massachusetts, factory of CRRC MA for final work.

Boston’s Massachusetts Bay Transit Authority says CRRC MA delivered only 130 of the 400 new subway cars it ordered in 2014. Many have been sidelined by problems that include a battery explosion, a derailment, loose brake bolts, and faulty wiring that caused an electrical current to strike a nearby train.

Last month, the MBTA updated its contract with the company, agreeing to pay $148 million more to speed up production of cars it desperately needs to replace aging cars on two lines.

As early as January 2022, SEPTA chief executive Leslie S. Richards said CRRC cars under construction for the agency had problems, including failures of watertightness tests, faulty interior panels, wiring issues, repeated brake test failures and unsafe emergency exit windows. No vehicles have been delivered.