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The Federal Transit Administration is investigating whether the company, which is owned by China’s government, is meeting Buy America contracts for new rail cars being built for Philadelphia’s SEPTA system.
It appears that a federal investigation into Chinese state-owned rail car manufacturer CRRC is moving ahead.
The Boston Herald reported this week that Federal Transit Administration (FTA) investigators paid a call to the CRRC MA factory in Springfield, Mass., where it assembles rail cars for regional transportation systems like Boston’s Massachusetts Bay Transportation Authority (MBTA) and Philadelphia’s Southeastern Pennsylvania Transportation Authority (SEPTA).
According to the Herald, FTA officials were there to investigate the factory as part of an ongoing probe into whether CRRC is meeting federal Buy America requirements for its contract with SEPTA and the Los Angeles Metro Rail system. Here’s the Herald:
A Federal Transit Administration spokesperson said “FTA staff are at CRRC’s Springfield facility as part of a Buy America compliance review of federally-funded procurements.”
The inspector general’s office of the U.S. Department of Transportation launched an audit of Chinese-state-owned CRRC MA’s $138 million contract with SEPTA — for manufacturing and assembly of 45 new passenger rail cars — on Feb. 24.
The probe is examining FTA’s oversight of SEPTA’s compliance with Buy America requirements for rolling stock, according to the inspector general’s office.
It stemmed from concerns raised by three-then [members] of the House Transportation Committee last year, who, citing a Philadelphia Inquirer article, stated that the rail cars appeared to be built almost completely in China before being shipped to Springfield for final assembly.
A CRRC spokesperson told the Herald that “CRRC MA is fully aware of Buy America provisions and meets the requirements.”
We’ve followed this investigation closely since Reps. Sam Graves (R-Mo.), Rodney Davis (R-Ill.) and Rick Crawford (R-Ark.) wrote to the Department of Transportation Inspector General in September 2022. As the Herald noted, the three were prompted to request the investigation after the Philadelphia Inquirer story, which highlighted these photos on social media:
Looks pretty far along in the manufacturing process, right?
Of course, it’s up to government investigators to determine whether CRRC is indeed meeting Buy America requirements. As the congressmen noted in their letter, federal Buy America requirements require that the “cost of the components and subcomponents for rolling stock produced in the United States must total more than 60 percent for fiscal years 2016 and 2017, more than 65 percent for fiscal years 2018 and 2019 and more than 70 percent for fiscal year 2020 and beyond.” Final assembly must also take place in the United States.
The Buy America investigation isn’t the only issue currently plaguing the CRRC MA factory in Massachusetts. CRRC’s contract with the MBTA to build rail cars for Boston’s T subway system has turned into a boondoggle, with transit officials writing to the company about “significant lapses in overall quality management” and former factory employees raising concerns about working conditions. The project is now years behind schedule, and there have been “chronic workmanship quality issues” with the cars that have been delivered, including “electrical assembly work, wire crimping, [and] wire terminations.”
The rail cars made for Philadelphia’s SEPTA system haven’t fared much better. The Boston Globe obtained a February 2022 letter from SEPTA management to CRRC officials that cited “repeated failures of water tightness tests and CRRC’s refusal, over the past [four] years, to provide required as-built drawings and a Structural Repair Manual . . . faulty interior panels, the need for changes to plans for electrical locker wiring, repeated failed friction brake dynamometer tests and unsafe emergency exit windows.”
The CRRC contracts with these transportation systems have been problematic from the start. The company — which is controlled by China’s government and receives massive government subsidies — severely underbid to obtain these taxpayer-funded contracts. When SEPTA awarded its contract to CRRC, a spokesperson for Hyundai Rotem told the Philadelphia Inquirer: “I cannot grasp how they are able to do it at that cost.”
It quickly became clear that CRRC was aiming not to make a profit, but rather as part of the Chinese government’s stated plans to dominate global industry. And that caught the attention of lawmakers in Congress. The Transit Infrastructure Vehicle Security Act (TIVSA) passed in 2019, effectively banning Chinese-state owned companies like CRRC from bidding on rail car and bus contracts funded with federal taxpayer money.
But CRRC was allowed to finish the contracts it already had obtained, and the state-owned entity can still bid on other types of contracts, including those that are funded without federal tax money. Given all the problems that agencies like MBTA and SEPTA have faced, however, we’d suggest those considering working with CRRC approach potential contracts with extreme caution.
In the meantime, we will keep monitoring the ongoing Buy America investigation.