For MBTA, Canceling Railcar Contract Last Resort

(source: Boston Globe)

Hyundai Rotem, the sluggish South Korean railcar builder, must feel it has the MBTA and its riders over a barrel. Sure, the company lags far behind its schedule for providing 75 badly needed double-decker coaches. Sure, the four test cars it finally did provide in 2012, more than two years late, have been rife with faulty workmanship. Sure, the original $190 million contract brought suspicion on the MBTA, after it became clear the company had hired a senior T official’s father to help win a contract in Philadelphia. But what’s the MBTA going to do about it now? Cancel the whole contract and start all over again?

That’s just what the T has threatened to do in a letter to Hyundai Rotem last month, but it’s unclear how realistic a threat that is. Canceling the contract outright should be the last resort. The T has declined to comment on what its Plan B is, or, indeed, if it even has one. According to public-transportation analysts, it can easily take five years between the day a contract is put out to bid and when the new coaches start carrying passengers. Five years? The desperate need for more reliable equipment — now — is one of the reasons the questionable Hyundai deal was rammed through so quickly in the first place. That was in 2008.

Speed is not the only consideration, of course. The T’s letter raised serious questions about the quality of the four test cars, which had chassis and wiring problems. If in the T’s estimation the cars are unsafe, or will create an ongoing maintenance nightmare for the agency, it must cancel the contract. But if those issues can be addressed, and the T has no clear backup plan to fill the need more quickly than waiting for Hyundai, the best course for T officials is to grit their teeth and stick with the plan. That is what the transit agency in Philadelphia did after similar problems arose with its Hyundai Rotem deal. Philadelphia’s cars were more than a year late, but more than 90 percent of them have now arrived, and more than 100 are in service.

Whatever the T decides, the clear lesson is that the agency must take a hard look at its flawed contracting process. This is not the first major rail contract that has gone sour, with direct consequences for riders. In 1993, bowing to backroom political interference, the agency purchased concrete ties that turned out to be faulty; passengers paid the price with cancellations as the ties were replaced in 2010 and 2011 at a cost of $91.5 million. A 1995 deal with Breda for new Green Line trolleys also turned into a fiasco.

Perhaps the lesson is that the T just isn’t very good at handling big equipment contracts. There is an alternative: Even as the T mulls what to do with the Hyundai Rotem deal, the agency is also considering a new contract to operate the commuter rail system itself. The existing model has been for the T to buy cars and locomotives for the operator, but giving the contractor a longer-term deal and the responsibility to buy equipment could save the T some headaches. The delayed Hyundai cars are a powerful argument for trying a different approach.