SEPTA Terminates CRRC Contract ‘For Cause’

Written by William C. Vantuono, Editor-in-Chief
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Citing four years of delays, poor workmanship and quality controls and zero deliveries, SEPTA (Southeastern Pennsylvania Transportation Authority) has terminated a $185 million contract with Chinese SOE (state-owned enterprise) CRRC (China Railway Rolling Stock Corp.) for 45 bilevel railcars for the agency’s Regional Rail lines. SEPTA so far had paid $50 million to CRRC

SEPTA “terminated [the contract] for cause,” the authority said in an April 12 statement. “The authority is assessing its options for recouping funds that have been spent on the project.”

Carbodies are built in China and shipped to CRRC’s Springfield, Mass., plant for final assembly. CRRC bid $34 million below second-place Bombardier Transportation (now Alstom) and $47 million below Hyundai Rotem. The SEPTA contract was CRRC’s first U.S. order for bilevels. More than two years ago, SEPTA CEO and General Manager Leslie S. Richards cited manufacturing problems including watertightness test failures, poor wiring on interior control panels and other subassemblies, repeated brake test failures, and emergency exit windows that did not meet safety standards.

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

CRRC originally established the Springfield facility, CRRC MA, in 2014 to build 400 rapid transit cars to replace aging rolling stock on the MBTA (Massachusetts Bay Transportation Authority) Orange and Red Lines. CRRC MA has delivered 130 thus far; the contract is three years behind schedule. Many have been removed from service for problems including a battery explosion, a derailment, loose brake bolts and faulty wiring. In March, MBTA updated its contract, agreeing to pay $148 million more to speed production.

U.S. officials and competitor rolling stock manufacturers such as Siemens Mobility, Alstom and CAF have stated publicly that CRRC’s SOE status enables it to underbid on public contracts with artificially low prices.

“SEPTA” did the right thing,”  Rail Security Alliance Executive Director Erik Olson said in a statement. “Given that CRRC is four years behind schedule and does shoddy work, the choice is clear. SEPTA saw it and rightfully terminated its CRRC contract with cause. Communist China-owned CRRC won the original SEPTA procurement bid in 2017, just years after CRRC won its first $505 million contract with the MBTA. The contract specified that 45 bilevel commuter cars would be built for $185 million. In spite of not receiving a single car from the Chinese SOE, SEPTA says it has spent $50 million to date.

“Whether it’s in Boston or Philadelphia or  Los Angeles, CRRC’s ultra-low procurement bids are being shown for what they are. They’re years behind schedule, and their railcars are known for mechanical and safety issues.

“National security is also an issue with CRRC. Early this year, CRRC was placed on the U.S. Defense Department’s (DOD) updated entity list, which officially designates CRRC as an extension of Communist China’s military. It has also been flagged under Section 805 of the FY 2024 National Defense Authorization Act (NDAA), which prohibits the DOD from purchasing goods or services produced by Chinese military companies identified on the Section 1260H List and entities they control. Bipartisan lawmakers on Capitol Hill have also called out the SOE in numerous congressional and senate hearings about the China threat.

“MBTA should take a hard look at what SEPTA has done and seriously consider taking a similar action. Massachusetts transit riders and taxpayers should demand it.”

Further Reading: North American Rail Supply and China: Why We Should Be Concerned

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