The Southeastern Pennsylvania Transportation Authority’s contract for new passenger rail cars with CRRC MA Corp. has come under the glare of the U.S. Department of Transportation’s Office of the Inspector General. The OIG launched an audit on Feb. 24 of the Federal Transit Administration’s oversight of the applicable Buy America requirements for this federally-funded procurement. CRRC MA is an affiliate of CRRC Corp. Ltd., a Chinese state-owned enterprise.
Under the FTA’s requirements, more than 70% of the cost of the components and subcomponents for rolling stock must be from U.S. production for fiscal year 2020 and beyond. The final assembly of rolling stock must also occur in the United States.
CRRC MA, based in Springfield, Massachusetts, won a series of transit contracts with the Massachusetts Bay Transportation Authority in 2014, the Los Angeles County Metropolitan Transportation Authority in 2016 and SEPTA in 2017. CRRC Sifang America, an Illinois-based subsidiary of CRRC, is building rail cars for the Chicago Transit Authority.
According to a SEPTA spokesperson, no rail cars have been delivered yet. The first two pilot production vehicles are due to be assembled and tested at the Springfield factory this spring.
The OIG audit was prompted by a September 2022 letter from Reps. Sam Graves, R-Missouri, then the ranking member of the House Transportation and Infrastructure Committee; Rodney Davis, R-Illinois; and Rick Crawford, R-Arkansas, asking for a review of SEPTA’s contract with CRRC MA. (Graves is now chair of the committee.) A post on Twitter, republished by the Philadelphia Inquirer in July, appeared to show the first SEPTA cars being assembled in China, “apparently in contrast with FTA’s Buy America requirements for rolling stock procurement,” the letter states.
In an emailed statement to Smart Cities Dive, SEPTA said it has complied with all Buy America requirements. “The procurement received pre-award certification in 2017 prior to the award of the contract,” SEPTA said. A pre-certification letter from FTA grants a waiver from the Buy America requirements to the intended rolling stock purchase. The recipients — in this case, SEPTA — must be satisfied that the procurement meets the requirements after having conducted a review itself or a third-party audit.
“SEPTA initiated its own interim Buy America Audit in 2021, which found that the finished railcars are on track to exceed domestic content requirements with more than 150 unique components manufactured in the United States,” the statement said. “SEPTA is currently participating in a Buy America compliance review initiated by the Federal Transit Administration in December 2022, and we look forward to fully cooperating with the Inspector General’s Audit.”
CRRC MA did not respond to a request for comment on the OIG audit.
According to Fortune Business Insights, CRRC is the world’s largest railroad rolling stock manufacturer. A July 2022 Oxford Economics study states, “Between 2015 and 2020, CRRC won seven passenger rail projects in North America worth over $4.3 billion. They undercut the next lowest bidder on these projects by an average of 21%.”
Erik Olson, a lobbyist who serves as executive director of the Rail Security Alliance, which advocates for policies to protect U.S. railroad security, said in an interview, “Given what we know about CRRC and how they source materials, I think [the audit is] really appropriate, and I'd love to see it expanded to Chicago and LA and other places as well.” Freight car manufacturers, labor unions and a rail trade group fund the Rail Security Alliance.
The OIG confirmed to Smart Cities Dive that its audit is solely focused on FTA’s oversight of SEPTA.
