(The following story by Jere Downs and Nathan Gorenstein appeared on the Philadelphia Inquirer website on March 21.)
PHILADELPHIA — SEPTA abruptly canceled its quarter-billion-dollar purchase of new Regional Rail cars Friday in order to end a lawsuit that accused the transit agency of rigging the bid to favor a South Korean firm.
In a written statement released Friday, SEPTA board chairman Pasquale “Pat” Deon said the potential legal costs prompted him to end the suit and put the contract out to bid again.
SEPTA expects quickly to invite new bids for the contract to build 104 new cars for the Regional Rail system, the statement said.
Deon and agency manager Faye Moore signed the legal document to rebid the contract on Thursday. It was filed in court Friday, ending SEPTA’s effort to hire United Transit Systems to build the new cars.
The settlement stunned some SEPTA board members who learned of it from a reporter.
Executives for Kawasaki Rail Car, which brought the suit, were jubilant.
Kawasaki attorney Richard A. Sprague suggested the prospect that SEPTA officials, employees and others would be questioned prompted the agency to end the litigation.
“There are a lot of people who didn’t want to be deposed,” Sprague said. A SEPTA lawyer called Sprague’s comment unfair.
Kawasaki filed suit four weeks ago, alleging that SEPTA had improperly relaxed specifications requiring the winning bidder to have experience building stainless steel cars to U.S. regulations. SEPTA said the change was merely a clarification.
United Transit, the South Korean firm, submitted the low bid of $236 million, but its proposal was rated last of four bidders by SEPTA’s technical staff, in part because of its limited domestic experience.
Kawasaki, the second-lowest bidder, at $250 million, received the highest technical rating. It has built about 1,200 cars for the New York City transit system.
Deon and other officials said that the agency needed to save money and that United Transit’s zeal to enter the U.S. market would compensate for its inexperience with stiff Federal Railroad Administration guidelines. It was not mandatory for SEPTA to hire the low bidder.
“SEPTA is already in a severe budget crisis, and a protracted legal challenge would cost precious money and time,” Deon said in the statement.
United Transit had launched an intensive campaign that included hiring Alan Novak, the Pennsylvania Republican chairman, as a lobbyist for $10,000 a month. Albert Mezzaroba, president of the Convention Center and a fishing partner of Deon’s, was on Novak’s team.
Board members learning of the settlement from reporters barraged Moore with angry calls, according to sources at the agency.
“It’s a little embarrassing to have a reporter call me and tell me this,” Michael O’Donoughue, one of 15 board members, said Friday. “I don’t know about democracy. It is a little strange.”
Kawasaki marketing director Tomar Jitendra said the court action was “a matter of principle.”
“SEPTA should have followed the [request for proposals] process based on merit. All we ever wanted was a level playing field.”
United Transit said in a written statement that, like Kawasaki, it would again bid for the work and said it “remains confident that it will be awarded the contract because it manufactures superior products at a better price.”
Had Kawasaki’s lawsuit continued, Sprague was scheduled to depose 23 people. He would not disclose that list, but Kawasaki said it included Deon and Novak, as well as key SEPTA engineers and professionals. Kawasaki has alleged that at least one key technical official knew nothing of the specification change until after it had occurred.
SEPTA attorney Mark Gottlieb said the agency had “agreed on the deposition schedule long before this decision was made” and called Sprague’s contention that the agency was avoiding the depositions an “unwarranted inference.”
Another Kawasaki attorney, William H. Lamb, said that for SEPTA to end the litigation at such an early stage was “very unusual, highly unusual.”
Don Nigro, president of the Delaware Valley Association of Rail Passengers, said: “Kawasaki had a great case. SEPTA had a losing battle ahead of them.
“Quite frankly, Kawasaki is very experienced with U.S. standards. [United Transit’s] experience meeting Federal Railroad Administration requirements for these type of vehicles is zero.”
The technical specifications were first issued in 2002, when SEPTA required that the winning bidder have previous experience making stainless steel railcars “which comply” with federal technical and safety rules.
SEPTA also wanted the winning bidder to have experience making stainless steel cars with the same “methods, techniques and facilities” as would be used for the new purchase.
In May 2003, SEPTA changed the specifications to mandate “prior experience” with federal requirements generally, rather than experience specifically with stainless steel cars.
Also, SEPTA dropped a requirement that the winning bidder have experience manufacturing cars with the production methods that would be used for SEPTA’s order. Rather, SEPTA said such experience was “preferable.”
United Transit does not have any experience making stainless steel commuter cars for the U.S. market. Its only other experience in meeting federal regulations came in the late 1980s, when it manufactured eight cars for the Alaska state railroad out of nonstainless steel.