Philadelphia’s SEPTA Transit System Officially Cancels Its Disastrous Rail Car Contract with Chinese State-owned Firm CRRC

By Elizabeth Brotherton-Bunch
Apr 15 2024 |
A rendering of the interior of the planned double-decker rail cars built by CRRC for SEPTA’s regional rail system. CRRC handout

SEPTA said the contract to build double-decker rail cars was “terminated for cause.” CRRC failed to deliver a single car; the project was four years behind schedule and $50 million over budget.

When the Southeastern Pennsylvania Transportation Authority (SEPTA) in 2017 selected the Chinese state-owned entity CRRC to manufacture 45 double-decker cars for its regional rail system, officials cited cost as the key factor behind its decision.

CRRC’s bid came in at about $137.5 million, far below the next-lowest of submission of about $171.5 million — and it drew immediate suspicion. A spokesperson for Hyundai Rotem, which also bid on the project and had a manufacturing presence in the City of Brotherly Love, remarked that “I cannot grasp how they are able to do it at that cost.”

Well, as it turns out, they couldn’t.

On Friday, SEPTA officially announced that it is terminating its contract with CRRC. The Chinese firm failed to deliver a single rail car to the transit agency over the past seven years; CRRC was four years behind schedule and $50 million over budget.

The Philadelphia Inquirer reported that SEPTA found CRRC “performed shoddy work and repeatedly failed to meet production deadlines.” The Inquirer noted:

As early as January 2022, SEPTA chief executive Leslie S. Richards said CRRC cars under construction for the agency had problems, including failures of watertightness tests, faulty interior panels, wiring issues, repeated brake test failures, and unsafe emergency exit windows.

There also were big concerns as to whether CRRC was meeting Buy America requirements in building the rail cars. While the Chinese firm claimed the bulk of the work was happening at its assembly plant in Massachusetts, there was strong evidence that most of the work actually was happening in China. Photos published on X (formerly Twitter) showed double decker rail cars at a Chinese factory, complete with SEPTA’s trademark red, white, and blue logo.

SEPTA isn’t the only transit agency to run into trouble when dealing with CRRC. Up in Boston, the Massachusetts Bay Transportation Authority (MBTA) recently announced it will spend up to $148 million more to finish out its contract with CRRC to produce rail cars for the city’s T subway system. That project also has been plagued by years of delays and hundreds of millions of dollars in cost overruns, and the cars that the Chinese government-owned firm have produced have been plagued by safety concerns.

Given the awful results that both Philadelphia and Boston have faced in their dealings with CRRC, it’s wild to think back to what things were like seven years ago when SEPTA first announced its contract with the firm. At that time, CRRC had already won bids to build rail cars for not only Boston but also transit systems in Chicago and Los Angeles. Given how low CRRC was able to bid, it appeared like nothing would be able to stop CRRC from winning additional contracts across the country.

But in retrospect, the now-proven-to-be-unrealistic SEPTA bid was a turning point, as it helped to spark a bipartisan effort on Capitol Hill to stop Chinese state-owned companies from bidding on transit contracts funded by federal taxpayer dollars. Not only were there concerns that such low bids were a threat to local manufacturers, there also were significant national security worries about using tax money to give a company with ties to China’s military a direct role in building American transportation systems nationwide.

Congress enacted the bipartisan Transit Infrastructure Vehicle Security Act in 2019 to address those concerns. That law prohibits Chinese state-owned firms from bidding on future federal taxpayer-funded contracts to make rail cars or buses, but contracts already underway were allowed to proceed.

And there were loopholes in the TIVSA law that Congress is still working to address.

Just last week, a dozen House members wrote to leaders on the Senate Commerce and Transportation and Infrastructure committees urging them to include language in legislation to reauthorize the Federal Aviation Administration (FAA) that would prohibit Chinese state-owned companies from bidding on taxpayer-funded contracts to build shuttles, trams, and monorails for U.S. airports. That language was included in the House version of the FAA bill, but is not in the Senate version.

“With the ‘Buy America’ loophole for federally funded public transportation projects now closed, we are concerned that Chinese-based firms like the China Railway Construction Corporation (CRCC) and BYD Auto will turn to the U.S. market for airport shuttles, trams, and monorails,” the House members write. “Congress should not wait for unscrupulous foreign companies to exploit this remaining loophole in our ‘Buy America’ laws before acting to close it.”

Given the absolutely disastrous results of the previously CRRC rail projects, it seems like including this language in the Senate version of the FAA bill is a no-brainer. Congress must make sure the U.S. doesn’t continue to repeat its past mistakes and continue to send taxpayer money to Chinese government-owned firm that can’t even get the job done.

In Philadelphia, it is unknown whether SEPTA will seek out another company to build new rail cars. But it is clear that the city will be paying for its mistake to go with CRRC for a long time.

Along with the millions and millions of dollars likely lost in the failed contract, SEPTA’s decision to go with CRRC also led Hyundai Rotem to close its Philadelphia rail car factory. It will remain a missed opportunity to create good-paying jobs and build out a critical industry right in the heart of the city, one that very well could have generated massive revenue for decades to come.