There were big concerns raised when Massachusetts officials picked a Chinese state-owned company to build new rail cars. Now it appears the project has gone completely off the rails.
The Massachusetts Bay Transportation Authority (MBTA) is accusing the Chinese state-owned enterprise (SOE) it hired nearly nine years ago to build new rail cars for its public transportation system of abandoning “its core responsibility and commitment to lead, monitor, mentor, and support quality management” on the project, noting it “remains greatly concerned that the situation will only degrade further.”
Boston Globe columnist Joan Vennochi obtained a copy of a letter sent from MBTA Deputy Director Mark DeVitto to CRRC MA Corporation Project Director Xianyi Jiang on Dec. 22 outlining 16 “significant lapses in overall quality management for the Red and Orange Line project,” including everything from “chronic workmanship quality issues with electrical assembly work, wire crimping, wire terminations” to “failure to respond to many letters from MBTA for quality related issues/concerns.”
DeVitto adds that the situation “has already caused major disruptions, rework and delays in production and delivery of Orange and Red Line Cars,” although he doesn’t get specific as to what those disruptions have been.
Some of it can be inferred, though. MBTA pulled nine Orange Line trains from the “T” rail system on Dec. 30 because of electrical issues, for example. And the Boston Herald reports that this isn’t the first time the MBTA has had to pull rail cars, as it has taken Orange and Red Line cars out of service “several times” because of braking and battery issues.
To which we say: We’re shocked, shocked to find problems going on here!
All joking aside: It’s worth taking a step back and looking at just how things got so bad, because this boondoggle of a project should serve as a cautionary tale for transportation officials across the country.
“I believe the governor will likely live to regret this decision”
This story begins way back in 2014, the year Frozen first hit theatres and Gwyneth Paltrow coined the phrase “conscious uncoupling.” In October, the MBTA officially selected a Chinese SOE called CNR MA to manufacture 284 new Orange and Red line rail cars for the T.
Then-Gov. Deval Patrick and state transportation officials were giddy about the choice. CNR MA, which was “controlled by the Chinese government,” agreed to build a new factory in Massachusetts to assemble the new rail cars. Not only would the facility create jobs, but the factory would serve as the company’s entry point to the North American market.
CNR MA had severely underbid its competitors to win the contract. It landed the gig for $566.6 million; the next closest bid, from Hyundai Rotem, came in at $720.6 million. “This is a win for our riders. It’s a win for our financial bottom line. And it’s a win for the authority,” MBTA board member Janice Loux said.
But not everyone thought it was such a bargain. There were serious concerns raised about China’s human rights record, ones that have since been proven to have merit. Former Massachusetts Republican Party Chairman Robert McGinn testified: “I believe the governor will likely live to regret this decision should he ever decide to seek another public office.”
Our own Scott Paul even weighed in, noting that by rewarding a company underwritten by the Chinese government, MBTA had undercut American manufacturers. “By making [CRRC’s] entry into the U.S. market possible, this procurement opens the door to unfair, state-owned competition on other rail and transit procurements throughout the United States,” he noted at the time.
Still, the project moved ahead. CNR MA eventually merged with another state-owned company to become the China Railway Rolling Stock Corporation (CRRC), and won contracts to build rail cars for transit systems in Philadelphia, Los Angeles, and Chicago by again, as predicted, severely outbidding its competitors.
But worries about the role of China’s government in all those U.S. taxpayer-funded projects were beginning to mount, with one report arguing that the ultimate goal was for China to dominate the U.S. rail car market, including freight rail. Others worried allowing China’s government such a direct hand in building U.S. rail cars would leave the systems vulnerable to hacking or even espionage.
By 2019, Congress had begun to notice what was going on. A bipartisan coalition led by Sens. Sherrod Brown (D-Ohio), Tammy Baldwin (D-Wis.), John Cornyn (R-Texas) and Mike Crapo (R-Idaho) came together to introduce the Transit Infrastructure Vehicle Security Act (TIVSA), which sought to ban taxpayer-funded transit contracts from being awarded to Chinese state-owned companies like CRRC.
Members offered plenty of reasons for such a ban. Brown argued that “federal dollars should not support Chinese state-controlled enterprises that want to undermine U.S. manufacturers and overtake our supply chain,” while Cornyn noted that “China poses a clear and present danger to our national security and has already infiltrated our rail and bus manufacturing industries.”
There were economic concerns, too. An Oxford Economics report found that for “every $1 billion awarded to a Chinese SOE to build passenger rail cars leads to the loss of 3,250 to 5,100 jobs.”
TIVSA passed Congress as part of the National Defense Reauthorization Act in 2019. But there was a two-year implementation delay, and CRRC was allowed to finish work on its remaining contracts.
In 2020, the Defense Department named CRRC to a list of companies with ties to the Chinese military.
A “worrisome list of workmanship and inspection reporting lapses”
When the MBTA first announced the contract with the company that became CRRC back in 2014, it said it expected the first rail cars to hit the tracks in early 2018, and all of the 284 rail cars to be in service by 2023. But as Vennochi noted in the Boston Globe, the project has been plagued by delays:
“The first Orange Line cars did not enter service until August 2019. As of September, the T said the shells of 152 Orange Line cars had been produced and 78 were ready for use. As of that time, the T had received only 12 Red Line cars. The company blames production delays on COVID-19, but read the letter from the T and it’s clear these problems run deeper than a pandemic.”
The continued delays, combined with what Vennochi described as “a worrisome list of workmanship and inspection reporting lapses” cited by MBTA in its Dec. 22 letter, remind us of another government project that turned into a boondoggle.
The California Department of Transportation went out of its way to avoid Buy America preferences back in 2004 in order to award a government-funded contract to a company in China to make the steel for the Bay Bridge. Like Gov. Patrick, then-Gov. Arnold Schwarzenegger touted the cost savings at the start.
But as with the rail cars, significant problems soon arose. The project ended up delayed and went over budget by hundreds of millions of dollars. And, more importantly, there were numerous safety concerns about the safety of the “weaker steel” in the bridge, including whether it could withstand a major earthquake — which was the entire point of rebuilding the bridge to begin with, since the original had collapsed in the 1989 Loma Prieta quake.
Bridges and rail cars aren’t the same thing, but there are parallels between the two projects that may explain some of the issues.
While CRRC does operate an assembly plant in Massachusetts, it’s pretty obvious that a lot of the work making these rail cars is being done in China. Entire rail car shells have been imported by CRRC into the United States for final assembly. With so much work happening on the other side of the world, it is nearly impossible to effectively monitor project progress, or lack thereof.
That’s one of the reasons for the problems with the Bay Bridge. When problems arose, officials had to fly to China to find out what was going on. A Sacramento Bee investigation found that the top executive for that project made 64 taxpayer-funded visits to Shanghai during the construction, costing $300,000. And when issues were discovered, California officials responded by “by relaxing U.S. standards when the firm couldn’t finish fast enough” and overriding “bridge welding codes and near-universal requirements for new bridge construction.”
One hopes that officials in Massachusetts won’t make those mistakes.
“…no meaningful progress has been made by CRRC…”
All of the reasons for initial concern about giving a taxpayer-funded contract to a Chinese SOE with ties to China’s military have only increased in recent years.
The Biden administration, for example, is now cracking down on Chinese technology and is working to decouple from China in key strategic areas, citing national security concerns. The United States is beginning to invest in its own industries, as the pandemic and supply chain crisis drove home the dangers of becoming too reliant on imports. Sadly, there’s mounting evidence that China is utilizing forced labor in much of its manufacturing, a byproduct of the genocide it is said to be undertaking in Xinjiang.
All of this has led to a paradigm shift in U.S.-China relations. On a practical level for CRRC, that shift — along with the implementation of TIVSA — means it will likely be harder to win transportation contracts moving ahead.
But that doesn’t mean CRRC is going away. Indeed, CRRC boasts of winning contracts to supply 700+ rail cars to agencies across the country, and CRRC can still bid on contracts for projects not funded with federal tax money.
Which is why CRRC’s boondoggle in Massachusetts is so striking — especially considering at least one other CRRC rail car project is facing challenges, too.
Members of Congress from both sides of the aisle have voiced concern about CRRC’s contract in Philadelphia, questioning whether it abides by Buy America preferences. As with the rail cars in Massachusetts, the shells are built in China and sent to the United States; the agency’s logo is even already painted on the rail cars. And here’s a worrisome tidbit: The Philadelphia Inquirer noted that photos from the Chinese facility that were posted to social media “apparently provided the first look” for local transit officials.
The Philadelphia rail cars haven’t been delivered and put into service yet, so time will tell if the same issues that have plagued the Massachusetts cars will surface. But the issues facing the T in Massachusetts should serve as a warning to Pennsylvania officials to keep a close eye on this project — everyone from local transportation folks to incoming Gov. Josh Shapiro and Sens. Bob Casey and John Fetterman should be paying attention.
In the meantime, the situation in Massachusetts is deteriorating. The MBTA noted in its letter that despite bringing up the issues at “Weekly Production Review Meetings, Monthly Quality Review Meetings, at Directors’ Meetings and through numerous project letters… no meaningful progress has been made by CRRC.”
The agency gave CRRC seven days to respond to its letter, and a spokesperson told the Boston Globe that CRRC said it would do so this week. MBTA is also looking at potential financial penalties it can impose under the contract, the spokesperson said. In her Globe column, Vennochi noted that outgoing Gov. Baker “let the problems in Springfield fester without accountability,” and now it will be up to incoming Gov. Maura Healey to fix this mess. Good luck to her.
In any case, we’ll keep monitoring this boondoggle as it moves ahead, and we hope that it serves as a warning for government officials when considering bids on future projects. Bids from Chinese SOEs often come in strikingly low… but that doesn’t mean there isn’t a cost.