Rail car contract signed after city receives reassurance [Honolulu Star-Advertiser (HI)]

Ansaldo Honolulu JV signed a $1.4 billion contract with the Honolulu Authority for Rapid Transportation for 80 rail cars on Monday.

The contract, which underwent nine months of public scrutiny, calls for the Italian-based rail car company to deliver the first 16 vehicles to the city by 2014, and the rest to arrive by 2018.

The decision comes after the rail agency's board questioned the chief executive officer of Ansaldo STS, the operations arm of Ansaldo Honolulu.

"We have strong safeguards in bonds and guarantees to protect us," said Toru Hamayasu, interim executive director for HART. "But more importantly, I believe we selected a responsible contractor with a solid commitment to delivering a world-class system for Honolulu."

Ansaldo Honolulu was beset by scrutiny since the city announced its intent to award the contract in March.

Reports emerged from other U.S. cities that worked with Ansaldo about late deliveries and cars that didn't meet specifications, particularly in Los Angeles.

The two losing bidders of the contract, Bombardier Transportation and Sumitomo Corp. of America, protested to the city, then to the state Department of Commerce and Consumer Affairs.

Bombardier Transportation still has a case in Hawaii appellate court and has filed an appeal with the Federal Transit Administration. The company argues that it was never warned it would be disqualified after changing some language on liability insurance in its bid. It also had the lowest price offered out of the three bids.

"We continue to believe that we were improperly disqualified," Bombardier Vice President Andrew Robbins said Monday. "The city would've been served to rebid the contract. We have the lowest price, and we have a far lower operations and maintenance price."

Subcontractors for Sumitomo were somewhat successful in their complaint with the state that Ansaldo did not have a contractor's license before the company bid for the contract. However, the state's only response was to issue a $150,000 fine against Ansaldo.

And during the summer, Ansaldo's parent company in Italy, Finmeccanica SpA, announced it was seeking a buyer for AnsaldoBreda, the car-making arm of Ansaldo Honolulu. Finmeccanica suffered a third-quarter loss of about $1 billion, it announced earlier this month.

"We have confirmation at three levels -- the city, state DCCA and the state courts -- that the process was in full compliance with the procurement policies," HART board members Don Horner and Damien Kim said in a prepared statement. Horner is the Finance Committee chairman, and Kim is the Project Oversight Committee chairman.

The news about the financial losses shook even pro-rail members of the City Council, including City Council Chairman Ernie Martin. Earlier this month, five members called on HART to delay signing the contract.

Martin on Monday said he is "cautiously optimistic" and expects that the Council will stay on top of the situation.

"From HART they did an extensive review of the financial capabilities of Ansaldo, probably a more rigorous review than any other contract the city has had with respect to rail," Martin said. "Whatever due diligence that could've been done was applied in this instance. I think one of the things I found reassuring is that they will continue to ensure financial stability as they move forward."

With Monday's signing, the rail project now has about 50 percent of its construction contracts awarded.

The city hopes to complete the entire system by 2019. Project opponents, including former Gov. Ben Cayetano, have filed a federal lawsuit to stop it. The lawsuit gets its first hearing on Wednesday.

Credit: Gene Park