Concerns continue over rail car builder

Stanley Chang
Stanley Chang
Ivan Lui-Kwan
Ivan Lui-Kwan

HONOLULU (HawaiiNewsNow) - The contractor has been picked but the contract has not yet been signed and there's increasing concern the company in charge of building Oahu's rail cars and control system may not be around to finish the job.

It's one of the most important decisions in the entire rail project.  Who should build the actual train itself?  The city picked Ansaldo Honolulu for the nearly $1.5 billion job.  But now new revelations about the company's stability have the rail authority taking a closer look.

We've learned that the overall financial stability of the company only accounted for about seven percent of the selection criteria for choosing the company.

Ansaldo Honolulu did submit financial statements from the past three years.  But since applying for the bid the company has had significant financial losses.  And the parent company has talked about restructuring or selling the company outright.

"I'm deeply concerned about Ansaldo's ability to execute a project of the nature of the core systems contract that Honolulu has put out for bid," said Stanley Chang, Honolulu City Councilmember.

Honolulu Authority for Rapid Transportation or HART members tried to address the issue in today's meeting.  Although they were told by corporation counsel not to disclose specifics because of an ongoing legal challenge on the bid selection.  However they weren't able to escape the topic completely.

"I wouldn't want to have to change train suppliers in the middle of a procurement," said Simon Zweighaft, InfraConsult Chief Project Officer, which is the lead company consulting the city on the rail project.

"But it's not inconceivable?" questioned Don Horner, HART Board Member.

"It's not inconceivable," responded Zweighaft.

Zweighaft also explained there was one surety bond for the entire project that is worth more than $300 million to help finish the job.

"If they defaulted right at the beginning it would be pretty easy to switch it seems to me," Zweighaft told the board.

But an industry insider says it's completely naïve to think it would be easy to switch after they've started.  The insurance company won't just hand the money over right away.  It will cause huge delays and switching company's likely means starting all over because one company's technology is not going to be the same as the next.  And because the contract also calls for the guarantee to operate and maintain the train, the new company would not want to bank on the former company's work.  An analogy given is with Microsoft and Apple. If one went down you wouldn't take the computer to the other to fix because the technology, parts and software are different. And if you tried it won't work as well as it should.

Because it's so important to start with the company that will finish the job, HART board members have more questions about Ansaldo's future.

"Yes I think certainly we want to look very closely at what their issues are," said Keslie Hui, HART Board Member. "How strong is the parent company's support for Ansaldo going forward and having that understanding what kind of commitment do we have? The board has to make a decision on how to move forward."

"I think we're all committed to do the job and to make sure this project is done on time and on budget and I feel really good that we're moving in the right direction. I feel very confident we're going to get there," said Ivan Lui-Kwan, HART Board Member.

"Even with Ansaldo?" I ask.

"I just feel like there are enough protections in place under the law," Lui-Kwan responded.

Ansaldo beat out Bombardier Transportation and Sumitomo, two other companies vying to build the train cars and control system.  They both filed a protest.  Bombardier's protest was already rejected.

The oral argument phase of the Sumitomo hearing is complete and written arguments were due today.

A decision on that case is expected before August 15.  That decision could determine what the city does next.

Copyright 2011 Hawaii News Now. All rights reserved.