Metro Gets Bit By The "Buy American" Rule

Metro has received just about the worst news possible: The Federal Transit Administration's "Buy American" investigation found that Metro did, in fact, violate federal guidelines in its contract with the Spanish rail car company CAF.

In a letter to Metro, dated September 7, 2010, the FTA's chief counsel, Dorval Carter, wrote:

I have found substantial violations of FTA's procurement and Buy America rules...

The failure to properly correct these violations will result in a withdrawal of $64 million in Federal funding...and the ineligibility for Full Funding Grant Agreements for the North and Southeast Corridor projects.

That last part, especially, should be cringe-inducing to Metro execs and anyone hoping for Metro's light rail expansion throughout the city, because the Full Funding Grant Agreements, worth about $900 million, are crucial to any of Metro's plans.

In a press release, Metro's president, George Greanias, said: "We treat what the FTA says very seriously. The New Metro is committed to building a strong working relationship with the FTA and to build trust."

It could take awhile for Metro to get clarity on the federal funding situation -- it was hoping for that before the upcoming budgeting process -- because the FTA is requiring Metro "to terminate its existing contracts with CAF and re-procure [light rail cars] in a manner that complies with FTA rules requiring full and open competition."

It took Metro about a year to accept bids, negotiate, and sign the contract with CAF, and the Metro release estimated it will take about 20 months to sign a new contract and receive the rail cars for testing.

When the Buy America investigation started, the feds were only concerned that Metro planned to build two of the light rail cars in Spain, but, according to the letters from the FTA, the investigation expanded to the entire procurement process. And violations were found in the way Metro conducted that process.

A couple weeks back, Hair Balls wrote about Metro's procurement process that led to the CAF contract.

To date, Metro has paid out about $40.5 million to CAF, and according to Metro spokesman George Smalley, it remains unclear what will happen to that money until Metro execs have a chance to examine the FTA's 38-page report that details the Buy American ruling.

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