You are here

China state-owned rail-car maker eyes Washington contract

China Railway Rolling Stock Corp could make a bid for Washington DC's Metro, valued at over US$1b

Washington DC

CHINA'S state-owned rail-car manufacturer has shown increased interest in building the Washington DC Metro's next-generation of rail cars, a development that could put the transit agency at odds with the US Congress over concerns about the cybersecurity risks and economic conflicts of such a deal.

China Railway Rolling Stock Corp. (CCRC) made a Metro-sponsored site visit last month for companies interested in bidding for the rail-car contract, which could exceed US$1 billion for its next-generation 8000-series cars.

The visit, along with CRRC's aggressive push for rail-car contracts in other US markets (including in New York City), suggest the company is likely to make a bid on the Metro deal. The possibility concerns some Metro board members, experts and others who say China could potentially use the vehicles to conduct electronic spying on the nation's capital. Those concerns, experts say, are heightened given political tensions between Beijing and the West and accusations that it has previously used connected technology for malicious purposes.

sentifi.com

Market voices on:

In December, the United States and four of its allies blamed China for a 12-year campaign of cyberattacks affecting 12 countries, and two Chinese hackers were indicted by the Justice Department, which said they had acted "in association with" the Chinese Ministry of State Security.

"When we hear from security professionals both within the agency and the federal government, that's something that is worthy of consideration and discussion," said Metro board member Steve McMillin, who represents the federal government. "To the extent we can address that through the procurement process, we absolutely should."

Since 2014, CRRC has won four out of five major US contracts for new rail cars, including ones for transit systems in Chicago, Boston and Los Angeles. Critics contend the company has been able to secure the deals by dramatically underbidding competitors due to subsidies from Beijing.

In addition to Metro, the company is making a play for part of a more than US$4 billion contract with the New York Metropolitan Transportation Authority (MTA) for rail cars for that city's subway. A story in O'Dwyer's, a public relations publication, reported that the US division of CRRC is paying a public affairs firm US$25,000 a month in its bid to land a contract to build some of the more than 1,000 cars MTA needs.

The situation is complicated because there are no US transit rail-car manufacturers and there is concern about the economic precedent of allowing a state-subsidised manufacturer into the US market.

Other rail-car makers who attended last month's Metro event included Hyundai Rotem, of South Korea, and France-based Alstom, according to meeting documents. CRRC has bested Hyundai in the past, however.

Kawasaki Rail Car, the Japanese maker of the Metro's 7000-series rail car, which is built in Nebraska, has not made site visits for the 8000-series project, which calls for up to 800 new rail cars. Observers say that's probably because the company is consumed with a contract to build an initial batch of new rail cars for the New York subway.

CRRC was initially believed to be on the verge of securing that US$3.2 billion contract - which would have been the company's largest US deal - but lost out in a joint bid with Canada's Bombardier Transportation, according to media reports.

A China-based rail expert said the decision reflected "political considerations," among other factors, according to a summary of his comments in the Beijing-aligned Global Times.

A spokesman for MTA did not immediately respond to a request for comment on whether the agency has heeded cyber security and economic concerns about CRRC. Kawasaki, which had delivered about three-fourths of Metro's 7000-series cars by the end of last year, is expected to have delivered all 748 by the end of this year, according to Metro projections.

Neither Kawasaki nor CRRC returned requests to multiple employees for comment.

The Southeastern Pennsylvania Transportation Authority (Septa) awarded CRRC a US$137 million contract in 2017 for the construction of 45 regional rail coaches, to be built in Massachusetts. Septa said CRRC beat out two other bidders based on two factors: technical rating and pricing.

Septa said the next lowest bid was from Bombardier, for nearly US$172 million, followed by Hyundai Rotem at nearly US$185 million.

After cybersecurity concerns were raised, Metro updated its bid solicitation to address some of the issues. It also extended the deadline for bids to April from January.

Last week, the transit agency outlined several new procurement requirements for the contract, such as requiring the manufacturer to disclose the country of origin of all rail-car components, assert that any software-related "back doors" have been disabled and remove any communications ports that wouldn't otherwise be needed for operations.

But some members of Congress are concerned any safeguards would not go far enough. WP