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http://www.wetmtv.com/news/local/story/CAF-USA-Contract-Talks/lCpb9yZvFkOMi5UuO3MlbQ.cspx
Reported by: Jenelle Tortorella
Last Update: 9/16 7:54 pm
Elmira Heights, N.Y. - It looked like a ghost town at CAF USA in Elmira Heights during the WETM 18 News exclusive tour of the plant. But the lack of people on the premises is not because the $330 million contract with the City of Houston has been cancelled.

The Federal Transportation Administration has place the process that Houston Metro used to select CAF USA as the manufacturer of 103 vehicles for the city's transit system under review. The FTA claimed the two pilot cars that were already made violate 'Buy America' requirements because they were made out of the country.

Another issue: Houston Metro allowed CAF to revise it's bid, but didn't allow anyone else to do that. Officials said jobs are now on the line.

"We anticipated 100-150 jobs coming to the plant. It was our expectation to begin hiring late last year, early this year and right now those are in jeopardy," said CAF USA Vice President of Operations Mark Smith.

For CAF USA employees, this development after almost a year and a half of planning came as a huge blow.

"They want to know what's going on, what's the status of the facility, where the plant is. This is extremely important to them and extremely important to us," explained Smith.

Smith said it isn't just the jobs that would come with the Houston Metro project that are at stake.

"We also have a supply base out in the local community and Upstate New York and throughout the country. These folks will also be impacted by the fact that we're not currently buying material to support the project. Other jobs are being effected besides the ones here in Elmira," he said.

CAF USA maintained they followed the contract and are compliant with 'Buy America' regulations. Smith said the two cars made out of the county should not effect the status of the deal because they were not paid for by federal stimulus money.

"We want our folks back and they're ready to come back. We need these jobs and we need them now," Smith said.

The FTA will review the contract; CAF USA is hopeful that the deal will be allowed. The FTA could force Houston Metro to put the whole contract out for bid again.

CAF USA's contract with AMTRACK that will bring an estimated 575 jobs to Elmira remains valid.


Memorial Examiner News
http://www.hcnonline.com/articles/2010/09/16/memorial_examiner/news/me_metro_denied_final.txt
FTA: Metro violated law; $900 million grant stalls
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Metro Chairman Gilbert Garcia and Mayor Annise Parker field questions from the media.

By MICHAEL REED<mailto:mreed@hcnonline.com>
Published: 09.15.10
The Federal Transit Administration has found Metro "violated both federal procurement law and the Buy America requirements" in signing a contract to buy 103 light-rail vehicles from a Spanish company.

Additionally, the FTA told Metro officials Sept. 8 the transit agency will have to put the order through a re-bidding process in order to qualify for a $900 million grant that had been held up by investigators.

"There is a path forward. It is very rocky. It is steep," said Mayor Annise Parker, about three hours later at a news conference. "Metro should support our local and national economy."

In the letter from FTA Administrator Peter Rogoff, hand-delivered to Metro's acting president and CEO George Greanias and its Chairman Gilbert Garcia, Rogoff wrote:

"The results of the investigation are both alarming and disturbing. They reveal a series of systematic efforts through which Metro and CAF (the Spanish firm, Construcciones y Auliliar de Ferrocarriles) sought to bypass numerous federal rules. These rules are designed to ensure the integrity of procurements involving taxpayer funds and the requirement to use taxpayer funds in a manner to maximize the creation and sustainment of well-paying jobs here at home."

In its findings, the FTA said the Metropolitan Transit Agency's purchase plan was "flawed due to the sum of many failures" and pointed to the unfair advantage the transit agency had given the Spanish firm in allowing for the construction of prototype rail vehicles abroad.

The lack of grant funding has caused Metro to delay some of the work it is doing on three light rail lines currently under construction. Additionally, not receiving the money poses a major threat to construction of two future lines - the Uptown, to run along Post Oak Boulevard, and the University, to run locally along Richmond Avenue and Westpark Drive.

Rogoff's letter did say while the violations are serious, Houston commuters should not be denied needed transit improvements due to the actions of Metro's previous management.

"The Administration still believes that the North and Southeast Corridor projects have merit and we stand behind our Fiscal Year 2011 budget request of $150 million for the two projects," he wrote.

At the news conference, Greanias said the need to re-bid the contract could delay the receipt of new LRVs for as much as 20 months.

While, CAF was not barred by the FTA from trying to regain the contract, he said a decision on whether it would be allowed to participate in the process would be determined by the Board of Directors.

CAF has already received about $40 million toward the contract with Metro, both Greanias and Garcia confirmed, though neither would speculate on legal action toward recouping those funds.

"There are several lawyers in this town who are likely licking their chops," Parker said.

Metro had planned to file a request with the state Attorney General's office to sell revenue bonds - not secured by sales tax - after receiving the $900 million federal grant.

Rogoff had written to U.S. Rep. John Culberson (R-District 7) on Christmas Eve saying Metro was "projecting $2.6 billion in bond proceeds from FY (fiscal year) 2009 through FY 2014."

The FTA began a formal investigation into the Metro's possible violation of Buy America policy guidelines for federal funding on April 23, 2010.

Chief among its concerns was Metro's approval of a contract to buy light-rail vehicles from CAF. Part of the policy requires that final assembly of the LRVs take place in the United States.

Buy America rules are designed to stimulate the economy and increase jobs in the United States.

The contract to purchase 103 LRVs was executed by Frank Wilson, former Metro president and CEO, on April 22, 2009, following board approval. This occurred a week after the FTA sent Wilson a letter saying Metro was not eligible for a waiver from Buy America guidelines, an Examiner open records request showed.

"CAF is ineligible for a waiver (from Buy America guidelines) in this instance," because it has already signed a certificate of compliance, the letter from acting-FTA Chief Counsel Scott A. Biehl said.

It further denied a Metro request for a public interest waiver to allow two pilot LRVs to be built in Spain, saying that element is an "integral" part of the contract CAF had won through the legally required bidding process.

"... for purposes of Buy America, the pilot LRVs cannot be separated from Metro's contract with CAF for production and assembly of LRVs for use on the North and Southeast corridors."

Adding to the complications, Metro Board resolutions for April 23, 2009 also showed the board approved a contract to "lease" two light rail vehicles.

This was not the first time Buy America issues had cropped up in the funding process.

On March 6, 2008, the FTA wrote to Metro saying it had received an inquiry from "a prospective supplier of LRVs" that stated Metro had issued a procurement for LRVs that did not include Buy America provisions, the open records request showed.

Separately, the FTA reviewed Metro funding documents following allegations the agency used outdated, pre-stock market-bust sales tax revenue projections in its November application for the grant. Metro denied that allegation.

However, a little more than two weeks ago, Louise Richman, Metro chief financial officer, told the Examiner the transit agency's liquidity ratio - a measurement of the transit agency's ability to pay off its short-terms debts - had fallen to 0.86 to 1 during fiscal 2009.

That formula serves as a significant component of federal funding for light-rail lines in the New Starts program.

To gain funding, an applicant must receive at least a "medium" accumulated rating based on five categories, one of which is the liquidity ratio, defined as total cash, accounts receivable and nonrestricted investment portfolio vs. current liabilities.

Based on its 2009 liquidity ratio, Metro would receive a "low" rating in this crucial category for falling below the 1-to-1 level.