June 8, 2014 at 6:27 pm

Critics target $58M state deal for Amtrak rail cars

Lansing — State lawmakers are looking into claims that the Department of Transportation is mistakenly buying passenger rail cars that Wisconsin rejected as the result of a faulty bidding process.

The criticism, aired at a recent Senate Appropriations Committee hearing, came from former U.S. Rep. Joe Schwarz of Battle Creek and a competing firm that argues the state’s bid specifications were so narrow only one company could meet them.

At issue is a pending $58 million Michigan Department of Transportation deal to buy two sets of passenger cars built in Milwaukee by the Spanish firm Talgo and once headed for a now-defunct high-speed rail project in Wisconsin. The cars sit idle because Wisconsin Gov. Scott Walker called off his predecessor’s railroad plan.

The state of Michigan wants to buy passenger cars, rather than pay a leasing charge to Amtrak as part of an annual subsidy that has exploded from $8 million in the 2013 budget year to $40 million this year for its three routes.

Aluminum coaches on the Wolverine route between Chicago and Detroit, where three trains a day often run at capacity, lack modern amenities and are deteriorating because Amtrak has no budget to overhaul them, according to MDOT. They have institutional decor, lack carpeting, have harsh lighting and lack hot water in restrooms, the state department says.

Talgo was the only bidder on Michigan’s proposal to upgrade to “next-generation” passenger coaches. An official of a competing company issued a statement Friday claiming the state’s request for bid proposals “was so narrowly targeted at one company’s product that we could not meet it.”

“MDOT simply did not write us into its script,” added James Coston, chairman of Chicago-based Corridor Capital LLC. “Instead, it drafted a one-character show and then invited the character to come to Lansing and perform.”

But Talgo argues Corridor Capital has no excuses.

“It is unfortunate that a company who had the opportunity to submit a proposal chose not to,” a Talgo representative said. “Even worse is that this same company is now attempting to interfere with a fair publicly offered ... (bid) using lobbyists and PR firms to advance what must be a questionable proposal.”

The state’s request for proposals, with a March 31 deadline, sought two complete sets of cars, each capable of carrying 310 to 350 passengers, MDOT railroad chief Tim Hoeffner told the committee. The state wants to have them in service in September.

This raises suspicions among Corridor Capital officials who had sought a longer-term deal with the state. MDOT officials said those talks helped spur the proposal to seek newer cars before they even were aware of the idled Talgo train sets.

Senate Appropriations Chairman Roger Kahn, R-Saginaw, held a hearing after learning of media accounts of the issue. Lawmakers drilled Hoeffner with questions about the deal.

“I guess if I were running a multimillion-dollar company, which you are called MDOT, and I only got one bid, boy, would I be nervous as to what I had missed, and I guess I would step back and look at the entire process and start all over again,” said Sen. Bruce Caswell, R-Hillsdale.

But Hoeffner said MDOT believes it would be unfair to Talgo because it did submit a bid. He emphasized the department hasn’t yet contracted with Talgo because it is doing a required evaluation to ensure Talgo can meet all of MDOT’s requirements for the coaches.

He said the department held a pre-bid meeting, attended by Corridor Capital and Talgo representatives, where potential bidders could ask questions and raise concerns about the bid specifications. The state heard none from Corridor Capital, Hoeffner said.

Prior to the Talgo proposal, Corridor Capital officials had been in talks with MDOT about their own plan to construct a rail car plant in Michigan and supply modern double-decker passenger cars as part of a 2016 plan, a company synopsis indicates.

Schwarz said Talgo’s cars, while new, are inadequate to make up the sleek 110-mile-per-hour trains Michigan wants to whisk passengers between Detroit and Chicago. He said he spoke only as an interested citizen and railroad buff.

Talgo’s train sets are “not compatible with existing Amtrak equipment nor with Amtrak next-generation equipment which may or may not come online sometime in the 2017, 2018 or 2019 time frame,” he said.

Schwarz, a one-term Republican congressman, helped arrange Michigan’s purchase of the 132-mile Dearborn-to-Kalamazoo portion of the Detroit-Chicago rail corridor for $140 million with a $338 million federal grant in 2011. The remaining federal money is being used to upgrade that segment for 110-mile-an-hour service to start in 2016.

Schwarz also questioned whether the Talgo coaches could operate without problems during Michigan’s harsh winters and would line up properly with platforms at Michigan train stations.

Public relations specialist John Truscott, who represents Corridor Capital, said the Talgo cars also may not be equipped for handicap access. Talgo’s legal bid to collect $66 million it claims it’s still owed by Wisconsin also raises concerns about ownership of the cars Michigan wants to buy, Truscott said.

While the state is assessing Talgo’s coaches’ ability to perform to its specifications, Hoeffner said the coaches can be adjusted to fit Michigan platform heights, are designed to operate at temperatures from 110 to minus-40 degrees and don’t need to line up with existing equipment because they’re complete by themselves.

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