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LA County Awards $890M Deal to Japanese Firm

San Francisco Chronicle – May 1, 2012

LOS ANGELES – Despite complaints from local labor unions, Los Angeles County has awarded an $890 million contract for commuter light rail to a Japanese firm. Officials at the Los Angeles County Transportation Authority said the contract awarded to Kinkisharyo International to build 235 cars is crucial for opening the new light rail system on time and replacing old equipment on existing systems. Competing bids were rejected from Siemens Industry Inc. and CAF USA Inc.

The new light rail vehicles will be used on several projects, including the Crenshaw Line, the Expo Line to Santa Monica and Gold Line extensions. Earlier procurement issues, most notably with the Italian firm AnasaldoBreda resulted in a failed $300 million contract in 2009 to build 100 cars. As a result, Metro officials welcomed the new contract, as time is running short to purchase and deliver the rail cars before the new lines are complete.

“We are running out of slack, and the past two years have used up the slack that we had,” Art Leahy, Metro’s chief executive officer told the Board. “We are on the edge of slipping behind our construction schedule.”

Labor unions and civic organizations opposed the Japanese bid, saying the federal and local tax revenue that is paying for the rail cars should be used to create jobs within the state of California, not in Japan. Siemens, which has a factory in Sacramento, said it would create 1,122 jobs, open a new Los Angeles factory and invest $5 million in job-training programs.

This is hard; money is tight and jobs are a concern. How much of a premium does an agency pay for jobs–blindly making decisions on the “buy American” issue likely makes for poor decisions. I am in favor of creating and sustaining American jobs. That said, Wal-Mart used to tout their “Made in America” policy but it has been gone for many years. In order to provide the low cost goods that so many Americans buy at Wal-Mart they had to reach out to overseas manufacturing. Whether or not you agree with Wal-Mart’s decision, millions of shoppers benefit from this policy change. Cheaper rail cars means the authority can build more facilities for millions to use for decades to come. TW

The Tom Warne Report