Amtrak Disqualified in
Los Angeles Commuter Rail Procurement

At its meeting on 28 June the Southern California Commuter Rail Authority, which governs the Los Angeles commuter rail system, unanimously disqualified Amtrak from bidding on a systems maintenance contract for insufficient financial capacity. The text of the staff report follows:

TRANSMITTAL DATE:      June 24, 2002                                                              ITEM XX


MEETING DATE:                June 28, 2002


TO:                                         Board of Directors


FROM:                                   Chief Executive Officer


SUBJECT:                           Request for Corporate Pre-Qualification No. OP120-03 – Equipment (Rolling Stock) Maintenance Services- Recommendation to Pre-qualify Contractors





Establish a list of pre-qualified contractors to submit technical and cost proposals to provide equipment (rolling stock) maintenance services.






Staff recommends that the Board pre-qualify four of the five contractors that submitted corporate pre-qualification responses and that these four contractors be permitted to submit technical and cost proposals to provide equipment (rolling stock) maintenance services:


Alstom Transportation, Inc.

Bombardier Transit Corporation

Herzog Transit Services Inc.

Talgo, Inc.


Staff recommends that the fifth contractor, National Railroad Passenger Corporation (Amtrak), not be permitted to submit a proposal because Amtrak’s corporate pre-qualification response failed one of the pass/fail criteria.




Utilizing the criteria previously approved, re-score the corporate pre-qualification responses and revise the list of pre-qualified firms.




SCRRA contracts for the maintenance of its rolling stock equipment.  This work includes the management and performance of scheduled and unscheduled maintenance and repairs on locomotives and coaches; equipment engineering and materials management services; systems safety and quality assurance/quality control program development and implementation; incident response/investigation/cause-determination, and employee training.


The current contract (OP 112) was awarded by the Board to Bombardier Mass Transit Corporation in April 1998.  The contract expires on June 30, 2003.


The procurement process to award the new contract for maintenance of equipment was initiated a number of months ago and involves three phases: roundtable conference for interested parties, corporate pre-qualification, and receipt and evaluation of technical and cost proposals.  The roundtable conference was held on January 7, 2002, and was well attended by contractors engaged in the business of railroad equipment maintenance.


On March 22, 2002, the Board approved the evaluation criteria for the Corporate Pre-Qualification phase of the process. The corporate pre-qualification phase of the procurement process includes the review of a number of issues within four general categories: 1. General Corporate Structure and Experience; 2. Corporate Resources and Depth of Experience; 3. Financial Stability, Capacity and Resources; and 4. Bonding and Insurance.  Within these categories the issues considered included, but were not limited to, the following:


§        corporate structure to determine how the corporation is organized

§        experience managing large dollar value projects

§        whether or not equipment maintenance is part of the firm’s core business

§        experience in providing equipment repair and maintenance services to other fleets of rail vehicles similar in size and nature to those operated by SCRRA

§        independence of the equipment maintenance operation from other corporate activities

§        how well the equipment maintenance operation is supported by other corporate functions such as equipment engineering

§        identification of resources, if any, that are shared between the maintenance, operating and manufacturing operations and the potential impact of shared resources

§        ability to provide materials management/inventory control

§        experience handling incident response and on-site repairs

§        experience and qualifications in the areas of quality assurance, quality control, safety planning, maintaining a safe work environment, and financial systems and reporting

§        experience recruiting and training key management and craft labor workforce personnel

§        assessing each firm to determine if they have the appropriate resources and financial stability, using an outside auditor to determine financial capacity


A recommendation that a contractor be pre-qualified allows the contractor to advance to the next phase of the procurement.  It is not an indication, however, that the contractor will meet all of the specific requirements and conditions addressed in the scope of services to be evaluated during the next phase of the procurement.


The request for corporate pre-qualification was issued on March 28, 2002.  The document was distributed to all of the contractors that participated in the roundtable conference and was advertised in newspapers throughout the five-county region, railroad-related publications and in Passenger Transport.  Twenty-four firms received the documents and were included on the planholders list.


A corporate pre-qualification conference was held on April 11, 2002.  Sixteen contractors (six potential prime contractors and 10 potential subcontractors/suppliers) attended.  A brief tour of the Central Maintenance Facility was also held at that time.  The corporate pre-qualification responses were due on May 13, 2002.  Five contractors responded.


Consistent with SCRRA policy, an evaluation team was established to review the responses to the corporate pre-qualification.  The evaluation team consisted of two SCRRA staff members, two outside consultants with extensive railroad equipment maintenance experience, and an independent audit firm.  This same team will evaluate the technical and cost proposals in the next phase of this procurement.


After completing the evaluation of the corporate pre-qualification responses, the evaluation team determined that three of the five contractors, Alstom, Bombardier, and Herzog, had passed all four criteria and should be pre-qualified.  The evaluation team had concerns with respect to two of the five contractors, Talgo and Amtrak.


The Talgo response presented two areas of concern, the second of which was also applicable to Amtrak.  The first area of concern was a technical issue primarily regarding Talgo’s ability to maintain a fleet the size of SCRRA’s fleet.  The second area of concern was identified by SCRRA’s independent audit firm and focused on Talgo’s and Amtrak’s ability to meet short-term future financial obligations.  The audit firm’s concern derived primarily from an analysis of Talgo’s and Amtrak’s financial records that showed they had incurred substantial operating losses for FY2000 and FY2001, and have liabilities that substantially exceed their assets.


On June 6, 2002, SCRRA sent letters to Talgo and Amtrak requesting clarification of these areas of concern.  With respect to Talgo’s and Amtrak’s ability to meet short-term future financial obligations, the letters specifically requested that they provide an explanation of how they would meet their financial obligations for SCRRA’s work and that they provide a written, signed confirmation from their financial institution that a $5 million letter of credit would be provided should they be awarded the contract. The $5 million represents the estimated ‘float’ the awarded contractor will have to cover between incurring expenses and being paid by SCRRA.  The letter to Amtrak also sought a clarification as to whether a $270 million credit agreement obtained by Amtrak from a consortium of lenders would be available to cover Amtrak’s obligations to SCRRA in the event Amtrak was awarded the contract.  Talgo and Amtrak were both instructed to provide their response by June 12, 2002.


Talgo timely responded to SCRRA’s request for clarification.  Talgo’s response to the technical issue (primarily focused on Talgo’s ability to maintain a fleet the size of SCRRA’s fleet) satisfied the evaluation committee.  Likewise, Talgo’s response to the financial issue (being able to meet short-term future financial obligations) satisfied SCRRA’s independent audit firm.  Talgo’s response to the financial issues was satisfactory because SCRRA received a letter from Talgo’s bank committing to provide the required letter of credit should Talgo be awarded the contract.  In addition, Talgo obtained a commitment from its parent company, Patentes Talgo, to be responsible for Talgo’s performance of the work.


Amtrak’s reply on June 12, 2002, was not responsive.  Amtrak did not provide the requested commitment of a $5 million letter of credit from their financial institution.  Amtrak stated only that they were working on obtaining such a letter.  Amtrak’s reply also indicated that the $270 million credit agreement was in place only until November 2002, and that Amtrak would seek to renew the credit agreement.  If Amtrak was successful in renewing the credit agreement at the end of the year, and presumably for each successive year thereafter, then the credit agreement would be applicable to the contract to be awarded by SCRRA.  If Amtrak was not successful in renewing the credit agreement each year, then the agreement would not be available to Amtrak with respect to SCRRA’s contract.  Indeed, Amtrak’s existing credit agreement appears to be in jeopardy based on testimony provided by Kenneth Mead, Inspector General of the U.S. Department of Transportation.  On June 20, 2002, Mr. Mead testified before Congress that the banks providing the current credit agreement are not allowing Amtrak to draw against it until Amtrak can provide an acceptable form of security.


On June 18, 2002, SCRRA sent a second letter to Amtrak again requesting that Amtrak obtain a written commitment from a bank to provide a $5 million letter of credit if Amtrak was awarded the contract.  Amtrak was given until noon on June 21, 2002, to provide the letter from its bank.  Shortly after noon on June 21, 2002, SCRRA received a letter from Amtrak’s bank.  Unfortunately, the letter was not responsive to SCRRA’s request.  Instead of stating that it would provide SCRRA with a letter of credit, the bank simply stated that it would consider providing the letter of credit.  The letter also contained numerous conditions and qualifications.  Staff consulted with SCRRA’s independent audit firm and determined that the letter from Amtrak’s bank failed to provide the requested commitment.


On June 20, 2002, President and CEO of Amtrak, David Gunn, in testimony before Congress, stated that Amtrak faced imminent financial peril.  Mr. Gunn testified that unless Amtrak receives access to additional funds, it will run out of cash in July, leaving him no choice but to shutdown Amtrak’s entire system.  He also testified that Amtrak had yet to obtain a final opinion from its auditors concerning Amtrak’s fiscal year 2001 financial statements and this, coupled with Amtrak’s precarious financial situation, had placed in serious jeopardy Amtrak’s ability to obtain short-term loans.


After consulting with SCRRA’s audit firm, staff determined that Amtrak had not passed this portion of the corporate pre-qualification.  Contractors had to pass all four criteria of the corporate pre-qualification in order to be pre-qualified and move on to the next phase of the procurement.  Therefore, staff does not recommend that Amtrak be pre-qualified.


The following is a chart indicating the results of the corporate pre-qualification.  As stated in the corporate pre-qualification document, failure on any one criterion results in the failure to pre-qualify.



General Corporate Structure and Experience

Corporate Resources and Depth of Experience

Financial Stability, Capacity and Resources



Bonding and Insurance


Pre- Qualification Result
































Accordingly, Alstom Transportation, Inc., Bombardier Transit Corporation, Herzog Transit Services, Inc., and Talgo, Inc. are recommended for inclusion on the list of pre-qualified contractors.


Budget Impact


Approval of the list of pre-qualified contractors, in itself, has no budget impact. The budget impact of a new equipment (rolling stock) maintenance services contract cannot be determined until the technical and cost proposals have been evaluated in the third  phase of this procurement.


Prepared by:     William X. Lydon, Jr., Director, Equipment

                           Linda Ford-McCaffrey, Contract Administrator

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