December 17, 2010

Houston Metro, CAF reach settlement

The Houston Metropolitan Transit Authority (Metro) reached a settlement with CAF USA Inc. (CAF), a subsidiary of the Spanish Firm Construcciones y Auxiliar de Ferrocarriles, S.A., over two disputed contracts for the construction of light rail cars for its North and Southeast Corridor lines.

Under the agreement, the contracts are canceled and CAF will forego any additional payments for unpaid work and lost profits. In addition, the railcar manufacturer will refund $14 million to Metro. The agreement was ratified by Metro's board on Friday.

In September, the Federal Transportation Administration found that CAF and prior Metro management had violated federal procurement law and Buy America requirements regarding the contracts, putting $900 million of federal transportation grants for the rail lines in jeopardy. Metro's new management ordered CAF to stop work on the railcars and immediately swung into action to protect access to federal funds.

Metro initiated a mediation process with CAF that took place recently, leading to the settlement, which allows Metro to now move forward quickly to protect the $900 million in federal funding for the rail lines.

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