Frustrated state officials have summoned to Boston the chief executive of a South Korean company lagging far behind on a $190 million contract to build commuter rail coaches, demanding to know how the firm can avoid additional delays that would leave riders relying on cramped, dated rail cars.
Already nearly two years late, Hyundai Rotem appears to be in danger of falling further behind on its contract to build 75 coaches, officials said. The modern double-decker cars are supposed to replace some of the MBTA’s oldest single-level cars and expand the size and reliability of its 410-coach commuter rail fleet.
“We’re not happy with where we are today,” Secretary of Transportation Richard A. Davey said. “I remain open to Hyundai Rotem being able to bring resources to bear to make this contract ultimately successful. We’re not ready to throw in the towel yet but we really need to hear a plan [Wednesday] to move forward.”
Hyundai Rotem’s president and chief executive, Min-ho Lee, is to appear at Wednesday’s monthly meeting of the board overseeing the MBTA and state Department of Transportation. Board members demanded in March that corporate leaders fly in from Korea — member Janice Loux said they should “bring their flak jackets” — but Hyundai Rotem dragged its feet on sending the top executive, eventually agreeing last month, Davey said.
“We’re pleased he’s coming so we can hear from him personally how Hyundai Rotem’s going to get this contract back on track,” he said.
‘We’re not ready to throw in the towel yet but we really need to hear a plan.’
The T sent Lee a letter Tuesday detailing the board’s concerns and asking him to address how the company can accelerate delivery without cutting corners on materials, quality, or other essentials.
“The board is extremely concerned about your progress on this project. . . . More importantly, there are questions about Hyundai’s commitment and ability to deliver the quality that we value most,” the letter, signed by acting MBTA general manager Jonathan R. Davis, said. The board “needs your personal commitment to providing this project with the leadership and resources it needs to succeed.”
A company spokesman did not respond to requests for comment Tuesday.
The contract has placed transportation officials in a bind. Most were not in office when it was bid five years ago and finalized in early 2008, and they have struggled to hold Hyundai Rotem accountable without fraying the relationship or settling for inferior coaches.
Terminating the deal and suing to recover costs is a last resort, Davey said, because starting over would surely cost more and mean years of additional waiting.
The T’s original selection of Hyundai Rotem represented a gamble, because the company had yet to open an assembly plant in the United States or navigate the stricter US safety requirements that bedeviled a slew of overseas firms trying to enter the rail market.
The Korean firm made a bold US entrance nearly a decade ago by pursuing contracts through low bids, high-level contacts, and attractive promises. Seeking a debut order from Philadelphia’s transit agency, its consultants included a former leader of that agency, and it promised to build its US factory in Philadelphia, while beating experienced manufacturer Kawasaki on price.
In Boston, the company underbid Kawasaki by nearly 20 percent and received high technical marks from T staff reviewing the bid, which glossed over the lack of US experience in encouraging the MBTA board to approve the contract, according to meeting minutes and materials prepared for the board.
Hyundai Rotem either did not understand or failed to take seriously the MBTA’s feedback on the design process, Davey and others said.
Four test coaches were supposed to be designed and built in Korea and delivered to the MBTA in late 2010, with the remaining 71 rail cars assembled in Philadelphia and delivered to the T between May 2011 and December 2012. The first partially finished pilot cars arrived in Massachusetts earlier this year but remain works in progress, according to the T.
With Hyundai Rotem already delayed, the company in 2010 negotiated for an extra 10 months in exchange for doubling the potential penalties the T could impose for contractual problems, to $19 million. The T also negotiated a $3 million discount on added features. But the board was not kept in the loop because the settlement did not require its approval.
Instead, the board learned of problems only this year, when it was asked to approve a $4 million addition to an existing $10 million contract with PB Americas, an affiliate of Big Dig contractor Parsons Brinckerhoff. PB, hired to consult for the T in Korea and Philadelphia and test coaches here, sought more money as the work expanded.
Board members were livid, but T administrators said rejecting that contract would only compound coach delays. The state may be able to recover the money later, Davey said.
Multiple board members said Tuesday they were eager to question Lee. “I don’t have a lot of faith in them,” said Loux, a labor organizer. But “I’m very interested in hearing what they’re going to have to say.”
“As a relationship builder, it’s useful that this guy is showing up,” said Ferdinand Alvaro Jr., a board member and corporate lawyer. “But at the end of the day, the proof is in the pudding.”