Long Beach Transit has terminated a contract to buy 10 electric buses from Chinese automaker Build Your Dreams.
Federal transit authorities said they could not fund the contract after finding that the Chinese company, known as BYD, violated regulations that made it ineligible to bid in the first place.
BYD won the bus contract in March 2013. At the time, the Federal Transit Administration said the company was not eligible to compete for the contract because it had violated regulations on federally funded projects, according to letters sent by the agency to Long Beach Transit.
Specifically, the company did not submit goals for working with businesses owned by minorities or other disadvantaged groups, as required by the federal agency. The rules are designed to give small businesses a chance to compete fairly on federally funded projects.
The company submitted the required paperwork in June, but by then it was too late.
That left only two options for Long Beach Transit: Cancel the contract with BYD and open a second round of bidding, or find money to replace lost funding from the federal agency.
In a statement, BYD said Thursday that it had agreed to a "mutual" termination with Long Beach Transit and planned to bid again for any future bus contracts.
Stella Li, an executive at BYD, described the company's mistake as a "technical error that in no way casts doubt on our deep commitment to purchase from disadvantaged businesses."
"We are confident that we will prevail in any competitive re-bid in the future for the same reason we prevailed last year: Our superior technology," she said in the statement.
BYD opened a bus-manufacturing factory in Lancaster last year with grand ambitions to supply electric-powered buses to companies and transit agencies across the country.
The Shenzhen, China-based company, which has its American headquarters in downtown Los Angeles, also won contracts to build two buses for the Antelope Valley Transit Authority and as many as 25 for the Los Angeles County Metropolitan Transportation Authority.
Follow Shan Li on Twitter @ShanLi