Morrison Knudsen and a Potential Problem Derailed

It was most interesting to note the serious problems besetting Morrison Knudsen’s rail car business (“The Corporate Hero Derailed,” Feb. 3).

Three years ago, the Los Angeles County Transportation Commission (a predecessor of the Metropolitan Transportation Authority), was severely criticized in front-page media coverage for its selection of Sumitomo Corp. to manufacture rail cars despite a lower bid received from Morrison Knudsen. It was the agency’s determination at the time that regardless of its 1% higher price, the Sumitomo offer represented the best value to Los Angeles.

Awarding a contract on a best-value basis rather than simply upon lowest initial purchase price is, in fact, the way most of us make our personal buying decisions. Factors such as maintenance costs, product history, service reliability and a company’s track record are important considerations in any purchase, and especially so with technically complex equipment costing millions of dollars and expected in business. Morrison Knudsen, a long-established construction contractor, had never manufactured and delivered a single new rail car.

The initial rail car manufacturing efforts of many competent U.S. aerospace and defense firms had been uniformly unsuccessful, leaving transit systems with delayed deliveries or major service reliability problems. Sumitomo, on the other hand, had a 100-year rail-car-building history and had already completed the successful on-time and on-budget delivery of L.A.’s first modern rapid-transit cars for the Blue Line.

Despite these facts, the media-driven frenzy that developed led to termination of the Sumitomo contract 10 days after it was awarded. When delays resulting from this termination threatened the scheduled opening of the Green Line, a small number of Blue Line-type cars were ultimately ordered from Sumitomo to support initial Green Line operations.

One positive outcome of those events was the development of the L.A. standard rail car and the defense-conversion and local job prospects that the L.A. car project promises. Then and current MTA Chairman Mike Antonovich deserves credit for forming and leading the successful Ad Hoc L.A. Car Committee. The most negative result was the harsh and often unjustified criticism leveled at the transit agency and at Sumitomo Corp.

By not awarding the Green Line rail car contract to Morrison Knudsen, L.A. taxpayers avoided a deal that the company’s latest revelations confirm was simply too good to be true. As those who’ve had such experience will tell you, there is no situation worse than being dependent upon a supplier who is losing money on your order.

EDWARD McSPEDON

West Hills