Rewarding Failure

Streetcars that are too wide, long, and heavy (136 @ $3.5 million per). Bus engines that don't fit and are scrapped (20 @ $116,000 a pop). Manhole covers that take 10 engineers and three months to design (cost: $243,000). Muni's management has produced su

Breda's streetcars are too big to comfortably fit Muni's tunnels. Yes, it's true: The streetcars, supposedly custom designed for San Francisco's system, are too wide (some platforms had to be shaved); too heavy (the extra weight, and a lopsided distribution of that heft, is destroying Muni's 70-year-old rails); and too long.

The length problem carries its own special irony: The Breda rail cars were bought, purportedly, to mesh with a computer control system that would move more trains and more passengers through the subway at peak hours. Because the rail cars are two feet too long, four-car Breda trains will not fit in front of several Muni station platforms. Therefore, even if a central control system could move more trains through the Market Street tunnel, the trains would each be one car shorter -- and fewer passengers would move.

The Breda streetcars have other problems. Government records say the vehicles' sliding doors break down constantly. Also, because the doors are on the outside of the car, there is a dangerous 5-inch gap between the door step and Muni platforms. The emergency brakes are so suspect that safety inspectors have reduced the allowable train speed from 50 miles per hour to 30 miles per hour. Excessive weight and faulty engineering cause high- and low-frequency noises that irritate, even enrage, entire districts of the city.

Why would Muni buy these pigs in the poke, and keep on buying them, long after the agency knew they were wrong for its system?

When it comes to managing billions of dollars of capital projects, Muni bureaucrats report directly to Booz Allen Hamilton Inc. A globally connected consulting firm, Booz Allen is a major player in public works management from Washington, D.C., to Kuala Lumpur; the firm is charging Muni about $30 million for consulting on the Breda streetcars and the Alcatel guidance system.

Under its contract with Muni, Booz Allen handles capital procurements from start to finish. The firm writes specifications and bid proposals, and influences the selection of contractors. It manages the nitty-gritty work on a daily basis; in large part, Muni officials sit back and sign off on Booz Allen invoices. And the more time a project takes, the more Booz Allen bills -- at $200 an hour.

There are a dozen major streetcar manufacturing companies in the world. In 1991, Muni advertised for a company to manufacture 35 customized streetcars. Booz Allen Hamilton created the streetcar design specifications, and guided Muni through the bidding process.

It was a very strange process.
A German, a Japanese, and an Italian firm all sought the contract. The Japanese company, C. Itoh & Co. Inc., put in the lowest bid -- about $150,000 per car less than Breda, the next lowest bidder. Price, of course, is not the only factor evaluated in deciding whether to purchase technology as complicated as that used in rail cars. Muni's bid specifications deemed a proven track record in making streetcars and the ability to meet certain technical specifications to be as important as price.

Public records show that Breda's bid was higher than C. Itoh's, and that Breda had less streetcar manufacturing experience than the Duewag Corp., the German firm in the running for the contract.

C. Itoh's low bid was disqualified on a minor technicality. (To this day, city officials are at a loss to explain exactly why the low bidder lost.) With C. Itoh out of the way, city bureaucrats wrote that the remaining two bids, by Breda and the German Duewag Corp., were so close in terms of price and technical promises that either could be chosen. Only after a series of meetings between the two remaining bidders and Booz Allen Hamilton did a victor emerge. In December 1991, Muni awarded the streetcar contract to Breda -- paying $2.5 million for each of the 35 custom-designed streetcars.

This was the beginning of a very good deal for Breda. Muni soon ordered another 42 cars at premium prices -- up to an additional $355,000 for each car. Eventually, Muni ordered 101 additional streetcars (for a total of 136) at an average of $3.47 million for each car -- or 30 percent more per car than was originally bid. At this price, the Muni Bredas may well be the most expensive streetcars on the planet.

After the first contract was let, the subsequent streetcar purchases were never put out to competitive bidding. In government-speak, the 101 additional streetcars were "sole-sourced," or simply added onto Breda's original contract. The lack of competition showed: Each batch of Bredas cost more, per car, than the last.

While San Francisco ended up paying nearly $3.5 million apiece for its streetcars, San Diego was buying light rail cars from Siemens-Duewag for a bit over $1.5 million each. (The federal government's National Transit Database shows that the average cost of a new light rail car in America is currently $2.381 million, or $1 million less than San Francisco pays.)

There were other odd fiscal facets of the Breda contract, including Muni's subsidization of a Breda factory at Pier 80 in San Francisco (see sidebar). But the real question is not why Muni is paying so much to Breda, but why it keeps buying Breda streetcars at all.

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