A new way to procure

Photo credit: Chicago-L.org

The CTA's new 5000-series rail car costs $1.6 million dollars a pop—which means, when that 8-car train pulls into the station, you're staring at a cool $12,800,000.

Why so expensive? After all, you can buy a private jet for half the price. At that price, they should come with Italian hand-stitched leather seats instead of those plastic bucket seats... right?

There are a few contributors to the extreme price:

• Non-standardization. Although most mass transit systems use the same gauge rail (ahem, BART), the platform heights, third rail type and voltage, platform lengths, clearance widths, signal system, and maximum curve radii are all vastly different. That means that every new order of trains essentially has to be entirely custom designed. 
• No economy of scale. Once the trains are designed, the manufacturing process often has to be started from scratch. Besides specifying the process itself, this can even include procuring or building factories to satisfy Buy American laws—just for the life of the order. 
• Few suppliers. In fact, there is only one American manufacturer of railcars left. Most equipment in the US is now designed by Bombardier (Canadian), Kawasaki (Japanese), or Alstom (French). So in the absence of a whole lot of competition, the bids are all high.  

It's not hard to imagine a new business model in this space, one that works more like the development and sales of automobiles or airplanes do.

Theoretically, a private supplier could standardize the basic technology and build platforms that can be adjusted to spec. Factory processes would have to be innovated, of course: for instance, adjusting the suspension for a different platform heights and using different transformers for different voltages. The truth is, the combination of factors is not infinite, and by standardizing as much as possible, better economies of scale could be established, engineering could be cut in the long-run, production could be more continuous, and industry innovations could be faster to disseminate. Plus, agencies could cut down on their costs of having to define in detail the specifications for new vehicles because the standardized units would already be compliant with ADA laws and have the latest technology offered as build-to-order options.

The biggest difficulty I can imagine is that the public procurement bidding process might not support this as it exists today. Because vehicles probably wouldn't be built exactly to RFP spec, public agencies would have to reconsider the way they perform large procurements.

But that's not such a bad thing, because the public procurement process is rife with waste. Imagine a change on a much larger scale: for example, a government agency in charge of establishing standards for all public services, thereby giving individual agencies must less work to do in the first place, saving money at the state and local level, and allowing private industry to simply build to those standards. The CTA wouldn't have to order a 5000-series car with every painstaking detail, they'd just order a 48' long, 9'4"-wide railcar with blue seats and top-loading 600V third rail shoes.

Most of the rest of the work would already be done.