Metro's rail car contractor formally asked federal officials Friday to reconsider their decision that the company's $330 million contract must be canceled in order to preserve federal funding for light-rail expansion in Houston.

The company, CAF USA, said the Federal Transit Administration's decision was based on incomplete or erroneous information — starting with the name and nationality of the firm holding the contract.

Taking issue with name

Throughout its report on its investigation of the procurement, the company said in a letter to the federal agency, the FTA refers to CAF - an acronym for the Spanish company Construcciones y Auxiliar de Ferrocarriles - which is the parent company of CAF USA.

"It is troubling to CAF USA that, after a four-month investigation, the name of one of the key contracting parties was incorrectly stated giving the impression that Metro was negotiating with CAF USA's Spanish parent. CAF USA is a U.S. company, pays U.S. taxes, employs U.S. workers and has a production facility in Elmira, N.Y.," the letter states.

A joint venture led by CAF USA won a $330 million contract with Metro in 2009 to supply 103 vehicles for the new light-rail lines the transit agency plans to build.

In April of this year, the FTA launched an investigation of the process that led to the contract and concluded that Metro had violated "Buy America" rules intended to protect American jobs and unlawfully favored CAF during negotiations.

Metro has already paid CAF USA more than $40 million for work in progress. Nevertheless, the transit agency immediately said it would cancel the contract and solicit new proposals in order to preserve a $900 million rail construction grant.

Funds in question

CAF USA's letter to the FTA said a key factor in the federal agency's decision, involving a separate contract to assemble two prototype light-rail vehicles in Spain, was based on incorrect information supplied by a competing bidder.

Metro approached CAF USA with the idea of using local funds to build the prototypes only after the FTA had denied a waiver that would have permitted federal funding of these two vehicles, the letter states.

But the FTA report mischaracterized the separate, locally funded contract as being "carved out" of the larger federal contract, the letter states.

And the language in zthe FTA's investigative report is similar to that in a letter to the FTA from Alstom, another company competing for the contract, the letter states.

mike.snyder@chron.com