The city will delay signing what would be the largest contract in Honolulu history to allow time to gather more information about the financial stability of rail company Ansaldo Honolulu JV and determine whether problems at Ansaldo’s troubled parent company could affect the Honolulu rail project.

The proposed contract for up to $1.4 billion between the Honolulu Authority for Rapid Transportation and Ansaldo Honolulu JV was scheduled to be signed by today, but HART staff notified the City Council that the signing will be put off.

"I think that’s a wise decision at this particular stage," City Council Chairman Ernie Martin said. "We recommended at the Council that they proceed very cautiously, just to ensure that if the decision is to go forward with Ansaldo, that they are totally capable of fulfilling the contract. We will be monitoring it very closely.

"It seems that every day there’s another concern that arises."

Most members of the City Council urged city transit officials last week to delay final approval of the rail transit contract with Ansaldo Honolulu JV. Ansaldo was awarded the contract to design, build, operate and maintain the rail cars for the Honolulu system.

Ansaldo Honolulu is a joint venture formed last year between two Italian-based transit companies, AnsaldoBreda and Ansaldo STS. AnsaldoBreda makes rail cars and has been losing money for years. Ansaldo STS produces and maintains train control or operating systems and is profitable.

Both are owned or partly owned by Finmeccanica SpA, the largest defense company in Italy. Finmeccanica officials have said they are seeking a buyer for the unprofitable AnsaldoBreda, and some published statements suggest Finmeccanica may also be interested in selling Ansaldo STS.

Finmeccanica announced last week it had suffered a third-quarter net loss of 790 million euros, or more than $1 billion. The stock value of Finmeccanica has plummeted 60 percent since January amid the financial losses and a corruption scandal.

Italian Prime Minister Mario Monti on Tuesday called on Finmeccanica to quickly respond to the corruption investigation by Rome prosecutors alleging company officials created slush funds that were then used to pay bribes to government officials, according to coverage by Bloomberg Businessweek.

The Italian government owns a 30 percent share in Finmeccanica, and Monti said government ministers will review steps taken by the company in response to the investigation to be sure they have taken the "necessary initiatives," according to the statement from Monti.

The scandal has triggered demands that Finmeccanica board Chairman Pier Francesco Guarguaglini resign. However, Guarguaglini this week denied the company had set up slush funds or that he had given orders to pay off politicians.

HART officials say the city is protected by bonds put up by Ansaldo to ensure the work is completed. Those include $361 million in performance bonds to guarantee the work is done and another $361 million in payment bonds to assure that subcontractors are paid.

Additional bonds will be required for maintenance and operations work to be done under the contract, and Finmeccanica will be required to provide a line of credit as a guarantor commitment for an additional $50 million, said Toru Hamayasu, interim executive director of HART.

Jeanne Mariani-Belding, HART’s chief public information officer, said HART’s focus over the past week has been to gather additional information on Ansaldo’s finances to ensure the company still has the financial capacity to meet the obligations of the contract.

The HART Finance and Project Oversight committees will meet today to consider the Ansaldo financial review.

The contract requires Ansaldo Honolulu to design and build 80 rail cars for Honolulu for $574 million. The company will also handle interim operations and maintenance for the system during construction for an additional $167 million, and will provide regular operation and maintenance for the rail system for five years after it becomes fully operational, for an additional $339 million.

The city also has an option to extend the operations and maintenance contract for Ansaldo for another five years from 2024 to 2029 for an additional $317.6 million.