Seven teams of contractors are vying for a $550 million to $600 million deal to design and build the first phase of Honolulu's elevated commuter rail from East Kapolei to Leeward Community College.

City transportation director Wayne Yoshioka wouldn't disclose the identities of the teams during testimony to the City Council Budget Committee earlier this week. However, his testimony suggests that there's a healthy level of competition for the major construction project.

Early next month, an evaluation committee will narrow that list to four teams that will be chosen to actually bid on the first phase of the $5.4 billion elevated commuter train that eventually will connect to Ala Moana, Yoshioka said.

The city plans to award the contract sometime this fall if it receives needed federal approvals. Under current plans, the city will use a limited form of private partnership called design-build for the first 6.5-mile segment of the 20-mile rail. That arrangement makes contractors responsible for designing a system that works.

The three losing teams will each receive $500,000 to help offset the costs of competing for the design-build project. That's an unusual practice for Honolulu. However, Yoshioka said stipends are a standard way for Mainland communities to encourage firms to spend time and money competing for such large construction projects.

"After a while the (losing) firms, even the good ones, start saying 'well, we can't do this very often, if we do this often enough we'll go bankrupt,' " Yoshioka testified. "Because of the issue, many of the design-build efforts, especially the large ones, offer stipends."

City Councilman Charles Djou yesterday said the stipends do not seem unreasonable, but he wanted to know more about whether other cities had similar practices.

"I'd rather not have to expend those resources," Djou said. "That is not common in the city's procurement practice."

Djou said news that seven teams were fighting for the first major transit contract is a good sign.

"That's a healthy number," he said. "Obviously, the more the better. That's a good start."

Other major transit contracts to be put out for bid this year include a $250 million rail vehicle and systems contract and a $120 million contract to build a maintenance and storage facility. Those contracts won't be awarded until early 2010.

Those procurements are part of a plan to launch limited train service in phases, from late 2013 to late 2018.