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Features — October 20, 2010 11:59 pm

Bombardier-Alstom granted metro car contract

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QC government accused of cronyism and protectionism

In this downturn economy, we all have to make some sacrifices. I know that I, for one, have started to lean towards some of the cheaper “no name” brands over others. Some items, especially those typically deemed luxuries, I’ve opted to stop buying all together. For me, it’s all about getting the best product for the cheapest price.

Unfortunately, this common sense concept hasn’t yet reached Jean Charest’s provincial government. On October 5, it awarded a billion dollar contract to build 468 subway cars for the Montreal Metro to a Bombardier-Alstom consortium.

This move has sparked criticism from Spanish government. Spanish Prime Minister, Jose Luis Rodriguez Zapatero criticized the Quebec government for abruptly ending the normal bidding process, and refusing to consider an offer tendered by CAF, a Spanish rail company.

Charest spoke with reporters about the deal with Bombardier, saying “we have the best price we could hope for.” But according to the Montreal Gazette, CAF pledged to build each car for $1.2 million each, approximately $1.4 million less than Bombardier. They even went as far as to promise that the cars would be built in Quebec.

This decision by the Quebec government seems to go against conventional economic wisdom. It has obviously raised some eyebrows in the opposition and the media, as accusations of cronyism and backroom dealings are directed at Charest’s government.

Some are claiming that this is an act of protectionism – a response to an increasingly competitive global economy. Charest countered this claim, saying that the Societé de Transport de Montreal (STM), as a municipal service provider, does not have to adhere to WTO regulations that require contracts to be awarded in a non-bias manner.

Many commentators have pointed out the irony that Quebec is one of the main proponents for a free-trade agreement with EU, currently being negotiated.

The Quebec government has effectively bypassed the entire international bidding process by passing a special piece of legislation, Bill 116, which permits STM to award the contract to Bombardier outright.

Bombardier’s bid for this contract was a promise to build each of the 468 cars in Quebec for $2.6 million per car, for a total of $1.2 billion. This offer was up against CAF’s tender of $655 million.

Considering conventional wisdom, one would expect the Charest government to have gone with the lowest bid. Unfortunately, this is not the case.

It would appear that the reason why Jean Charest is so eager to see the contract go to Bombardier is because it may mean that Bombardier’s train manufacturing plant in La Pocatiere, Quebec could hire back 400 recently laid off workers.

Charest asserts that “in this economic context, I think every country in the world understands perfectly that if we are going to spend this kind of public money, then we expect to have some fallout within our own jurisdiction.”

In light of this story, it is very easy to draw the conclusion that Premier Charest is using a politically expedient tactic to buy votes in a riding which has been hit hard by the recession and one that he may probably lose in the next election.

But there’s also an incentive to avoid further time-consuming legal complications. Quebec Transport Minister, Sam Hamad argued that bypassing the biding process will spare the project a costly two year delay.

The process has been delayed since June 2006, when the French train manufacture Alstom took the STM to court. Again the dispute was over the fact that Bombardier was the only company being considered. The conflict was eventually resolved by a partnership between the competing companies.

Bill 116 was adopted by the Quebec legislature on October 7. Bombardier-Alston will go ahead with production immediately. The project is expected to be completed in February 2013.

The story doesn’t end here, though. There is a strong possibility that CAF will sue the government over this, leaving the taxpayers on the hook, not only for the more expensive metro cars, but for legal fees as well.

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