A sole-sourced deal for $528-billion worth of transit vehicles, pitched by the Ontario government as an elegant solution that would offer certainty two Toronto rail lines would open on time, is facing a flurry of criticism from competitors who warn it breaks the rules.
The purchase of 61 light-rail vehicles from Alstom SA was presented by Transportation Minister Steven Del Duca as a way to offer insurance in the event that Bombardier Inc. wasn't able to follow through on its commitments to produce LRVs. He defended the decision not to put the contract out for bids, saying that this was acceptable in an emergency.
But Bombardier disputes that argument.
"There is no emergency," Bombardier spokesman Marc-Andre Lefebvre said from Edmonton Wednesday. "When you look at the facts … we are entirely on schedule."
And Siemens AG, which had been hoping for some LRV business in Toronto, made it clear privately that the firm was bitterly unhappy.
"This decision effectively eliminates Siemens from competition for future light-rail car procurement in Ontario, causing us irreparable harm," Robert Hardt, the CEO of Siemens Canada, wrote in a letter to Mr. Del Duca dated May 24. The letter, which was not publicly released, was first reported by the Toronto Star.
The Ontario government said it had to order from Alstom after losing confidence in Bombardier's ability to produce vehicles for light-rail lines along Eglinton and Finch avenues in Toronto.
"The purchase of Alstom vehicles is a necessary contingency plan to address the emergency created by Bombardier's failure to perform and deliver," Celso Pereira, a spokesman for Mr. Del Duca, said in a statement. "Alstom is already in production in Ontario and their trains have passed all of the engineering requirements."
If Bombardier does come through with the LRVs it has promised, the Alstom vehicles will be used instead for transit projects in Mississauga. Either way, this would appear to give Alstom a competitive advantage for any future LRV needs.
The short letter from Siemens' Mr. Hardt goes on to argue that buying from Alstom "appears to extend a pattern" of non-competitive procurement, is "inconsistent" with provisions in CETA, the recently signed trade deal between Canada and Europe, and "may well be a factor in upcoming NAFTA negotiations."
Trade expert Lawrence Herman noted that CETA isn't yet fully in force, so can't be legally invoked, and that the part dealing with procurement could allow "limited cases" of sole sourcing.
"Nonetheless, the CETA principles governing procurement are that they be non-discriminatory as between treaty parties, with full transparency and an open bidding process," he said in an email. "So Siemens might have a legitimate point. Whether there is the basis for a legal claim against the Ontario government is another matter."
This is the second time in recent years that Alstom has secured a substantial sole-source contract in the Toronto market. The TTC decided in 2015 to shift gears on a major signalling project and bring in Alstom, giving them the $562-million contract without putting it out to tender.
Agency officials now call that a decision necessary to getting the project back on track. When Alstom was also awarded the Ontario LRV contract, transit observers noted that they seemed to be carving out a lucrative niche as a company that is given the deal when a competitor is perceived to be struggling.
But other firms refuse to take this lying down, though it remains unclear how combative they are willing to be in order to protect their chance at the Ontario market.
In his letter, Mr. Hardt says that the company is "exploring all options," without specifying how far it could go. A spokeswoman for the firm declined to elaborate Wednesday.
Likewise, Bombardier's Mr. Lefebvre was unwilling to give details about how far Bombardier might go to protect its chance to bid on future projects.