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Metrolinx signs $528-million deal with Bombardier rival in ‘creative’ solution

A Metrolinx LRV is shown being built in Thunder Bay in this recent handout photo.

HO/THE CANADIAN PRESS

Metrolinx is spending $528-million to buy light-rail vehicles from Alstom for Toronto-area transit projects, fearing that Bombardier won't deliver under its contract in time.

Provincial Transportation Minister Steven Del Duca made the formal announcement on Friday morning in midtown Toronto, near the site of the future Crosstown line that prompted the new deal.

Metrolinx contracted with Bombardier in 2010 to provide vehicles to the Crosstown and other projects. Since then, concerns have mounted at both the transit agency and in government that they would not come through.

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The order for 61 Alstom vehicles is officially for light-rail lines along Finch Avenue, in north Toronto, and up Mississauga's Hurontario Street. But the 44 earmarked for Hurontario can be redirected to the Crosstown if needed to open that line as scheduled in 2021.

"We believe that this is both a creative and prudent approach to dealing with a less-than-ideal situation that none of us relishes being in," Mr. Del Duca said. "Entering into this new agreement with Alstom provides us with more certainty."

Bombardier, which offered no public comment when news of the deal was first reported on Thursday evening, released a statement on Friday morning saying they were "ready, able, and willing" to live up to the terms of their contract.

"We believe what's best for the people of Toronto and Ontario is that we work together to ensure taxpayers are not on the hook for another cancelled contract," the statement said.

After repeated production delays, Metrolinx gradually became concerned about Bombardier's ability to build its light-rail vehicles. Last summer, the agency issued a notice of default to the company. And in the fall, it followed that with a formal notice of intent to cancel the deal.

But Metrolinx was caught off guard when the company fired back in court to preserve the deal. And they were again caught by surprise when the judge granted Bombardier its injunction, preventing the agency from unilaterally cancelling the contract.

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The court loss means that Bombardier and Metrolinx have to go through a formal dispute-resolution process, which could take eight to 12 months and has an uncertain outcome.

"I think the message to Bombardier is, look, we respect the judge's decision, we are in the dispute-resolution process … we will see what happens through the dispute-resolution process," Mr. Del Duca told reporters. "But fundamentally, everybody needs to understand, we are going to open the Crosstown and Finch West LRT on time in 2021."

Metrolinx has previously said it needs 76 of the Bombardier light-rail vehicles – about two-fifths of the total to be supplied under the 2010 deal – to operate the Crosstown. Not all would be required initially to open the line, though. Alstom's vehicles are also bigger, meaning that fewer would be needed to have the same capacity on the Crosstown.

The minister said that they were able to sole-source in unusual circumstances and that the new deal had stronger penalty provisions.

A second vehicle supplier reduces the financial risk to Metrolinx, which is liable to the consortium building the Crosstown if the required vehicles aren't available when needed, facing daily fines of up to $500,000. This is far higher than the penalties Metrolinx would get from Bombardier for late delivery, a financial shadow that has been looming over the agency.

The deal with French manufacturer Alstom caps a difficult period for Bombardier, the storied Canadian firm.

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Bombardier Transportation has been struggling to build streetcars for the Toronto Transit Commission, repeatedly adjusting its delivery schedule and piquing tempers on city council. And parent firm Bombardier Inc. has been embroiled in controversies over government bailouts and executive compensation.

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