Bombardier Faces Possible Legal Action from Toronto Transit Commission

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TTC Streetcar
Streetcars running on the TTC lines were built in Thunder Bay
TTC Streetcar
The new streetcars running on the TTC lines were built in Thunder Bay

THUNDER BAY – BUSINESS – Bombardier is facing a possible decision by the Toronto Transit Commission that would exclude the company from bidding of future contracts. The move will come at the TTC Board Meeting on October 28th.

The Board recommendation is to: “Authorize the TTC General Counsel to immediately commence a claim or legal action against Bombardier for all damages sustained by the TTC relating to or arising from the schedule delays in the delivery of the streetcars and any other non-performance related issues.”

The delivery of new streetcars from the Thunder Bay manufacturing facility has been delayed and is causing the concerns and request for action from the TTC.

A promise from Bombardier to have sixteen streetcars delivered by the end of the year is being viewed by the TCC as an empty promise.

The TTC is looking to exclude Bombardier from future bids on TTC contracts and is also seeking $50 million in compensation for the late delivery.

Union officials in Thunder Bay have blamed the company over decisions to have work done in the company’s manufacturing facility in Mexico. Bombardier workers were on strike in Thunder Bay last summer.

The TTC says “There is no financial impact directly related to this report. However, based on the success of the claim/action commenced by the TTC, a recovery of some portion of the TTC costs are expected. This will offset additional costs incurred by TTC.

The contract for the supply of 204 low floor streetcars was awarded to Bombardier in 2009 for a total price of $993,008,166, inclusive of taxes, duties, freight, and brokerages fees.

The Chief Financial & Administration Officer has reviewed this report and agrees with the financial summary.

The TTC says that “The further delay in receiving new streetcars impacts customer accessibility to the TTC’s streetcar network”.

Decision History April 2006 – A Board decision was made to procure accessible streetcars to replace the streetcar fleet (ALRV and CLRV) that was approaching the end of its design life. On December 18, 2007, the TTC Board adopted a motion requiring that the TTC Request for Proposal (RFP) for the design and supply of new streetcars include a minimum requirement of 25% Canadian content.

Nineteen companies were issued copies of the proposal document out of which two submissions were received. Based on the review of each submission, it was determined that neither bidder had provided a proposal that complied with the TTC requirements as set out in the RFP documents.

This decision was supported by an independent fairness monitor retained to oversee the procurement process.

As a result the TTC cancelled the RFP. At the August 27, 2008 Board Meeting staff were directed to proceed with a Structured Multi-Phase Bid Process (SMPBP) with three car builders that had demonstrated experience in producing 100% low floor light rail vehicles. These companies were Alstom Transportation Inc. (Alstom), Bombardier Transportation Canada Inc. (Bombardier) and Siemens Canada Limited (Siemens).

At its April 27, 2009 meeting, the TTC Board approved a staff recommendation to award the contract to Bombardier for the supply of streetcars to replace the aging fleet and accommodate marginal future growth. Toronto City Council’s approval of the Contract was, amongst other conditions, subject to a commitment of funding from the Province of Ontario.

On June 19, 2009, the Province of Ontario announced funding of up to $416,300,000.00 towards 1/3 of the Eligible Costs for the TTC’s procurement of the new low floor streetcar fleet.

Subsequently, in a special meeting on June 26, 2009, Toronto City Council approved the funds required to complete the purchase of 204 low floor streetcars. The TTC and Bombardier executed the Contract on June 30, 2009 for a total Contract price of $993M inclusive of taxes but before foreign exchange.

Subsequent Contract Amendment costs have not been included. The procurement documents were structured to reflect a minimum award of 204 vehicles. The procurement documents included an option to purchase up to 400 additional vehicles for use by the TTC for future growth requirements and in any approved Transit City projects (subsequently 300 option vehicles were assigned to Metrolinx based on a Board authority at the May 6, 2010 Board Meeting.)

On January 21, 2013 an Agreement was established between the Province of Ontario, City of Toronto and the Toronto Transit Commission regarding Ontario’s and Toronto’s contribution toward the TTC’s low floor streetcar fleet replacement project.

City funding will be sourced through a combination of debt and the application of gas tax funding. On June 22, 2015, a status update report was provided to the Board outlining the current status of the delivery of the new streetcars.

At the June 22nd meeting, the Board requested that staff report back to the July 29th, 2015 Board meeting with respect to a range of options available to the TTC based on Bombardier’s poor performance to deliver the streetcars within the time specified in the Contract Schedule.

Issue Background At the June 22, 2015 Board Meeting, the Board received a report outlining the current status of the delivery of the new streetcars. In accordance with the contract delivery schedule (as adjusted), by the end of 2014, the TTC was expecting to receive 37 streetcars and by the end of 2015, TTC was to receive 73 total streetcars.

4 number of streetcars delivered as of December 31, 2014 was 3 and Bombardier was targeting to have 27 streetcars delivered by the end of 2015. At the June 22, 2015 Board Meeting, the Board adopted the following motion: That staff be requested to report back at the next Board Meeting on a range of options, including the exclusion of Bombardier from bidding on future contracts for new vehicle purchases for a specified period of time, based on poor performance related to the delivery of the new streetcars.

In response to the Board’s motion, staff provided a report back to the Board on July 29, 2015. This report was deferred to September 28, 2015. At the September 28 Board meeting, the report was referred to the December 2015 Board meeting. This report should be read together with the previously deferred and referred report (July 2015 and September 2015).

Comments: In accordance with the contract schedule (as adjusted), 73 vehicles were to have been delivered to the TTC by the end of 2015.

TTC – No Confidence in Bombardier

On June 22, 2015, a status update report was provided to the Board outlining the current status of the delivery of the new streetcars indicating that Bombardier would not achieve 73 vehicles by the end of 2015.

On June 1, 2015 Bombardier submitted a proposed revised schedule indicating that 27 vehicles would be delivered by the end of 2015.

The schedule was later revised by Bombardier in July 2015 and showed that 20 vehicles would be in service by the end of 2015.

On October 15, 2015, Bombardier advised the TTC that the previously revised July 2015 schedule as it relates to the number of vehicles to be delivered and in service by the end of 2015 was not achievable and was again revised (by Bombardier) to a total of 16 vehicles being in service by the end of 2015.

In a public statement issued by Bombardier on October 16, Bombardier has stated: Due to production issues with the crimping of electrical connectors on its streetcars #13 to #18 currently in production, Bombardier has submitted a revised delivery schedule to the TTC.

In order to address this situation and to ensure that it continues to produce the highest quality vehicles, Bombardier estimates that it will now deliver, this year, four streetcars less than previously announced.

Therefore, by the end of 2015, Bombardier will have shipped a total of 19 vehicles to the TTC, 16 of which will be in service.

Staff has no confidence that Bombardier can or will meet its latest estimate to have 16 vehicles in service by the end of 2015 as it has not received substantive information to support recovery, production, testing and commissioning plans.

TTC continues to incur costs based on the late delivery of the streetcars. As noted in the previously referred report (September 2015), the current TTC and Bombardier contract contains a provision for liquidated damages based on the late delivery of streetcars.

The liquidated damages currently outstanding represent approximately $50M. It is staff’s recommendation that a claim be commenced immediately against Bombardier for payment of the liquidated damages and/or other damages incurred by the TTC, including future additional maintenance costs relating to the existing streetcar fleet, service and customer impact costs, and additional TTC staff time.

The current contract contains a dispute process and staff will review the dispute process as outlined in the contract to determine whether its claim(s) should be pursued through the dispute process, the courts, or both.

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