Siemens wants in on light rail project

 Firm pushes Ontario on content rules

One of the world's largest companies is beginning a campaign to pressure Ontario to change domestic content rules so it can reenter the competition to build Ottawa's massive $2.1 billion transit project.

Siemens, the German-based multinational, anchored a consortium selected by the city to build its last such project. That contract was ripped up by a new municipal government in 2006, prompting a lawsuit and a nearly $37 million payout to Siemens and its consortium partners.

Now Siemens wants a crack at the new project, but says it will be hindered by a 2008 law forcing all provincially-funded transit vehicles to contain at least 25 per cent Canadian content.

Siemens manufactures its lightrail vehicles in Sacramento, California.

The company says Ontario's laws are giving an "unfair advantage" to Bombardier, the lone company that builds light rail cars in Canada.

Siemens would ideally like the domestic content provision waived. If not, it will ask for it to be changed.

"The amendment, it could be 25-per-cent Canadian content on the whole project, not just the vehicles," says D.L. Leslie, a spokesman for the company. "That's why we're having talks with different people both within the city and at the province - to find out what can be done." er price."

A spokeswoman for transportation minister Kathleen Wynne said the province had "no plans to change the policy." She later added the government was open to talking to any company that wants to bid on Ottawa's LRT project.

"If a company like Siemens wants to talk to the ministry about what the rules are and how they can make necessary accommodations so that they can bid on contracts, then absolutely we're open to having that conversation with Siemens or any other company," said Kelly Baker.

One trade expert says the domestic content provisions are ill-conceived, populist measures that ultimately hurt taxpayers.

"I think they're stupid," says Michael Hart, the Simon Reisman Chair in Trade Policy at Carleton University. "If you say that 25 per cent must be done within the province that means you're reducing the number of bidders available to do the work and they will bid a high-

Hart says Siemens would have almost no chance of challenging Ontario's 'buy local' provisions at the World Trade Organization because provinces and municipalities have not entered into formal trade agreements.

That is one reason Ontario and other provinces were asked to join ongoing Canada-Europe trade talks, he says.

"This is a very large part of those negotiations," Hart said in an interview. "These antiquated local content requirements that we still have in government procurement are the last remnant of the age of protectionism."

Although both agree the new rules will raise the cost of Ottawa's LRT project, neither Hart nor the Siemens spokesman could say by how much.

Leslie says Siemens might be forced to build a new manufacturing facility in Ontario in order to qualify.

"We'll have to look at the marketplace in general to see how many opportunities there are for this specific vehicle," said Leslie. "So obviously there are costs to ramp up a facility."

Although the 'buy Canadian' transit provisions have been in place since 2008, they have so far only applied to the purchase of 250 buses, from New Flyer Industries and Nova Bus Inc, according to the government.

No deals for more expensive light rail vehicles or streetcars have been processed under the rules.

Asked how many companies could fulfil the domestic content requirements for light rail vehicles, Baker was unable to answer.

She also chose not to comment on the effect the new rules would have on price.

"I'm not sure about that," she said, later adding: "We really want to support local jobs and local manufacturing companies, and I think that's what the majority of people in Canada would agree with. It's important when you can to keep jobs here."

A provincial Conservative spokesman said the Tories have "no plans to drop the 25 per cent domestic content rule on transit projects."