The province will table special legislation in the National Assembly on Wednesday to award the billion-dollar contract directly to Bombardier and its French partner Alstom without going through the normal bidding process.
The deal, said Premier Jean Charest, will be worth more than a billion dollars and will mean the recall of more than 400 workers at Bombardier's plant in La Pocatière, about 150 kilometres east of Quebec City.
In all, Charest said 775 jobs will be created by the project over the next eight years, both in La Pocatière and the Bombardier facility near Montreal in Saint-Bruno.
The deal announced Tuesday involves about half of Montreal's subway fleet.
"We are very, very proud to be at your side today," Charest told workers gathered at the La Pocatière plant on Tuesday.
'There is a lot at stake because it is a very important contract. The process is rigorous and the negotiations are tough.' —Jean Charest, Quebec premier
"Quebec workers can continue to do what they have always done — construct the best subway cars in the world."
The government intervention will allow the Montreal Transit Corporation, the City of Montreal and Bombardier-Alstom to sidestep the international tender process that was put on hold to give the sides more time to reach a deal.
Charest said the government has done its due diligence and is refusing to wait any longer. Legal wrangling has already delayed replacement of the 40-year-old metro cars for five years, he said.
"There is a lot at stake because it is a very important contract. The process is rigorous and the negotiations are tough," Charest said.
The government tried to give Bombardier the contract in 2006, but the decision was put on hold after Spanish and Chinese manufacturers took the Montreal Transit Corporation (MTC) to court to force a public tender.
Chinese, Spanish firms angered
Last week, the Charest government ordered MTC to put the tender call on hold to give Montreal and Bombardier-Alstom more time to reach a deal.
The move outraged ZhuZhou Electric Locomotive Ltd., the Chinese company that has been positioning itself to put in a bid.
'If Charest goes ahead with this, he's really walking on thin ice.' —Glen Fisher, spokesman for China's ZhuZhou
Glen Fisher, a spokesman for the company, said the Quebec government's actions are violating international trade agreements and Canadian law.
"If Charest goes ahead with this, he's really walking on thin ice," Fisher told CBC News last week.
CAF, the Spanish company, was considering legal action.
Both companies claim they can build the subway cars for less money than Bombardier-Alstom.
Charest said Quebecers will get a good deal with Bombardier-Alstom. He said each subway car will cost $2.6 million.
Experts warn of backlash in Europe
McGill University international trade professor Armand de Mestral said the Charest government is treading into delicate waters.
He said closing the bidding process could provoke retaliation — and hurt Quebec's business interests in Europe.
"I'm astonished. I really find it extraordinary," de Mestral told CBC News.
"If every European government did this to Bombardier and other Canadian companies, what would that mean? I don't think we'd like to be treated this way."
De Mestral said the deal could also threaten a major trade agreement that Quebec is currently negotiating with the European Union.