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Chiarelli reiterates stand on Cancon rule

Posted by Alistair Steele

When I spoke to Infrastructure Minister Bob Chiarelli last week about Siemens' complaint over the province's Canadian content requirement, he was unequivocal: The 25 per cent rule will apply to any and all companies bidding on Ottawa's LRT project, and it will not change. Period.

So I was a bit surprised to see this article in the Ottawa Business Journal today. This afternoon I went back to Chiarelli for an explanation, and here's what he told me:

"I wish to confirm that what I communicated to you and what I reported is what our position is. What I did say to the Ottawa Business Journal was that we'd received input of concern from Siemens in particular and one or two others, and I also indicated that our rule was 25 per cent Canadian content for the rolling stock, and that didn't change. I think where there might be some divergence in interpretation is that when somebody like Siemens...wants to make a representation to us we receive it, we receive their concern...They deserve the courtesy to be listened to...But we have a fixed rule which is a fair rule, as I've pointed out 25 per cent content compared to 60 per cent in the US and higher percentages in other jurisdictions. So we're going to protect Ontario jobs. [That rule] absolutely will not change."

Although the OBJ article appeared this morning, Chiarelli says he gave the interview before he spoke with me. The "divergence of interpretation" seems extreme. I can only tell you what the minister's saying today.

Made in Canada rule riles Siemens

Posted by Alistair Steele

As CBC reported yesterday, Siemens Canada is planning to bid on Ottawa's LRT project. But the international giant isn't too keen on Ontario's new Canadian content policy. Under the rule, which was enacted September 2008, public transit vehicles purchased with even a dollar of provincial money must be at least one-quarter Canadian made. The province has pledged $600-million towards Ottawa's project, so contractors who bid when the RFP goes out this fall must demonstrate they can fulfill this requirement.

Siemens doesn't like the policy because its North American manufacturing plant is in Sacramento, California. The company has quietly approached both the City of Ottawa and the province to discuss altering the Cancon regulation, or waiving it altogether (though according to provincial officials there's been no formal request). The company's Canadian spokesperson, D.L. Leslie, says the 25 per cent rule gives Canadian train-builder Bombardier an unfair advantage.

"That's one of the reasons we're talking about an ammendment or waiving, it's that it would make a plain and even playing field for all competition...[Bombardier] is the only manufacturer or the only supplier that has a facility here in Ontario." Leslie says Siemens could include Canadian content in all kinds of other ways if it's awarded the project, but the company can't be expected to construct a train manufacturing plant here.

Neither the City nor the province appear to be taking the complaint too seriously. A City Hall source says staff within the light rail office have pre-assessed several companies expected to submit bids, and have determined they're all capable of competing for the prize. That includes Siemens. 

The official line from the Ministry of Transportation is pretty clear: "There are no plans to change the policy."

And Infrastructure Minister Bob Chiarelli says "this [policy] is the most appropriate way to support jobs and maintain an open bidding process...I've heard of various strategies by train manufacturers to become compliant. It's a little more trouble but I don't think it's overly taxing [Siemens'] competitive position. It's a very reasonable policy."

Chiarelli points out local content policies exist in many other jurisdictions, including our NAFTA partners the United States and Mexico. Such rules also exist in Europe, Japan and China. In some cases contracters bidding on infrastructure projects must conform to a 60 per cent domestic manufacturing policy.

Anyway, Siemens does indeed appear to have a Plan B. "We are interested in this project, and right now the project has a 25 per cent [requirement] so I'd imagine we would continue with our view of wanting to be participating in the project," says D.L. Leslie.

Siemens was of course the company chosen to build the last light rail plan when Bob Chiarelli was mayor of Ottawa. The new council, and the new mayor, cancelled the project, and Siemens sued, settling for nearly $37-million. Nevertheless, Leslie says the City of Ottawa has been a "good customer" in other areas, and the company is eager to continue doing business here.