Firm warns of 'penalties' for scrapping Ontario's $120-million GO transit deal

If Ontario's next government moves to scrap a $120-million transit contract, it'll have to pay the financial consequences.

As far as Quebec-based Canadian Allied Diesel Railway Industries is concerned, the deal to refurbish 127 GO train cars is finalized and legally binding.

"This is a legally binding contract, arrived at after a competitive and open process. These types of contracts have penalties if you break them," said Thomas Dea, chairman of Global Railway Industries, CAD Railway Industries' parent company.

"CADRI intends to fully comply with the terms of the agreement in good faith."

Neither CAD Railway Industries nor the Ontario Liberals have said what those penalty clauses are; the contract hasn't been made public.

Both the Progressive Conservatives and the New Democratic Party have said they'd like to go back on the deal, which they think should have gone to North Bay-based Ontario Northland.

NDP leader Andrea Horwath said she'd rip up the contract outright; Tory leader Tim Hudak hasn't gone quite that far, saying only that he'd suspend it and review the details.

The contract was finalized in June. As with most government procurement, Metrolinx – the province's arms-length regional transit body – held a competitive bidding process. The contract went to the lowest bidder to meet the province's requirements. Ontario Northland's bid was $2-million higher than its Quebecois rival's.

The contract has taken on a potent symbolism in the North: It has 104 employees at Ontario Northland fearing for their jobs once their current five-year Metrolinx contract is completed. And it has both opposition parties looking to capitalize on feelings that Northerners are being neglected by Queen's Park.

"The last information we had is that the contract had not yet been finalized," Ms. Horwath said in Temagami Saturday. "There are always penalty clauses and things that are built into contracts. We're fighting to keep those jobs in Ontario, in North Bay. We're going to fight to keep that contract there, and that's our priority."

Ms. Horwath has proposed to beef up the province's "Buy Ontario" policy, which now only applies to public transit projects and requires 25 per cent of the value to be sourced locally. She'd boost that requirement to 50 per cent, and make it apply to all provincial and municipal procurement – anything from infrastructure to catering.

Ms. Horwath's sentiments were echoed by Mr. Hudak in the Toronto area the following day.

"I'll suspend that contract, and I'll look at the details to see what's in the best interest of families," Mr. Hudak said Sunday. "Dalton McGuinty messed up. He allowed dollars to leave our province that could have helped create jobs in North Bay and Ontario Northland."

Mr. Hudak has also said he'd like to end a $7-million deal with Samsung.

The Liberals, for their part, have said they don't see losing the contract a death knell for Ontario Northland.

"Our government understands the importance of [Ontario Northland]and the vital role it plays now, and the expanding vital role it's going to play in the future with regards to the ring of fire and Northern development in Ontario," said Liberal candidate Rick Bartolucci in an interview Saturday.

"The reality is, that contract would probably be tied up in court for many, many years. … That kind of failed protectionist policy is really very upsetting to the people in my community. The last thing we want are walls built around Northern Ontario."

Mr. Bartolucci, along with other Liberal incumbents in Northern Ontario, has been put on the defensive by opposition parties trying to weave a populist wave of voter dissatisfaction.

It's far from unheard of for politicians to promise to go back on contracts signed by their predecessors. When he was elected in 1993, former Prime Minister Jean Chretien made good on a pledge to cancel a $4.8-billion contract to purchase 50 EH-101 Sea King helicopters (he called them unnecessary "Cadillacs"). The government ended up paying almost $500-million in cancellation fees.

The federal government's now embroiled in talks entreating the United States to make an exception for Canadian suppliers in its "Buy American" part of President Barack Obama's jobs act.

Ms. Horwath emphasized Saturday it isn't her intention to start a trade war, or wall Ontario off from foreign investment.

"I'm saying a good amount of 'Buy Ontario' is good policy. I'm not saying everything is Buy Ontario. But where the goods and products are available in Ontario, produced by Ontarians … then we should be using our tax dollars to buy Ontario."

But some observers have argued the PC and NDP policies promoting Ontario commerce smacks of protectionism that could blow up in the province's face if pursued as aggressively as Ms. Horwath and Mr. Hudak say they intend.

"There are great trade relations between the two provinces of Quebec and Ontario, including in the realm of government procurement," Mr. Dea said. "In my view, the status quo works well."

With a report from Kim Mackrael