Public Transit: Politics, Procurement Policy and Taxpayer Dollars

Post by Gondola Project

Lots of folks nowadays love local. Suppose someone asks you, “Do you support local produce? Or in this case, locally manufactured trains?” Many would probably answer “Yes”. But what if I told you this means it will cost an extra 10-15%, would your answer change?

A recent article in the Globe and Mail discusses the relationship between mass transit and political agendas. It appears that throughout the world high-stakes rail projects worth millions or even billions of dollars are becoming entangled in a struggle that pits the bottom line against local interests.

In this age of globalization, companies around the world are constantly looking to cut costs while maintaining quality and driving innovation. That is, except companies in the public transit industry.

In Canada, the provincial government of Ontario requires 25% Canadian content on all provincially financed transit infrastructure. These regulations, aimed at protecting and stimulating local jobs and economies, elicit both support and criticism. Already Siemens has lobbied the province to relax this policy. It argues that this legislation unfairly gives Bombardier the upper hand since it’s the only company capable of manufacturing rail vehicles in Canada. In essence, Bombardier is the only show in town and politicians know it (how’s that for competition?).

The question is therefore: is it fair to enact these type of regulations? More importantly, do they inhibit cost-savings and are governments getting the best deal for the taxpayers who ultimately fund transit projects?

Rational arguments exist on both sides of the coin and a consensus isn’t likely to be reached anytime soon. More often than not, policy is is influenced by current political agendas of the ruling party and the economic state of the region.

But now let us flip the story around and look to see what all of this means for CPT.

Although the world’s two main cable manufacturers are both involved in global distribution, for the most part their manufacturing tends to be concentrated. As these companies continue to increasingly serve the urban market they should look to existing legislation and practices for public transit manufacturing. Perhaps it isn’t too soon for them to consider further global expansion of their manufacturing facilities.

Larger manufacturing capabilities in several targeted geographic locations may very well give them the presence, exposure and political support needed to convince governments and citizens alike that cable manufacturers are truly serious about the needs of the local urban market.

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  1. Matt the Engineer
    Like this? In response to the Buy America act Skoda worked with a local fabricator to create an American streetcar company that uses 70% local parts. They're located in Porland and built Portland's streetcar system, but recently won a contract for a new Tucson streetcar system.
  2. That is a fine example of the type of partnership that companies must establish in order to compete for public sector dollars - especially in the economic climate today.
  3. Three things are problematic. First the percentage only considers the end value. So you can bring in a empty vehicle into a country. Then you do a paint job and add the interior and a passenger information system in the destination country. You still don't get the needed percentage just increase your margin. Just change the books so the subsidy in the destination country makes all the profit. Of course the profit can be transfered back the the holding company. So for big company its possible to circumvent those problems. It will just add more cost but there are no high qualified jobs created. Second to build any complex system you need a experienced team. If you start with a new team for a project the outcome will be a disaster. So there will be quite a lot of supervisors, engineer and training staff common from the mother house to instruct the local team. For a single contract this will maybe not be worth the effort. Third The public sector in the USA is about to default. Austerity measures will increase. On the other side a foreign company has to face serious legal challenges. And many companies have enough orders. So the will serve their clients in Europe and Asia first which are easier to deal with and have bigger pockets.
  4. Good points. Still lots of issues for cable manufacturers to circumvent. Cable is probably not at the point where it requires overseas factories to support operations but maybe some in the future.
  5. Matt the Engineer
    A lot of this doesn't make sense. 1. Skoda is a large company, yet I've seen pictures of them building the Portland streetcars from the ground up. Sure it's possible to find loopholes to rules that governments come up with, but a smart agency won't be fooled. The answer isn't to give up, it's to close loopholes and add oversight. 2. I've been working on specifying biomass boilers in Alaska. There aren't any great manufacturers in the US, so we looked at Europe. To build and commission the systems they fly a team in from Gemany. If they can do this for a little boiler installation, they can do it to set up a gondola company. 3. Austerity measures aren't terribly relevant. With gas prices up even the US is building transit. Cheap transit like gondolas might sell well. 4. Any company that tells you they have too many orders doesn't desrve to be in business. You scale up to meet demand or you're leaving money on the table. 5. Yes, gondola companies will only focus on countries with deep pockets. Like South American countries?!
  6. I work as an engineer and i travel often overseas except the USA. But with the USA there are many legal troubles. If you want to be sure you need one or better two teams or lawyers. You have to set up a company which you can let co bankrupt and let the mother company untouched in case of any legal trouble. I know many company which cannot afford to work in the US and the just wont accept orders from there . Because the risks too high for a SME. To overhead to handle a project in the SA is much larger than for any other country.. Larger companies can find ways to handle those obstacles but this also cost money. See all the compromises they had to do for the Acela high speed train. A standard TGV is lighter,faster,safer and cheaper. But because Americans think the heavier the safer they had to compromise the initial design.
  7. Matt the Engineer
    Yes, our passenger train policy is crazy. But that's just trains, and we haven't done trains well for generations. There is hope that we'll finally get positive train control and be able to order standard trainsets. I'm not sure why your experience requires teams of lawyers and shell corporations, but I work as an engineer in the US and have never been involved in litigation. The firms I've worked for do have errors and omissions insurance, but little interaction with lawyers. Contracts are usually written up on jobs, but I've worked on multi-million dollar projects that were based on a handshake. And I've never found a company that won't sell to me because I'm in the US. Anyway, we clearly have different experience sets. Have you ever worked on a US project, or is this all second-hand?

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