Q&A: What the LRT delay could cost Bombardier and the Region of Waterloo
Though the service launch date for the Ion LRT has been thrust into uncertainty, there is one thing that can be counted on: money will be changing hands.
The Region of Waterloo has a number of payment-recovery clauses built into its contract with Bombardier for the light rail vehicles. So does Grandlinq, the light rail builder and operator, if it finishes construction on time and is left waiting with no service to operate.
- No more 'wiggle room' in LRT schedule, start date delayed to 2018 due to train delays
- Bombardier taking 'bold, decisive action' to deliver LRT trains
The Morning Edition host Craig Norris spoke with Region of Waterloo Counc. Tom Galloway about what options the region has to hold Bombardier to account, now that the delivery of those vehicles has been delayed by several months.
Craig Norris: Bombardier. Will they be penalized for this?
Tom Galloway: Well, we expect to collect on the liquidated damages that is in the contract.
What does that mean?
"Liquidated damages" is a legal term that is in the contract, $1500 a day, per vehicle from the original schedule. They will argue against that, obviously, they will say "Well we had a 7-week strike, we had 'this' problem and 'that' problem, you can't hold us responsible for certain things." And that will all be subject to negotiations.
We really don't want their money. We want their vehicles.- Counc. Tom Galloway
It has an upset limit of $3.3 million on that part of the liquidated damages. There's liquidated damages on other things as well. We are buying $9 million of spare parts and specialized tools. There could be liquidated damages on that as well.
We really don't want their money. We want their vehicles.
But that money will be taken off what the final bill will be, correct?
That's correct – whatever is negotiated. It's not an automatic thing, it could go to a third party resolution.
Does this end up costing the region money though, to do all this?
One thing for sure it's going to cost is we're not going to have fare revenue as early as we had hoped.
Now, that's a smaller part of our financing. The financing we have is all in place, so it's like buying a house and having to pay the mortgage, but not being able to live in the house for the first few months – which sometimes happens to people when they're in-between houses.
And it's not a good thing...
It's not a good thing. So it can't make us money.
And then Grandlinq would have the option, might say: "You've now cost us money because we've got staff on board who are waiting to run these trains and test them out and they're not here yet and we're going to have to keep them on staff longer than before."
So they may make a claim, but then against that cost we will be looking to Bombardier for liquidated damages.