Montreal Transit Corporation

SCMP Module 7: SM for the Public Sector

Problem: The main problem for Jean Belanger is which procurement method to use for the modernization project of 336 metro cards for the Montreal Transit Corporation (STM). He needs to decide whether to have a sole source contract via direct negotiation with Bombardier, or go through an RFQ process involving more competition such as Alstom Transport and Siemens.  Having said that, there are various sub related issues to take in consideration when taking the decision, such as the local economic impact to the city and the citizens in the short and long term, the environmental impact to the city,  and last but not least, the lead time to get this project done in time and on budget.

Cause: The root of the problem is that the city of Quebec is looking for a modernization project of 336 metro cars, with an estimated budget of $1 billion. The have had the same metro system since 1966. 

Analysis: 

Sole Source vs RFQ (SWOT Analysis)

Sole-Source Bombardier

• Strength

• Strong brand name
• World leading knowledge in manufacturing of planes and trains
• Great performance tracking database to understand and monitor supplier performance
• La Pocatiere Factory located in Quebec helps supports the local community
• Negotiations will only focus on the project cost controls, terms of contract, train specs, and warranty which will reduce the chances of any delays.

• Weaknesses

• Less energy efficient
• Less opportunity for innovation with a more environmental friendly metro cars
• Does not manage quite well the risk and opportunities of the long term sustainability of growth, both for the company and for the planet.
• Lack of product variations.

• Opportunities

• If contract is awarded directly to bombardier, it would generate 4,600 direct and indirect jobs per year for the next 8 years, which directly impact the local economy and the continuous growth of the community.
• STM could also benefit from favorable public relations by supporting local companies and communities.

• Threats

• Competitors
• STM may experience relatively higher costs for the modernization project as a result of not driving competition through an RFQ process.

RFQ process

• Strength:

• Driving competition
• Less costs in the long term.

• Weaknesses

• Take more time to implement.
• Higher costs to implement.

• Opportunities

• More opportunities for innovations
• Opportunities to identify the environmental and social impact of the project in the long term.
• Opportunity to develop a sustainable supply chain for the manufacturing of the metro cars as well as applying
• Opportunity to manufacture a more environmental friendly metro car

• Threats

• Competition
• STM may lose local support
• A lot of people from La Pocatiere Factory located in Quebec will lose their jobs.

Solution: My recommendation is to negotiate directly with Bombardier. It will take less time; it will shorten the execution of the project, and focus only on terms of contract, train specs, warranty, etc. without having to spend time, money and effort into a full RFQ process. Moreover, by awarding directly to Bombardier, it would generate 4,600 jobs per year for the next 8 years, which directly impact the local economy of Quebec which at the end of the day should be a priority. Once the city is up and running with the new metro cars, STM and Bombardier could look at a possibility of partnering with Alstom in order to look for long term plans of renewable energy production, as well as sustainable development and eco design principles for the operations and maintenance of the metro cars.