(The National Post circulated the following article by Andrew McIntosh on its website on October 22.)
OTTAWA — The chief executive officer of Via Rail Canada says the government railway has not incurred any cost overruns on its plan to revive passenger service in Canada by purchasing and refurbishing 139 railway coaches from Britain.
Marc LeFrançois, president and chief executive of Via Rail, made the remarks in a letter to the National Post, saying coaches the railway bought from Alstom in late 2000 were “brand new equipment” that “incorporated the best in passenger car design and technology.”
Two weeks ago, the Post reported the government’s plan to revive passenger rail service had run into trouble as the cost of buying and refurbishing all 139 cars had soared to $235-million from $125-million disclosed to taxpayers in 2000.
The story was based on testimony by David Collenette, the Transport Minister, who told members of a Commons committee in June during little noticed testimony that Via had incurred “cost overruns” on its Renaissance rail car purchase.
Without referring to the Minister’s testimony, Mr. LeFrançois is now insisting any suggestion that extra costs incurred to bring the Renaissance coaches into service were “cost overruns” is untrue.
“The managers of this project are not to be pilloried, but are to be congratulated for great service to the company and to Canada,” Mr. LeFrançois’s letter stated.
On Dec. 15, 2000, Via Rail announced the Liberal government authorized its plan to buy 47 passenger coach cars, 20 service cars with a lounge and restaurant and 72 sleeper cars from European manufacturer Alstom.
The cars, built in the mid-1990s for a European railway consortium at a British Alstom plant, never went into service and were to be shipped to Canada and reassembled and refurbished at a Bombardier plant in Thunder Bay, Ont.
The total cost for the acquisition and all modifications and upgrades for the 139 cars was to be $125-million, a Via Rail news release said at the time.
Testifying before the Commons transport committee just before Parliament rose this summer, Mr. Collenette told MPs only 106 of the 139 cars have been modified at the Bombardier facility in Ontario. That work alone cost $165-million, he said.
Helena Borges, executive director of rail policy at Transport Canada, then testified Via Rail needed “about another $70-million” to refurbish the remaining 33 cars.
The Transport Minister blamed what he called “cost overruns” on several factors, including “additional unforeseen costs” incurred to adapt the cars for people with disabilities, a requirement to add crash resistance to the cars, and a requirement for safety upgrades to be done in washroom zones at the ends of the new cars.
“We found that the placement of the washrooms in the crash zone at the ends of the cars did not afford enough protection for anyone who might be in the washroom when there was an accident. Therefore, we request Via adjust the location of the washrooms, so that was an additional cost,” Mr. Collenette said.
In his letter to the Post, Mr. LeFrançois states Via submitted a five-year business plan to the government in 2000 that proposed it be authorized to buy 100 cars, “second-hand and retrofitted at a budget of $130 million.”
He added that during a “worldwide search for the 100 cars, Via Rail discovered “a fleet of 139 completed and partially completed new cars” built by Alstom.
Even though Via Rail needed only 100 coaches, the Alstom fleet of 139 was available only “as a package deal,” he said. Mr. LeFrançois’s letter states that in September, 2000, Via Rail’s board of directors “approved a capital expenditure of $145-million for the purchase and transport to Canada of all the cars and parts.”
That initial plan — the details of which were not disclosed to the Canadian public by either Via executives, or in its press briefing materials at the time — was to refurbish only 100 cars, he said.
In 2002, Via Rail decided to complete six more cars, including one dinning and one baggage car “to meet the needs of its customers in Atlantic Canada, at an additional cost of $10-million.”
He said “the final budget” for the “purchase, assembly, redesign and completion of the 106 cars was therefore only “$160-million.”
However, Mr. LeFrançois revealed “the additional 33 unfinished cars” that Via Rail bought “are being kept in reserve in the event that demand for capacity increases.” The cars are being stored in Thunder Bay, a Via spokesman said.
As for the evidence Ms. Borges gave to MPs indicating that Via Rail needed an extra $70-million to complete and refurbish the remaining 33 coaches, Mr. LeFrançois said: “No moneys have been budgeted for this purpose at this time.”
“Via Rail met the final budget figure and put the cars into service on time,” he added.
A Via Rail spokesman conceded the $160-million “final budget” cited by Mr. LeFrançois cannot be a final budget and exclude $70-million in future costs.
The real cost of the complete project to purchase and refurbish all 139 cars shall be an estimated $230-million to $235-million, the Via spokesman said.