Embattled construction and engineering company SNC-Lavalin has won a $660-million contract from Ottawa — the city, not the federal government — to extend a light-rail transit line.
The City of Ottawa selected SNC to build a 12-kilometre extension to the Trillium Line and a 4-kilometre connection to the airport, a project that includes maintenance of the system for 27 years, the Montreal-based company announced Thursday.
It’s part of a larger $4.66-billion transit expansion in the nation’s capital, with Nebraska-based Kiewit Corp. and France’s Vinci Construction winning the rest of the work.
“We are proud to have the opportunity to further contribute our experience and expertise toward the growth of this transit network and help our nation’s capital achieve its vision of shorter commutes, cleaner air and a stronger economy,” SNC infrastructure president Jonathan Wilkinson said in a statement.
The contract win sheds light on SNC’s business opportunities in Canada as it fights charges of bribing Libyan government officials to secure contracts. If it’s found guilty, it could be restricted from bidding on federal contracts for up to 10 years.
As SNC’s attempt to negotiate a remediation agreement instead of going to court dominates political headlines, questions remain over whether projects like the Trillium Line extension would get the green light if the company is found guilty of bribing Libyan government officials to secure contracts.
Most major infrastructure projects in Canada, particularly transit projects, are built with funding from municipal, provincial and federal governments, often with each throwing in one-third. This means there isn’t a simple answer to what SNC would be able to bid on if restricted from federal contracts.
“That’s the hard question,” AltaCorp Capital analyst Chris Murray said Thursday. “There’s a broad debate that’s happening right now inside public works about what the actual rules should be.”
City staff in Ottawa concluded SNC will be able to do the work, regardless of the outcome of the charges.
SNC-Lavalin is currently allowed to bid on projects under an administrative agreement with Public Services and Procurement Canada it signed in 2015 after being charged with bribery. The agreement was the first under a revised integrity regime designed to be less harsh on companies that had yet to be convicted for criminal charges.
Murray noted that SNC has a large portfolio of infrastructure it’s bidding on given such processes can take a couple years. While SNC’s competitors may use the fact that it’s embroiled in a political scandal as a “competitive weapon,” he expects it will carry on with business.
“They’ve got a very viable business. It’s technically a good company, a good competitor. We would expect they continue to both bid and win,” he said.
Still, SNC itself is bracing for potential consequences if the charges do go to trial and result in a guilty verdict.
In its annual information form released to investors last month, SNC noted the potential consequences include the mandatory or discretionary suspension, prohibition or debarment of SNC from participating in projects by federal and/or provincial governments.
Government contracts make up a “significant” portion of its annual global revenue and an “even larger” percentage of its annual Canadian revenue, according to the annual report.
Nearly 30 per cent of the company’s total revenue of $10 billion came from Canada in 2018, according to the annual report, so any restrictions would “likely have a material adverse effect on the company’s business, financial condition and liquidity and the market prices of the company’s publicly traded securities.”
Desjardins analysts estimate that, as of October, SNC’s exposure to the Canadian government was less than 15 per cent of its total revenue.
SNC stock fell 1.6 per cent to $35.51 in Toronto Thursday.