The Montreal Transit Corporation

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Montreal Transit Corporation

Problem:

The Montreal Transit Corporation (STM) and its procurement director Jean Belanger requires to provide detailed information, recommendation and procurement methods to choose from a sole-source contract negotiation or an RFQ for a modernization contract of 336 metro cars with an estimated value of over $1 billion dollars.  Jean is aware about competitors in this industry and has a tight deadline to submit his findings to Board of Directors of the Company. He has to make a strategic decision based on several criteria such as:

1. The added value for the customer
2. Planning
3. Financial considerations
4. Organization and control

Cause:

The Montreal Metro subway system was introduced and operated since 1966 with rubber-tired trains and it is outgrown by the volume of daily passenger usage, by technology, with high maintenance cost and energy inefficiencies.  

Analysis:

Bombardier Sole-Source - SWOT Analysis

Strengths

• Well known and well recognized Brand name
• Expertise and strong specialization in Planes and Trains manufacturing
• Global leader in Transportation
• Local Company with support of local business and community (Factory in La Pocatiere)
• Focus on supplier’s long-lasting relationships with improving their own CSR performances
• Faster and less cost logistics
• Contract negotiation focus on project’s cost controls, terms of contract, train specifications and warranty only

Weaknesses

• Financial backlog for the transportation subsidiary from $7.6 billion to $6 billion
• Technology dependency and integration from other innovators - Not in-house  
• Lack of competitive strength
• Less advanced technology

Opportunities

• Positive impact on supporting local business with creation of 4,600 direct and indirect jobs for the next eight years
• Public support and positive public influence from developing local economy and continues growth
• Lead time and cost reduction

Threats

• Possibility of higher cost with no competition
• Delays in delivery and not supporting deadlines
• Financial problems
• Negative Public impact for not offering bidding competition

Alstom Sole-Source - SWOT Analysis

Strengths

• French global company with worldwide operations in rail markets, passenger transportation, signaling and locomotives
• Financial growth and stability
• Increase life and performance due to modern solutions to all phases of a train’s life
• CSR integration in their products and services in exchanging information between Alstom and its suppliers and partners to understand and meet local requirements
• Innovative solutions and more advanced technologies to all aspects of transportation

Weaknesses

• Geographical presence – head offices and production are outside of a Country
• Logistics delays and possible damages, returns (ex. union strikes, tariffs)
• Production delays or shortages due to natural disaster

Opportunities

• Time saving in awarding a contract
• Innovative solutions to lower total cost of ownership
• Better price due to multiple selection of suppliers
• Dedicated CSR team will focus on company short- and long-term business decisions with producing and improving products and processes and will work together towards the sustainable and profitable business model

Threats

• Possibility of higher cost with no competition
• Negative Public impact for not offering bidding competition
• Negative Public impact to STM for not offering contract to a local company
• Negative impact on local economy growth
• Currency fluctuation/Exchange Rates

RFQ – SWOT Analysis

Strengths

• Competitive bidding
• Wide variety of products
• Rational decision making
• Trade Agreements and Purchasing compliances

Weaknesses

• Time consuming and long process
• High competition in the industry
• Possibility of not meeting deadlines in delivering from staff management

Opportunities

• Opportunity for high quality, innovative and sustainable product
• Lower cost of ownership
• Opportunity to share contract with other vendor for different product or services
• Opportunity to have not only A but B or C vendors for different products or services if A partner cannot meet the requirements

Threats

• Negative Public impact to STM if contract not offered to a local company
• Negative impact on local economy growth if contract not offered to a local company
• Increase in the cost
• Currency fluctuation/Exchange Rates
• Logistics, production, political or natural disaster delays

Solution:

Jean Belanger has a very difficult decision to make as it might have big impact on STM as public sector transport agency and local economy. He has to understand and evaluate different options in a timely manner.

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