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CN Says Its Rail Infrastructure Construction Work For GO Transit Was Rigorously Reviewed, Rejects Unfounded Allegations Of Irregularities

Stocks in this article: CNICNR

TORONTO, Oct. 1, 2013 /PRNewswire/ - CN (TSX: CNR) (NYSE: CNI) said today the commuter rail infrastructure projects it undertook for GO Transit in the Greater Toronto Area (GTA) were rigorously reviewed and that it rejects unfounded allegations that it defrauded the agency.

Sean Finn, CN executive vice-president, corporate services, and chief legal officer, said: "CN is deeply concerned with allegations of financial improprieties in connection with its work on behalf of GO Transit since 2004. CN and GO Transit developed a rigorous construction management process that assured financial integrity, cost certainty, quality work and strict oversight. CN categorically rejects allegations that it in any way defrauded the agency."

All of CN's construction projects for GO Transit were completed on a fixed-price basis that the parties agreed upon before work started. This approach required CN to maintain discipline in delivering projects within the agreed-upon price. This also provided GO Transit with cost certainty for each project, enabling it to manage expansion budgets without the risk of cost overruns.

The rigorous construction management process agreed to by CN and GO Transit contained four steps:

  • Project scoping and definition: for each project there was a specific agreement on the scope of the work, which took into account the fact that freight, commuter and passenger trains share the same infrastructure and that no infrastructure is dedicated to GO Transit on CN's network.
  • Contractual agreement on fixed price: CN prepared -- and GO Transit reviewed and formally approved -- a detailed estimate for each project that formed the basis for the committed fixed price under which CN agreed to deliver the project. Only once satisfied with the details and price did GO Transit provide CN with a purchase order allowing for the work to commence. Such fixed-price purchase orders were seldom varied, and only with the consent of GO Transit and CN.
  • On-site construction monitoring: regularly throughout each project, joint CN and GO Transit field inspection took place to ensure that the work was executed as planned and quantities installed in accordance with the agreed-to project scope. A highly experienced consulting firm was also hired by GO Transit to help carry out the inspection work.
  • Post-completion inspection and final payment -- upon completion, a joint inspection was done in the field to confirm that the work was to GO Transit's satisfaction. Final payment was made by GO Transit only after such inspection was completed.

Finn said: "This rigorous construction management process assured projects were completed as to agreed-upon specifications and on budget. Of equal importance, this rigorous process assured transparency and full accountability of CN. At no time has GO Transit expressed concerns with CN's management of projects performed on its behalf.

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