Construction/Building — March 11, 2010

SNC-Lavalin refutes misinformation published on federal building contracts

MONTREAL, March 11, 2010 /CNW Telbec/ - SNC-Lavalin expresses its disappointment over an article published in La Presse on March 10, 2010 concerning SNC-Lavalin Operations and Maintenance's federal building management contract. In effect, the author of the article chose to ignore many important facts which were explained to him. If they had been included in the article, they would have clearly demonstrated that SNC-Lavalin's rates are absolutely consistent with the going market price for these types of services.

The federal buildings maintenance contract was specifically tailored to align with the government's objective to save taxpayers money while offering quality services. SNC-Lavalin is proud to have realized substantial savings of about $50 million annually for the client since the contract was awarded following a call for tenders for this property management contract for 320 federal buildings. Moreover, SNC-Lavalin's Operations and Maintenance (O&M) division has also reduced energy costs for these buildings by $2.1 million annually.

By virtue of the volume of work SNC-Lavalin O&M manages, it has also been able to obtain very competitive prices and rates from suppliers through economies of scale thus transferring these savings to the Government and ultimately, Canadian taxpayers.

Certain numbers mentioned in the La Presse article may appear to be high, but it should be noted that they cannot be compared to residential rates. For one thing, there are laws, conventions and regulations that apply to various trades for work carried out in commercial buildings that must be respected.

The following examples show just how much information is missing in the article:

    - Maintenance costs for the cleaning of two offices of $36,000 a year:
      these costs, in reality, cover the daily cleaning of two floors of the
      building, with a total of 22 enclosed offices, two common areas, two
      kitchens and two complete washrooms, which together add up to
      1,500 square metres.
    - A new doorbell that cost $1000: this required the installation of a
      current-reduction transformer, the opening and repair of part of a wall
      in order to install an electric panel, electrical conduit and wiring,
      extending more than 12 metres from the doorbell.
    - Plants that cost $2000: these costs related to the two mature plants
      (one metre and two metres high) include the two plants and special
      self-irrigating pots, as well as delivery charges, planting, and
      maintenance and watering over a one-year period.
    - Installation of blinds costing $1414: the installation of three blinds
      included the cost of the blinds at $392 each and the removal of old
      ones. This work also could not be done during work hours and therefore,
      overtime had to be paid to the subcontractor.
    - Installation of six recessed pot lights at $5266: this included six
      non-standard halogen recessed lights, installation of a dimmer, a
      separate circuit breaker, and 30 metres of conduits plus cabling for an
      independent outlet for installing a new projector in the ceiling. This
      work also had to be done after hours.
    - Removal of an exit sign costing $256: due to safety reasons, this
      project required two electricians in order to secure the electrical
      panel.
    - Removal of a light switch costing $1000: this work consisted of
      removing the switch and the cabling and conduits up to the electrical
      panel (50 metres). After removal, the lighting needed to be reconnected
      to the existing automated system which was 50 metres in the other
      direction with additional conduit and cabling. Again, this work was
      done after hours for security reasons and not to disturb the occupants.

SNC-Lavalin O&M is responsible for the complete management of these installations, which includes the supervision of work entrusted to 6,000 prequalified subcontractor companies. These subcontractors are for the most part small- and medium-sized Canadian enterprises, and are chosen through competitive calls for tender.

Whenever possible, SNC-Lavalin carries out its maintenance, renovation and cleaning work during regular work hours, in order to minimize costs. However, some projects are carried out after hours when these would be disruptive to building occupants.

Since this contract began, SNC-Lavalin O&M's performance has had an average of 170 satisfactory annual audits conducted by organizations such as Public Works Canada and Audit Services Canada. It has also undergone an additional 400 internal audits in order to ensure that best practices are always applied.

It should also be noted that, as stated in the Company's latest annual report, SNC-Lavalin's gross margin for operations and maintenance for all clients was recorded at less than 4% in 2008.

SNC-Lavalin is very proud of the great work accomplished by its employees, and of the quality of the services offered to Public Works and Government Services Canada and to all its clients, and is at all times highly committed to transparency and good management practices.

SNC-Lavalin (TSX: SNC) is one of the leading engineering and construction groups in the world and a major player in the ownership of infrastructure, and in the provision of operations and maintenance services. SNC-Lavalin has offices across Canada and in over 35 other countries around the world, and is currently working in some 100 countries. www.snclavalin.com

For further information: Media: Leslie Quinton, Vice-President, Global Corporate Communications, SNC-Lavalin Group Inc., (514) 393-8000, ext. 7354, leslie.quinton@snclavalin.com; Investors: Denis Jasmin, Vice-President, Investor Relations, SNC-Lavalin Group Inc., (514) 393-8000, ext. 7553, denis.jasmin@snclavalin.com

Print | Email