New IT services and Industrial Benefits Agreement announced

Government today signed a five-year extension to an existing agreement with xwave to provide IT services to government and industrial benefits to the province. The agreement will result in a minimum of 100 new specialized IT positions in the province, and bring a minimum of $30 million in new business to the province over the term of the contract.

The announcement was made today by Beaton Tulk, Minister of Industry, Trade and Rural Development, and Treasury Board Minister Joan Marie Aylward. The new agreement is valued at $16.5 million per year, including $2 million in IT work to be subcontracted by government.

xwave's vice president Keith Collins also participated in the contract signing, and announced the company will invest $6 million to expand its mainframe processing facility in St. John's, just one of the significant investments undertaken over the last several years to help build the IT industry in Newfoundland and Labrador. 

Mr. Tulk said the new agreement will not only continue the strong gains in industrial benefits that have already been achieved, but will make more government work available to local IT companies, and will help further the development of the IT sector generally. "The tremendous success of the current contract in creating new jobs and industrial benefits was a key factor in our decision to extend the contract," he said.

He said that as a result of discussions with Nati, the association representing local IT companies, the new agreement differs from the current one in several respects in order to address their concerns.

"This is not just about providing the necessary IT services to maintain government's core administrative functions. This is also about bringing in new business from outside the province, and creating specialized IT jobs for Newfoundlanders and Labradorians, right here at home. This is about providing new industrial benefits that enhance the continued development of our IT sector, and the growth of employment in that sector. In short, it is about economic development benefits," he said.

Under the new contract, the company has committed to creating a minimum of 100 new specialized positions. As a direct result of its work under the existing contract, xwave has created 225 specialized IT positions to date, far exceeding the company's contract commitment to create a minimum of 60 jobs.

"Contrary to popular misconception, only a small portion of these new jobs are related to providing core IT services to government," Mr. Tulk said. "The majority of the specialized jobs created are related to new work that xwave brought into the province from elsewhere."

Minister Alyward said the new agreement will make $24 million of work available over the term of the contract for other companies to bid on. This represents almost 25 per cent of the annual revenue generated from the new agreement. Under the existing contract, xwave subcontracted more than $19.5 million to other local companies. Under the new agreement, there is also a commitment to increase subcontracting if government expenditures exceed a base amount.

xwave's vice president Keith Collins said that with its investment of $6 million for a mainframe processing facility in St. John's, "xwave will create the largest data processing facility east of Montreal, ensuring that the potential IT work associated with the province's natural resource developments will remain here in the province. This mainframe processing facility is being established as a result of the continued partnership with the province where the new facility will be xwave's Regional Atlantic Mainframe Center doing related work for the province, Aliant and its affiliated companies."

Stephen Wetmore, president and CEO of Aliant Inc., xwave's parent company said: "The Government of Newfoundland and Labrador has demonstrated tremendous leadership in supporting the growth of the local IT industry. 

"Through this highly successful privatization, they have helped create a critical mass of resources needed to support further investment by xwave. This in turn has provided the basis for xwave to hire more than 225 people, and to continue to seek opportunities internationally, bringing specialized IT work back to the province."

Under both the current and new agreements, xwave has committed to sourcing a minimum of $5 million of new business into the province each year of the contract. Under the current agreement, xwave has already exceeded its commitment to bring $30 million in new business to the province, with $38 million delivered to date.

"This is an excellent example of how funding and having an anchor tenant can be used to leverage additional funding and attract investment that contributes to the growth of our IT sector, and related employment growth," Mr. Tulk said.

With the new agreement, there's an increase in the amount of work to be subcontracted. Of the $24 million available to other companies to bid on in the new contract, $12 million will be direct government work. This work, and as proposed by Nati, will be contracted directly by government to companies other than xwave. 

"This is a departure from the existing contract, under which xwave administered the subcontracting of government work," Ms. Aylward said. 

Until 1994, a publicly owned entity called Newfoundland and Labrador Computer Services provided government IT services. Government sold NLCS to NewTel that year for $9 million and a commitment from NewTel that the company would create new jobs, and attract new business, including subcontracted work to other local IT companies. This resulted in the creation of xwave. 

Minister Aylward noted that xwave has not only met but exceeded the majority of its commitments. The company has become the fourth largest Canadian-owned systems integration company, with 2,400 staff worldwide. The company's head office remains in St. John's. 
"xwave attracts and subcontracts work to local companies that would not otherwise be available in Newfoundland and Labrador. We're also expanding internationally, and we are actively seeking opportunities to link our new office in Dublin, Ireland with our office here," Mr. Collins said.

Ministers Tulk and Aylward welcome xwave's intention to open the expanded data processing facility in St. John's. "This will greatly enhance xwave's ability to attract new clients to the province, and to perform additional work here in Newfoundland and Labrador," Minister Aylward said.

Photo#1(L to R) Keith Collins, vice president of xwave; Joan Marie Aylward, Minister of Finance and President of Treasury Board; Beaton Tulk, Minister of Industry, Trade and Rural Development (July 17, 2001)

Media contact: 

Josephine Cheeseman Industry, Trade and Rural Development (709) 729-4570
Glenn Bruce Treasury Board (709) 729-6793
Darell Fowlie xwave (877) 332-4605.

BACKGROUNDER
Extension of IT services and Industrial Benefits Agreement

• Government's seven-year contract with xwave to provide IT services and industrial benefits expires March 31, 2002. The contract is now being extended for five years, with amendments and new industrial benefits for the province, to March 31, 2007.
  
  
• As a direct result of its work under the existing contract with the Government of Newfoundland and Labrador, xwave has created 225 specialized IT positions in the province, and sub-contracted more than $19.5 million to local IT companies. This exceeds the contract commitment for xwave to create a minimum of 60 jobs.
  
  
• As a direct result of the new agreement, xwave has committed to create a minimum of another 100 jobs over the term of the new agreement.
  
  
• xwave will be investing $6 million in their Newfoundland operations to establish an Atlantic regional mainframe data center that will be the largest datacenter east of Montreal. This new investment will cause xwave Newfoundland to be the hub for processing all of Aliant's Atlantic mainframe needs, as well as the provincial governments.
  
  
• The new agreement will make $24 million of work available to IT companies. This represents 25 per cent of the annual revenue generated from the new contract that will be sub-contracted to other IT companies based in Newfoundland and Labrador. Of the $24 million, $12 million is for government work. The other $12 million is non-government work that xwave has committed to sub-contract.
  
  
• Under the new agreement, government will contract out $12 million in IT work to companies other than xwave. There is also commitment to increase subcontracting if government expenditures exceed the base amount.
  
  
• Under the new agreement, xwave commits to bringing a minimum of $30 million of new business into the province. Under the current contract, xwave has already exceeded its $30 million commitment, with $38 million of new business delivered to date.
  
  
• xwave will continue to maintain its corporate head office in St. John's, with specific emphasis on developing new business in Ireland. In addition, xwave plans to open an expanded data processing facility on Higgins Line. This facility will be the largest data processing centre east of Montreal.
  

2001 07 17                                                    11:15 a.m.