Government reaches agreement with xwave on remediation plan

Joan Marie Aylward, Minister of Finance and President of Treasury Board, and Judy Foote, Minister of Industry, Trade and Rural Development, today announced that government and xwave have agreed on a remediation plan that addresses both employment and subcontracting shortfalls in its Industrial Benefits Agreement (IBA).

As of March 31, 2003, xwave will be in full compliance with the IBA, with the exception of a six-month delay in the creation of 30 new jobs. Government will apply penalties to xwave beginning April 1, 2003 until the full employment targets are met in October 2003, consistent with the terms of the contract. Penalties are estimated at $100,000.

In addition to the commitments made in its remediation plan, xwave has committed to the following industrial benefits over and above the existing terms in the IBA to demonstrate its good faith in helping to grow the local information technology (IT) industry:

• Aliant, xwave�s parent company, will fund $750,000 of a joint government-industry Near Shore Development Initiative over a three-year period to aggressively establish the province as a recognized centre for IT development and bring new IT work to the province that will benefit both xwave and the local industry; and,
  
• xwave will give "first consideration" to Newfoundland and Labrador as the location for new business operations and jobs as new business is secured by xwave on a corporate-wide level.

Minister Foote said government has held xwave fully accountable for its contractual obligations under the IBA and is satisfied with the remediation plan presented by xwave, particularly the Near Shore Development Initiative. "I am pleased to announce today that government will match Aliant�s contribution to this initiative over the three-year period for a combined commitment of $1.5 million," said Minister Foote. "This will be a major boost to the further development of our local IT industry and government plans to engage the Newfoundland and Labrador Association of Technology Industries (Nati) fully in this effort."

Minister Aylward added: "Government�s objective is to leverage government�s IT expenditures to generate new employment and growth in the IT sector through work that xwave can bring to the province as the fourth largest IT systems integration company in Canada. This work not only benefits xwave�s operation in the province but also other local IT companies."

Until the recent downturn in the IT industry, xwave was successful in meeting all of its IBA commitments and, in fact, exceeded some of its commitments. Since government�s initial contract in 1994, employment at the company�s St. John�s-based operation has grown from 300 to 540 positions today, even after the reductions recently announced. Only 125 of these positions directly service government�s IT contract at present. With the implementation of the remediation plan, which includes an expansion to xwave�s client support center, xwave will have more than 600 employees located in the province. xwave has also brought more than $48 million in new IT business to the province since 1994; has contracted out more than $20 million in IT work to other local IT companies; and invested upwards of $6 million to bring its Atlantic data processing center to Newfoundland and Labrador in 2001.

Government�s contract with xwave provides protection to the taxpayer and the local IT industry in the event of a potential sale. The contract states that under the terms of the IT Service Level Agreement, government has the right to terminate the agreement in the event that the voting control of xwave changes. Government must also give its consent to the assignment of its IT services contract to any new owner.

Minister Foote noted: "We would only do this if it can be clearly demonstrated that any new owner has the required vision, commitment, experience and resources to ensure xwave remains a strong and viable company in the province and supports government�s policy objectives for overall growth of the IT industry."

Government renewed its initial 1994 seven-year contract with xwave in April 2001 for an additional term that will expire on March 31, 2007. A comprehensive Industrial Benefits Agreement was negotiated as part of the contract extension. To ensure there is a complete public understanding of xwave�s contractual commitments, government today made public its contract with xwave and the remediation plan accepted by government. Media outlets can obtain a copy of the contracts by calling (709) 729-4578.

Media contact:

Tansy Mundon, Industry, Trade and Rural Development, (709) 729-4570
Josephine Cheeseman, Executive Council, (709) 729-0329.    

2003 03 06 4:35 p.m.