TORONTO - In what's described as the biggest municipal contract in Canadian history, the Toronto Transit Commission has chosen Bombardier Inc. (TSX:BBD.B) to supply 204 new streetcars for more than $1.2 billion.

The procurement recommendation from the staff of the country's largest transit authority envisages spending $993 million for the streetcars, plus $293.1 million for spare parts, options and other items, a total of $1.29 billion including taxes.

After GST rebates, the total expected cost is $1.22 billion.

The commission will vote Monday on whether to approve the purchase, for which funding has not been finalized from the Ontario and federal governments.

Chairman Adam Giambrone was unable to offer specifics of financing arrangements Friday, but stressed that the streetcars represent "the No. 1 ask of the City of Toronto for the (federal) stimulus dollars."

Two companies were in the running to replace Toronto's aging streetcar fleet: the German-based Transportation division of Montreal-headquartered Bombardier, which has been making streetcars for decades in Thunder Bay, Ont., and Germany's Siemens.

Siemens put forward a base price of $1.53 billion -- 54 per cent more than Bombardier's $993 million.

Both companies promised that at least one-quarter of the production work would be done in Canada.

"We will be looking to negotiate with Bombardier for a higher Canadian content," Giambrone told reporters, adding that "we have to assume that there may be additional cost" for this.

The contract price doesn't include a new maintenance facility required for the larger vehicles, estimated to cost $345 million, which Giambrone suggested would likely be located in the city's port district.

A prototype of Bombardier's vehicle is to be delivered in 2011, with the first cars entering service in 2012 and all 204 delivered by 2018.

The TTC purchased 248 streetcars in the 1970s and 1980s, the last of which are expected to be retired in 2018.

"The new LRVs will be low-floor, quieter, have features such as air conditioning for greater customer comfort, and be able to carry almost twice as many people as the TTC's current streetcars do," the commission said.

TTC engineering staff -- previously worried that Bombardier's vehicles could not negotiate tight turns on the Toronto track network -- "is satisfied that Bombardier's proposed car will operate safely in Toronto."

The contract would include an option to purchase up to 400 additional vehicles.

"There's something really iconic about the streetcar in Toronto," Giambrone said, speaking at a lectern whose "Ride the Rocket" sign kept falling off.

Beyond sentiment, high-capacity streetcars provide "a practical, pragmatic solution," he said, addressing criticism that they are inflexible, traffic-obstructive and expensive -- almost $6 million each in the Bombardier contract, about 10 times the cost of a bus.

"They are essential to providing good service."

The decision on funding faces a June 27 deadline beyond which Bombardier's price is no longer guaranteed.

Giambrone observed that the city, province and federal government traditionally split such spending evenly, but "the funding charts often get incredibly complex."

Thunder Bay New Democrat MP Bruce Hyer welcomed the announcement, which "will bring some hope to workers that are left behind by the Conservative government."

NDP Leader Jack Layton, who represents a Toronto riding, added in a statement that parts for the streetcars will come from various Ontario plants and "now it's time for the federal government to do its part and allow the City of Toronto to use its share of the stimulus package for this project."

A spokesman for Siemens Canada, DL Leslie, expressed disappointment and said that "we still feel that our vehicle is the best streetcar for the city of Toronto." Leslie said he could not comment on the price difference, but noted that if it won the contract Siemens undertook to open a plant in or around Toronto with about 200 skilled jobs.