In October 2002, Council approved that a number of projects be considered on a priority basis for implementation under public-private partnerships and that staff be authorized to issue a request for qualifications (RFQ) for these projects. One of these projects was for the provision of new ice surfaces in the east and west sections of the City.

The RFQ was posted on the MERX on 18 November 2002 with a closing date set for 18 December 2002.

This report provides the results of the evaluation of the responses received from the RFQ stage, and addresses the issues that must be resolved to advance this project to a successful partnership.

DISCUSSION

Public-Private Partnership (P3) Process

The selection of a private sector partner to assist in the delivery of a public service is one of the key elements in a P3 process. Unlike a standard procurement process where the City defines its needs and details the solution to that need, the P3 process builds on the creativity and abilities of the private partner to assist in defining the solution, and in most cases, relies on the partner to finance part or all of that solution.

Inherent in the creation of a partnership is the notion of a long-term relationship and, therefore, the selection of the partner needs to be conducted in a rigorous and prudent manner. The process set up to select a partner is normally a two stage effort where the first stage consists of a Request for Qualifications (RFQ), where interested respondents are required to qualify their team and prove to the City that their team has the knowledge, ability, and financial capacity to deliver an acceptable solution to the expressed City need, in this case the provision of new ice surfaces.

The second stage is the Request for Proposal (RFP) stage, where the teams that have qualified under the first stage are required to provide a detailed business case of their proposal and to indicate how their proposal best meets the City’s objectives.

Following a detailed evaluation of these proposals, a partner is recommended for approval by Council and once approved, negotiations are held to develop a partnership agreement that satisfies both the interests of the City and of the private sector partner. Following the execution of the partnership agreement, the delivery of the project can then be initiated in accordance with the terms of the agreement.

Results from the RFQ stage of the process

Ten submissions were received as a result of the RFQ process and were evaluated based on criteria that were included in the RFQ document and therefore available to each respondent. The evaluation criteria were set up by staff from the Supply Management Division, with the assistance of an outside consultant with experience in this area and with a number of other internal staff from various departments.

The evaluation criteria were also verified by the fairness commissioner retained by the City to oversee the process and to ensure that the evaluation process would be open, fair and transparent. The appointment of a fairness commissioner to assist in this effort is a best practice recommended by the industry to provide a very high degree of credibility to the P3 process. This recognizes that unlike a standard procurement process where the low bidder is normally awarded a contract, a P3 process focuses more on the quality of the partner and on their proposed solution, therefore making the selection process less straightforward.

An evaluation team consisting of two representatives from the People Services Department, one from RPAM, one from Finance, and one from the private sector was set up to carry out the evaluation of the responses, under the leadership of the Supply Management Division and in the presence of the fairness commissioner.

The criteria set up for the evaluation of the responses consisted of a number of mandated and rated requirements, including a minimum passing mark. Responses were rated by consensus and the evaluations were based strictly on the content of the submissions. Once all of the responses were evaluated, the fairness commissioner conducted a consistency review with the evaluation team to ensure that each response had been evaluated consistently relative to each other.

Based on this rigorous process, the following teams have been qualified to be short listed for the next step of the selection process:

East District:

1) Serco Facilities Management Inc. - proposed expansion of Ray Friel Centre

2) Ottawa Arena Partners (Ellis Don Corporation/the Cochrane Group) – site to

be determined

West District:

1) Ottawa Community Ice Partners (Morley-Hoppner Group/Ottawa Senators Hockey Club/Ottawa Senators Alumni/H&R REIT/Palladium Corporation/CB Richard Ellis Limited) – redevelopment of vacant complex at 500 Palladium Drive

2) Ottawa Arena Partners (Ellis Don Corporation/the Cochrane Group) – site to

be determined

3) Outside the Crease (Outside the Crease General Partner, Inc) – site located at

100 and 160 Michael Cowpland Dr.

It is important to recognize that inviting these respondents to the RFP stage does not guarantee a response to the invitation. It is quite possible that for any number of reasons some may decide not to pursue this opportunity.

Conversely, there are also no guarantees that the City will enter into a partnership with any of the respondents who submit a proposal. While the City is committed to the process and has full expectations to enter into a successful partnership, it will only proceed if there is a strong sense of a win-win situation for both the City and the private sector partner.

Governing principles for the development of the RFP

In preparing for the next step, the development of the RFP, it is necessary to clearly identify the goals and objectives of the City in entering into a possible partnership with a private sector partner and understand the principles that will underlie the development of a successful partnership.

The need for additional ice surfaces is well documented and is supported by extensive community support shown for these additional facilities. Recent studies completed by the City indicate a need for up to ten additional ice surfaces over the coming decade. While the need is recognized, there are financial limitations in the ability of the City to meet all of these needs at once. The approach being taken by the City is to add to the supply of ice surfaces through partnering with the private sector.

The core principle underlying this proposed partnership is the City’s commitment to purchase blocks of ice time from the private sector partner under a long-term agreement. These blocks of ice time would be during prime time and would be allocated back to user groups in accordance with the City’s Arena Allocation Policy, at City rates. The remaining hours would be made available by the private sector partner at market rates to other users in the community.

True market rates for ice time vary, but generally fall around $250/hr. and more. This represents the total cost of owning and operating a typical arena type facility and would include the cost of land, design and construction costs, life cycle costs, operating costs, overhead and administration, and return on investment.

These rates represent an average rate to own and operate these types of facilities but the rates charged to users depend on the quality of the time being purchased. Prime time is normally made available at a higher rate than non prime time and time available during the summer months may be available at a still different rate, depending on the demand for those times.

Staff is of the opinion that the purchase of 2400 hours of prime ice time from the private sector partners in each of the east and west district represents a good balance in meeting the City’s mandate and in providing an attractive proposition to a private sector partner.

It is intended to issue the RFP based on this approach and to rely on the public sector comparator (PSC) to ensure that the City obtains the best value proposition for the provision of additional ice surfaces in the City.

The PSC is a detailed evaluation of the City’s cost to provide and deliver a service. In this case, the City’s cost to build and operate a twin pad arena will be used as the comparator and will allow the City to evaluate and compare the proposals received from the private partners. In developing the PSC the City will include all costs, including debt servicing, life cycle costs, and administration costs.

It is clear that the PSC will be significantly higher than the City rates being charged to user groups. City rates are set by policy by Council to achieve specific community benefits but do not represent the true cost of delivering the service. In assessing the true value of any business proposition from the private sector it is necessary to use the PSC and not rely on the City rates that have been set to achieve a different objective.

As part of the financial analysis that will be carried out in the assessment of the proposals, staff will also report on the impact of any new facility on the operations and operating budgets of existing City facilities, impact on service delivery, and impact on fees and charges, as directed by Council at their meeting of October 2002. At this time, given the pent up demand for new ice surfaces, no significant impacts are anticipated in these areas but this can only be confirmed following the analysis of the proposals.

Appendix A discusses the principles that are seen to be significant in the development of a successful partnership with the private sector. It is recommended that Council approve these principles as the basis to seek proposals for the next step of the P3 process.

Request for Proposal (RFP) Framework

The development and issuance of the RFP represents the next step in the P3 process and as part of this component it is necessary to identify the framework for the RFP.

Generally, responses to the RFP include a business and financial plan, a design, development and construction plan, an operations and maintenance plan, and a customer and community relations plan. A clear approach to identify what the City is looking for in the proposals and how it will value the proposals is necessary to ensure that the teams invited to participate at this stage can develop strong proposals that will achieve the City’s objective.

Appendix B provides a framework for the development of the RFP and Council is requested to approve this framework to allow the P3 process to move to the next stage.

Site Selection

New ice surfaces are required in each of the east and west sections of the City and as part of the RFP process, respondents will need to identify the site that they are proposing for their facility.

The City currently has an inventory of sites, some of which could be suitable to meet the requirements of both the City and the private sector partner for the provision of new ice surfaces. The site location is an important consideration for the private sector partner as it is expected that some will consider incorporating other activities or some complementary uses into their proposed development and the site location needs to support these additional functions.

The City, through RPAM, has already initiated a review of City sites that could potentially be offered to a private sector partner as part of this P3 initiative. If this were to be the case, the land could be sold or made available through a long-term land lease. In any event, the market value of the property would be used in evaluating the business case of that particular proposal, and the proposal would detail how the City property would be dealt with in the partnership agreement.

As an example, the City has assessed the suitability of a number of City owned sites in both the east and west sectors and despite the initial potential shown, most sites were considered unsuitable due to zoning considerations, servicing issues, and soil bearing capacity issues. The only City site that appears to meet all requirements at this stage is located in the west sector at the March Rd/Klondike Rd. intersection. It is a 15 acre site, where the Old South March Town Hall was located.

Staff will continue their assessment of potential City sites over the coming weeks and will identify any suitable City sites in the RFP document.

Community Responses from former West-Carleton

Two of the ten respondents to the RFQ were from community groups located within the former municipality of West-Carleton. One was from the West Carleton Minor Hockey Association proposing a one pad facility as an addition to the West Carleton Secondary School, and the second was from the Carp Agricultural Society proposing a new one pad facility on the fairgrounds but adjacent to and to be linked to the existing W. Erskine Johnston Arena.

In the case of the West Carleton Secondary School, the Ottawa-Carleton School Board provided its support, in principle, to the proposal on the basis that the school board could benefit from the facility during daytime hours in return for providing access to its property at no cost for the construction of the ice surface.

As part of its proposal, the Carp Agricultural Society indicated that it would provide 1.6 acres of land for their facility at no cost to the City. Both respondents made reference to the West Carleton Special Reserve Fund of $650,000 and of the West Carleton Legacy Fund of $515,000 as being available to finance their project and both indicated a commitment to a community fundraising effort ranging from $250,000 to $500,000. The balance of the capital funding was proposed to be financed through a mortgage in each case.

While these two responses did not qualify for the short list under the process established, the community involvement and commitment shown in these responses, along with the capital reserves that are already in place in former West Carleton, indicate that it would be appropriate to consider these responses on their own merits, and outside the P3 process established for the provision of new ice surfaces.

The People Services Department has confirmed the significant shortage of ice time in this part of the City and the benefit of an added facility in this area to meet their programming needs.

It is therefore recommended that staff meet with the two respondents and ask them to identify a common solution to the situation, including a preferred site for the facility. Staff will also assist in defining the best solution and report back to committee and Council on the financial feasibility of the proposed project, and on the overall financial impact of providing this additional ice surface in the west district of the City.

Next Steps and Timelines

The Strategic Delivery Unit has already initiated the development of the RFP and subject to Council’s approval of this report the RFP will be finalized and issued to respondents on the short list. This should take place by the end of February, and allowing a six week timeframe for the development of the proposals and a four week timeframe for the evaluation of these proposals it is anticipated that staff could recommend the selection of the private sector partner(s) in June.

As directed by Council, the City and the private sector partners will organize a public meeting to present their proposals prior to the final negotiations of the partnership agreements. It is expected that the full process would be completed by September.

ENVIRONMENTAL IMPLICATIONS

There are no environmental implications resulting from this report.

RURAL IMPLICATIONS

The east and west districts being considered for additional ice surfaces include a great portion of the rural areas and therefore rural residents will benefit from the provision of additional ice surfaces. In addition, it is recommended that consideration be given to two community proposals in West Carleton, which may result in the construction of a new ice surface specific to that area.

Following Council’s approval, the Strategic Delivery Unit will proceed with the development and issuance of the RFP and, together with the People Services Department, will initiate discussions with the respondents from the former municipality of West Carleton to identify a common solution to the shortage of ice surfaces in that area.

Appendix A

PRINCIPLES TO SEEK PROPOSALS FOR NEW ICE SURFACES THROUGH A PUBLIC-PRIVATE PARTNERSHIP

The following principles serve as a collective understanding under which staff will develop the Request for Proposal (RFP) and will also form part of the criteria for the evaluation of proposals. These principles are seen to represent a reasonable balance in meeting part of the City needs for additional ice surfaces while at the same time providing an attractive proposition to a private sector partner.

1.0 Scope and Objectives of the Project

1.1 The City’s intent and preference is to purchase ice time over a 15-25 year period.

By structuring the partnership for the purchase of blocks of ice-time, the City will not be incurring the liability and cost associated with the acquisition of additional capital assets, nor incurring the costs associated with lifecycle asset renewal, operations and management. Depending on the proposals received, this objective may be modified to obtain the best value for the City and allow a successful partnership to be executed.

1.2 The City will seek to purchase 2,400 hours annually in the East District, with the new facility located within the former boundaries of Cumberland and Gloucester.

The need for additional ice time was identified in Phase 1 of the Facility Needs Study, hence validating the legacy projects for new arenas in Cumberland, West Carleton and Kanata. As part of Phase 3 of the Facility Needs Study, a more comprehensive detailing and analysis is underway to define future facility requirements.

In addition, the market assessment (base information that will direct the Facility Needs Study Phase 3) which is being completed, has identified and substantiated the need for 10 additional ice surfaces over the next 10 years; 4 to serve the East and Central districts and 6 to serve the South and West Districts.

1.3 The City will seek to purchase 2,400 hours of ice time annually in the West district, with the new facility located within the former boundaries of Kanata, Goulbourn and West Carleton.

See rationale under 1.2

1.4 The ice time purchased will be during the prime ice rental season, described as September/October to April/May, and extend over 35 weeks.

Additional ice time during the off-season may be considered at a later date, depending on needs and budgetary allocations.

1.5 Generally, it is anticipated that the purchased ice time will be from Monday to Friday, 6:00 p.m. to 9:00 p.m., and 7:00 a.m. to 5:00 p.m. on Saturdays and Sundays.

The City’s greatest challenge is providing ice time during prime hours whereby demand constantly outstrips supply. As substantiated in the draft Market Assessment of the Facility Needs Study Phase 3, all arenas with the exception of an under-sized Belltown arena, are at capacity during primetime.

2.0 Allocation of Additional Ice

2.1 The City will purchase the ice time at a negotiated rate, and use it according to the City’s Arena Allocation Policy. Such allocations will be undertaken by the Community Services Branch, of the People Services Department.

2.2 User groups with permitted hours within the new facilities will be charged the same amount as in any other City of Ottawa arena facility.

Rather than use capital budget allocations for the construction of new arenas, the City will use its funds to purchase ice time at the negotiated rate and absorb the difference in cost between this cost and the City’s rental rate.

2.3 The City will negotiate first right of refusal, to purchase additional ice outside of the requested prime time hours.

There may arise a need to purchase additional time for events such as March Break, Christmas Holidays or major tournaments.

2.4 The City will ensure that the cost of purchasing ice time will be all-inclusive.

The negotiated partnership will ensure that no additional or hidden charges for items such as parking, dressing room fees, basic storage, program equipment etc. are charged to the City permitted user groups.

3.0 Compatibility with City Vision and Mission

3.1 The values of the potential partner and the proposed relationship structure must be congruent with the City’s and Department’s Vision and Mission.

The People Services Vision is “To foster a healthy community that promotes and supports quality of life so citizens can fully participate in and contribute to the life of their community”. The Department’s Guiding Principles are to be Responsive, Accessible, and Respectful of Diversity. These values are to be respected by the successful proponent(s). Recognizing that the private operators are most likely to be for-profit organizations, securing additional revenues by providing additional leisure and amenity components and services such a bar or rental space for example, are expected to be part of these new facilities. Such additions must not have a negative impact on the City’s image nor create embarrassment because of our association. Users must perceive the facility to be a family-oriented, family-friendly destination.

3.2 Specific Departmental and Corporate policies will apply to these new facilities.

Although not a City facility, proponents will operate and deliver services in a manner which are compatible with City policies where appropriate including: bilingual service, barrier-free access, limitations related to alcohol, advertising and sponsorship policies as it applies to areas where minors will have access i.e. lobby, dressing room, arena surface and boards.

3.3 The financial assistance policy will apply to these facilities, similar to that available in other City arenas.

3.4 There will be no City branding on these new facilities.

As the facility will not be owned and operated by the City, there will be no City logo on the building.

4.0 Preferred Partnership

4.1 The successful partner(s) will have the capabilities and capacity to undertake this long-term relation with the City and not unduly place the City in an adverse situation because of a failure to deliver.

Although the Request for Proposal will detail in-depth the requirements of partners, the City will seek assurances regarding the proponents past experiences and success with similar projects, their ability to meet the financial requirements, their capabilities in the area of design and construction and their experience in delivering and managing a recreation facility. Their business plan will demonstrate how stakeholders in the venture will minimize the impact of business failure.

4.2 The successful proponent must demonstrate a public service attitude and philosophy that includes concern for public accountability and accessibility.

Although this will be a private facility, the public and user groups will expect at minimum the same level of customer service and responsiveness found in City arenas. As directed by Council in Recommendation 4, a public meeting(s) will be held, demonstrating the proponent’s ability to be open and responsive to public concerns.

5.0 Planning and Development

5.1 Proponents will be expected to comply with existing municipal standards and by-laws.

Just as City-directed projects must abide by existing rules and regulations, partners will be held to the same standard and in compliance in areas such as zoning, parking and landscaping requirements, traffic circulation, compatible with adjacent development etc.

5.2 The building will be reflective of industry standards and meet all legislative requirements.

The Request for Proposal will detail expectations per the industry norms but additionally, staff will set performance standards, and safety standards that would reflect the same standards presently occurring in City facilities (glass protection/netting per the Canadian Hockey Association’s standards, accessibility not only into the facility but from players benches onto the ice, cleanliness and flooding per accepted standards, lighting levels, equipment congruent with program requirements such as time clock and sound system).

The City supports the provision of environmentally friendly and efficient operating systems.

Proponents will operate the arena in accordance with Provincial regulations outlined in all applicable legislation, and will also adhere to due diligence and risk management protocols in keeping with those established by the City of Ottawa (i.e. no skaters on the ice while the zamboni is in use; ability to access all parts of the arena without having to cross the ice etc).

5.3 A maintenance and lifecycle program will be submitted as part of the evaluation of the proposal.

The proposals will clearly define their program to ensure a state of cleanliness in accordance with janitorial and maintenance level of service presently exhibited in City facilities, and provide for annual lifecycle requirements, repairs or replacement items for the facility.

6.0 Staffing and Indemnification

6.1 It is understood that the staff hired are employees of the Proponent and not of the City of Ottawa.

In their staff recruitment, the proponent will comply with all Laws, By-Laws and Regulations enacted by any level of governmental authority as applicable to this programme but not limited to the employment of labour, their qualifications and standards of wages, occupational health and safety requirements and the Ontario Human Rights Code. It would be expected that additional screening of staff and training be reflective of the level of excellence presently offered by the City of Ottawa.

The proponent will be expected to develop and maintain a policy on the screening of staff and volunteers, which complies with the intent of the City’s policy. Additionally, facility staff will be trained in first aid, CPR and certified use and availability of public defibrillators.

6.2 The Proponent will not be viewed as an agent of the Corporation for any purpose.

The proponents will procure all appropriate insurance requirements and liability, ensuring indemnification of the City from any claims, demands, losses etc.

7.0 Reporting and Administration

7.1 The City will require the proponent(s) to establish an on-going communication protocol, which will ensure that issues are dealt with in a timely manner, and that service and performance standards are monitored and reviewed regularly.

The agreement will ensure the parties will cooperate with the City in the performance of any evaluation which the Corporation may conduct, including but not limited to providing information, materials, data or such other documents or information as may be required i.e. attendance reports, systems evaluations etc. The proponent must ensure an ability to respond appropriately to: all incidents of critical and personal injury, property damage, vandalism, criminal, unlawful or inappropriate behavior and or activity at the site.

Appendix B

Request for Proposal (RFP) Framework

As a result of the need for additional ice time, the City has embarked on a procurement process in order to establish a long-term relationship with a service provider for the provision of 2,400 hours of ice surface time in each of the East and West Districts of the City. The process has been designed to offer the potential partners the opportunity to bring forth innovative solutions, which meet the City’s overall objectives.

The Process

The selection methodology consists of three stages:

Stage 1 – Request for Qualifications (RFQ): The purpose of the RFQ was to qualify respondents based on their corporate financial strength, their understanding of the City’s objectives, experience of the firm and team as well as the suitability of their concept. This stage resulted in a short-list of some respondents who will pass to the next phase and be issued the RFP documents.

Stage 2 – Request for Proposal (RFP): The purpose of the RFP is to obtain specific information about the respondents’ proposed concept. It will validate the feasibility of the concept from a financial, operational and “fit” perspective. The evaluation will take into consideration the amount of risk retained by the City and the value of the complementary services that the respondent has included in their concept.

Generally the City will evaluate the responses based on the principles included in Appendix A to this report and on the following elements:

1. Business and Financial Plans

a. Cost per unit for the City, i.e. per hour of ice time and any variability in the costs over the length of the term

b. Spread between the City cost and other user cost

c. Overall cost, including risk and value added components

d. Requested City contributions, .e.g. guarantees, subsidies, equity, in-kind, reversion, etc.

e. Track record in achieving the committed costs on other projects

f. Ownership structure

g. Relationship management, including simplicity versus complexity of the agreement

h. Reversion or phase-out plans at the end of the agreement, e.g. continuation as a recreation facility, alternate use plan, etc.

2. Design, Development and Construction Plans

a. Design and construction, including the start and completion dates

b. Facility design and urban development – environmental sensitivity

c. Site suitability – traffic, location, accessibility, residential vs. non-residential

d. Impact on other municipal services and/or revenues

e. Implementation plan, including delivery and timing commitments

3. Operations and Maintenance Plans related to this project

a. Facilities management, including life-cycle planning and committed investments

b. Recreational planning and management approach

c. Quality assurance, including customer satisfaction, quality of the services, etc.

d. Management approach, including responsiveness and pro-activeness

e. Building and performance standards

f. Service levels

g. Innovation

4. Customer Service and Community Relations

a. Customer service plan

b. Community involvement plan, including ongoing community relations approach, including a process to address complaints from the public

5. Value Added Elements

a. Ability of City to leverage funding dollars for improved and increased programming

b. Other services to be provided and their impact on the City services or communities to be served

Site selection will be an important characteristic of the process. The City may make sites available to finalist bidders for their consideration. If the bidders use the City provided site as part of their proposal, the City will infer the cost of the site in order to compare these proposals with proposals of proponents who provided their own sites.

As a result of this process, staff will make a recommendation to Committee and Council on the private sector partner(s) recommended to pass on to Stage 3. It is also possible, however, that following the evaluation of the proposals, no respondents are recommended to proceed to the next stage.

A negotiation framework, including a public consultation component, will also be recommended at that time.

Stage 3 – Negotiations and Final Agreement: The purpose of this phase is to formalize the agreement with the respondents.

The Value Proposition

The City is seeking partners who will provide the best value solution in a manner that recognizes the importance of fitting that solution within the community within which they operate. They will operate the facility in a way that reflects the image of the City and provide a quality service to the users. They will support the City on issues management and by being responsive to the City’s needs, adjusting to an environment that may change over the course of the partnership. The partner will also seek to provide value-added services during the term of the agreement, continuing to apply best practices in this area of activity.

Attachment – Items to be covered in the RFP

· Introduction

· Goals and Objectives of the P3

· Purpose of the RFP

· Scope of the project and complementary services

· Description of City of Ottawa Available sites (if any)

· P3 Guiding Principles

· Instructions to proponents

· Proponent information requirements

· Proponent proposed concept, including site, number of ice pads, other services to be provided

· Proponent proposed design, development and construction plans, including planning process and timing

· Proponent proposed management, operations, maintenance plans, including service levels, performance standards, customer care, capital renewals, branding, community communication (users and neighbors) and concepts for delivery of complementary services

· Proponent proposed business plan, including business relationships, payment mechanism, ownership structure, expected commitments from the City, etc.

· Submission particulars

· Evaluation and selection process

· General Conditions

· Specific conditions, such as limit of liability, etc.

BACKGROUND

Results from the RFQ stage of the process

Governing principles for the development of the RFP

Request for Proposal (RFP) Framework

Site Selection

Community Responses from former West-Carleton

Next Steps and Timelines

ENVIRONMENTAL IMPLICATIONS

RURAL IMPLICATIONS

FINANCIAL IMPLICATIONS

Appendix A

PRINCIPLES TO SEEK PROPOSALS FOR NEW ICE SURFACES THROUGH A PUBLIC-PRIVATE PARTNERSHIP

2.0 Allocation of Additional Ice

3.0 Compatibility with City Vision and Mission

4.0 Preferred Partnership

5.0 Planning and Development

Request for Proposal (RFP) Framework

The Process

The Value Proposition

Attachment – Items to be covered in the RFP