Report to/Rapport au :
Corporate
Services and Economic Development Committee
Comité des services organisationnels et du
développement économique
and / et
Health, Recreation and
Social Services Committee
Comité de la santé, des
loisirs et des services sociaux
and Council/et au Conseil
2 September 2003 / le 2 septembre 2003
Submitted by/Soumis par : Steve Kanellakos, A/City Manager/
Directeur des services municipaux intérimaire
City Manager’s Office/Bureau du directeur des
services municipaux
and / et
Jocelyne St. Jean, General Manager, People
Services Department/
Directrice générale, Services aux citoyens
Contacts/Personnes-ressource : Réjean Chartrand, Director, Strategic
Delivery Unit/Directeur, Unité d’exécution stratégique
580-2424,
Ext./poste 21696, Rejean.Chartrand@ottawa.ca
and
Robert Cushman, Medical Officer of Health and Long Term Care/
Médecin chef
en santé publique et Directeur santé publique et soins de longue durée,
580-2424,
Ext./poste 23684, Robert.Cushman@ottawa.ca
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Ref N°:
ACS2003-CMR-OCM-0011 |
SUBJECT: PUBLIC-PRIVATE PARTNERSHIP
(P3) PROJECT –
GARRY J. ARMSTRONG LONG-TERM CARE CENTRE
OBJET: PROJET DE PARTENARIAT PUBLIC-PRIVÉ (P3) -
CENTRE DE SOINS DE LONGUE DURÉE GARY-J.-ARMSTRONG
REPORT RECOMMENDATIONS
That the Corporate Services and Economic Development Committee and Health, Recreation and Social Services Committee recommend Council:
1. Authorize
the General Manager, People
Services to finalize the negotiations and conclude and execute all necessary agreements
with PCL Constructors Canada Inc., Central Park Lodges Ltd. and Retirement
Residences Real Estate Investment Trust (REIT) for the construction of the new
Garry J. Armstrong Long-Term Care Centre and the redevelopment of the existing
Allan House on Porter Island in accordance with the proposal submitted, the
subsequent negotiations between the parties, the terms and conditions of the
Request for Proposal (“RFP”) and the framework set out in this Report;
and
2. Pre-commit $15M against the 2004 Capital Budget for the construction of the Garry J. Armstrong Long Term Care Centre.
Que le Comité
des services organisationnels et du développement économique et le Comité de la
santé, des loisirs et des services sociaux recommande au Conseil municipal :
1. d’autoriser la Directrice générale,
Services aux citoyens à clore les négociations et de conclure et de signer
toutes les ententes nécessaires avec PCL Constructors Canada Inc., Central Park
Lodges Ltd. et Retirement Residences Real Estate Investment Trust (REIT) pour
la construction du nouveau Centre de soins de longue durée Garry-J.-Armstrong
et le réaménagement de la Maison Allan située sur l’île Porter, en vertu de la
proposition soumise, des négociations subséquentes entre les parties, les
conditions de la demande de proposition (DDP) et du plan établi dans le présent
rapport;
2. de préengager 15 M $ imputables au
budget des immobilisations de 2004 pour la construction du Centre de soins de
longue durée Garry-J-Armstrong.
The project to build a new Garry J. Armstrong Long-Term Care Centre and redevelop Allan House on Porter Island was one of four projects approved by Council in October 2002 for priority implementation under a public-private partnership. This project is the second and final phase of a multi-year replacement plan for the 36-year old structures (Bradford House and Allan House), which comprised Island Lodge. This major capital development provides a modern environment in which to deliver quality care and services to people who can no longer live independently.
In phase one, residents were relocated to the newly built Peter D. Clark Long-Term Care Centre and existing Allan House. The second and final phase is the construction of a new 180-bed Garry J. Armstrong Long-Term Care Centre on the location previously occupied by the now demolished Bradford House. The 165 residents currently living in Allan House will move to the new facility. This move will render Allan House surplus to City needs providing an opportunity for redevelopment by the private sector.
A Request for Qualifications (RFQ) was issued on 3 February 2003 by the Supply Management Division, advertised on Merx and at the Ottawa Construction Association and closed on 6 March 2003. Qualification submissions were received from the following companies, which are listed in alphabetical order:
All firms qualified to be short-listed and were approved by City Council in April 2003 to proceed to the Request for Proposal (RFP) stage of the process.
The RFP was issued by the Supply Management Division and distributed directly to these firms on 8 May 2003. Three firms submitted proposals by the closing date of 3 July 2003. Prior to that date, Doran Contractors Ltd. advised the City that due to their receipt of another significant contract, they would not be able to assign the necessary resources to make this project successful and therefore would not be submitting a proposal.
In the RFP stage, firms had to meet the mandatory requirements and were then evaluated on both their financial proposal and redevelopment concept for Allan House. The process was led by Supply Management Division and a Fairness Commissioner was retained to oversee the entire process including the opening of the financial proposals. The evaluation team included representatives from the People Services Department, RPAM, the Strategic Delivery Unit and an external representative.
The evaluation team reviewed all proposals received and scored the proposals in relation to the criteria as detailed in the RFP, selecting the preferred respondent based on the best value to the City. The proposal submitted by PCL Constructors Canada Inc., Central Park Lodges Ltd. and Retirement Residences Real Estate Investment Trust (REIT) was deemed to be the best value having met all the mandatory criteria and achieving the highest point total on the criteria subject to point rating.
Following Council approval of PCL Constructors Canada Inc., Central Park Lodges Ltd. and Retirement Residences Real Estate Investment Trust (REIT) as the preferred respondent, staff initiated negotiations to develop a partnership agreement related to the construction of the Garry J. Armstrong Long-Term Care Centre and the development of a new seniors residence on the site of the current Allan House. Negotiations included value-engineering opportunities for the new construction, specific details of the new seniors residence, details of the land lease and the potential for exchange or purchase of services.
This report recommends advancing to the next step in the P3 process, the finalization of negotiations and the entering into a partnership agreement.
DISCUSSION
There are two primary components of the partnership, namely the
construction of the new City’s Long Term Care Centre and the redevelopment of
Allan House. The following provides the parameters to the partnership
agreement:
Design and
Construction of Long-Term Care Centre:
The design for the
Long-Term Care Centre was completed by J.L. Richards & Associates Limited
and the detailed design will be incorporated into the partnering agreement.
As per the City’s
standard practice for a construction project of this size and complexity, the
contractual relationship for the construction of the long-term facility will be
captured using the Canadian Construction Documents Committee 2 (CCDC 2)
Stipulated Price Document, amended by the standard City Supplementary
Conditions, and will form a major portion of the partnering agreement.
PCL Constructors Canada Inc. will enter into the CCDC 2 and will be required to provide the standard bonding and proof of insurance for a construction project of this size and magnitude. A 10% hold back will also be applicable to payments made under this partnering agreement.
The new facility
is expected to be ready for occupancy by March 31, 2005.
PCL Constructors Canada Inc’s assessment concluded that renovating the existing structure would not allow them to develop the size of units necessary for a successful business plan and they have therefore proposed to demolish the existing Allan House and construct a new facility. The new building would be of a similar scale to the existing building and would meet all zoning requirements.
The proposed concept will offer approximately 150 seniors residences. These accommodations will be designed for seniors who can live independently but may need to avail themselves of services such as laundry, meals, cleaning, daily assistance and nursing supervision. The choice of units includes one bedroom, two bedroom and studio suites, each with their own three-piece washroom and kitchenette. A variety of recreational and social spaces would be provided including a swimming pool, theatre and exercise area.
The proposed development is a high quality redevelopment, which will be
harmonious with the City’s facility and the vision for Porter Island as an
integrated, quality environment for seniors.
The proposed redevelopment must adhere to design guidelines that were
included in the RFP and will be incorporated into the partnering agreement.
Central Park
Lodges Ltd. (CPLL) will initiate
the redevelopment plan for the new seniors residence within 90 days following
the relocation of the residents of Allan House to the Long-Term Care Centre.
The land lease agreement for the redeveloped Allan House will be for 50 years, with an option to extend the land lease for an additional 10 years and will be in the name of CPLL. It will contain provisions to adequately protect the interests of the City that would be customary in a transaction of this nature having regard to the contemplated arrangements among the parties and the length of the term of the agreement and the option to extend.
Upon termination
of the land lease, the seniors’ residence will be conveyed to the City in a
good state of repair at no cost. The land to be leased will reflect the minimum
land required to support the development concept.
Financial
Framework:
Respondents were required to quote a Firm Lot Price for this project. The Firm Lot Price consisted of the Stipulated Price to build the Long-Term Care Centre less an amount equal to the value offered for Allan House and less the value offered for the land lease.
The Stipulated Price submitted by PCL for the
construction of a new 180-bed Garry J. Armstrong Long-Term Care Centre was
$23,194,000.00 and was the lowest of the three bid prices received. Respondents were also required to provide
the detailed construction budget for the City’s Long-Term Care Centre, which
supported their stipulated price. J.L. Richards & Associates Limited reviewed
the tenders for completeness and accuracy and concluded all of the tenders were
reasonably balanced and complete in scope.
Respondents also quoted the value the Respondent was offering for Allan House and the value for the land lease with their financial proposal. Because CPLL is proposing to demolish Allan House, it did not offer any money for Allan House but it did offer $2M for the 50-year land lease agreement. This represented the highest offer received for both Allan House and the land lease.
The cost of construction ($23,194,000.) less an amount equal to the value offered for Allan House ($0) and less the value offered for the land lease ($2,000,000.) results in a firm lot price of $21,194,000. The firm lot price does not include the City’s development costs still to be committed (i.e. quality assurance, furniture, information technology requirements, security systems and public art) estimated at $2,500,000.
These costs when added to the firm lot price exceed the approved ($8,600,000) & 2004 forecasted ($13,000,000) debt authority for this project by $2,094,000. and do not include any provision for a contingency. As such, the value engineering phase of the project was considered vital. PCL in conjunction with J.L. Richards & Associates Limited reviewed the design and were successful in generating value engineering savings of $850,000.
After applying the value engineering savings and allowing for construction contingency, a request of debt authority is required in the amount of $15,000,000.
The additional debt authority of $2,000,000 over what was forecast for 2004 in the five-year capital budget presented this year is required as a result of a change in scope. The original design was for 165 beds, however, due to floor template efficiency, it was decided to optimize construction from 165 beds to 180 beds. This was accomplished through the transfer of 5 beds from the Peter D. Clark facility and receiving approval for the addition of 10 beds from the Province.
A pro-rated cost for the addition of these 15 beds based on the low bid received identifies the value of this change in scope at $1.9M.
Risk
Distribution:
Under this P3 project, PCL assumes the contractual risk for the construction of the new Long-Term Care Centre and CPLL assumes the design and construction risk for the new seniors residence. CPLL and the REIT will be responsible for performance and revenue risk related to the operation and management of the new seniors residence.
P3 Benefits
to Community:
There has been no change to the goals and objectives for this
public-private partnership and this project achieves the following main
objectives:
The benefits of this public-private partnership approach to achieve
these objectives are many:
Benefits also flow to the community in the
form of increased programming and services.
All work to be completed will meet current environmental regulations and Rideau Valley Conservation Authority recommendations.
Open houses presenting the new design for the Garry J. Armstrong Long-Term Care Centre were held in the Spring of 2003. As directed by Council, another public meeting will be held on 11 September 2003 to get public feedback on this development project and partnering agreement. The feedback that staff receives will be reported verbally at the Committee meeting.
FINANCIAL IMPLICATIONS
There is $8.6M in unspent authority available for this project. with a request for an additional $13M in debt authority identified for 2004 in the five-year capital budget presented this year. Approval of this report will require a pre-commitment of the 2004 Capital Budget in the amount of $15,000,000.The Ministry of Health and Long Term Care will contribute $661,000 annually for 20 years, a total funding contribution of $13,222,000 towards this project.
None.
The Strategic Delivery Unit and People Services Department
in consultation with the Legal Services Branch will finalize and arrange for
execution of all the necessary agreements to implement this public private
partnership.