Report to/Rapport au :

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

and Council / et au Conseil

5 July 2005 / le 5 juillet 2005

Submitted by/Soumis par : Ned Lathrop, Deputy City Manager/Directeur municipal adjoint,

Planning and Growth Management/Urbanisme et Gestion de la croissance

Contact Person/Personne ressource : Réjean Chartrand, Director / Directeur, Economic Development and Strategic Projects / Développement économique et Projets stratégiques

(613) 580-2424, ext. 21696, Rejean Chartrand@ottawa.ca

and

Barry Townsend, Manager / Gestionnaire, Light Rail Office / Bureau du train léger / Economic Development and Strategic Projects / Développement économique et Projets stratégiques

(613) 580-2424 x21284, Barry.Townsend@ottawa.ca

Ref N°: ACS2005-PGM-ECO-0016

SUBJECT:

NORTH-SOUTH LIGHT RAIL Transit PROJECT

Results of requests for qualifications

OBJET :

PROJET DU TRAIN LÉGER SUR RAIL NORD-SUDRÉSULTATS DES DEMANDES DE QUALIFICATIONS

REPORT RECOMMENDATIONS

That the Corporate Services and Economic Development Committee recommend Council approve:

1. That the Respondents to the Request for Qualifications for the North-South Light Rail Transit Project identified in this report be accepted as qualified to participate in the Request for Proposals stage of the procurement process for the project;

2. The Request for Proposal framework described in this report; and

3. That, subject to Council’s approval of the Environmental Assessment for the project, staff proceed to issue the Request for Proposal for the implementation of the North-South Light Rail Transit Project.

RECOMMANDATIONS DU RAPPORT

Que le Comité des services organisationnels et du développement économique recommande au Conseil d’approuver :

1. que les répondants aux demandes de qualifications concernant le Projet de train léger Nord-Sud définies dans le présent rapport soient acceptés comme étant qualifiés à participer à la demande de propositions du processus d’achat du projet;

2. le cadre de la demande de propositions décrit dans le présent rapport;

3. que, sous réserve de l’approbation par le Conseil de l’évaluation environnementale du projet, le personnel procède à l’émission de la demande de propositions en vue de la mise en œuvre du Projet de train léger sur rail Nord-Sud.

BACKGROUND

In response to the Requests for Qualifications (RFQ) for the North-South Light Rail Transit Project, three submissions were received for the Manufacture and Supply of Light Rail Transit Vehicles, and five submissions were received for the Management and Construction of the Civil and Structural Components. The information provided in the submission documents has been assessed and evaluated by technical review teams, and the Selection Panel for the project. As a result of the assessment, all of the Respondents who provided submissions are recommended as being qualified to proceed to participate in the Request for Proposals stage of the procurement process for the project. The qualified Respondents are:

VEHICLES

Bombardier

Kinkisharyo International LLC

Siemens Canada Inc.

MANAGEMENT/CONSTRUCTION

Kiewit-EllisDon, a Partnership

National Capital LRT Group

Rideau Rail

Siemens/PCL/Dufferin Team

SNC-Lavalin Engineers & Constructors Inc.

Team members proposed at this time by the above Respondents are identified in Appendix A.

DISCUSSION

In accordance with the process set out in the report on Implementation of North-South Light Rail Transit Project as approved by Council 9 March 2005, Requests for Qualifications (RFQ) for i) the Manufacture and Supply of Light Rail Transit Vehicles, and for ii) the Management and Construction of the Civil and Structural Components for the North-South Light Rail Transit Project were posted for thirty-one days on MERX, closing 19 May 2005. Forty-five firms accessed the Vehicle RFQ, and eighty-seven accessed the Civil RFQ. Three submissions were received in response to the Vehicle RFQ, and five submissions were received in response to the Civil RFQ.

Two addenda were issued in response to questions and for clarification for the Vehicle RFQ, and three addenda were issued for the Civil RFQ, one of which elaborated on the terms and conditions applicable to Conflict of Interest in order to assist Respondent teams to self-assess for potential non-compliance.

Technical Evaluation Committee Teams composed of City of Ottawa staff and external consultant experts in the disciplines applicable to the respective submissions assessed the Respondents' documentation. The results of their findings were presented to the Selection Panel for discussion and approval of recommendations for Respondent participation in the future RFP stage of the procurement process for the project. Supply Management Division facilitated all the Technical Evaluation Committee Teams and Selection Panel evaluations. All the evaluations were attended by the Fairness Commissioner for the project, and/or his associate.

The respondent Vehicle submissions were assessed in a two-stage process. The first stage was a pass/fail analysis of Mandatory Submission Requirements. The Respondents were required to clearly demonstrate how their vehicles' Critical Subsystems met or could be adapted to satisfy the requirements of the Vehicle Functional Performance Specifications, under the Ottawa climatic conditions.

The second stage of the assessment of the Vehicle submissions required the Respondents to clearly demonstrate that their vehicle complied with the Critical Vehicle Performance Specifications, and if it did not, Respondents were required to indicate design changes proposed to achieve compliance with the specifications noted in the Vehicle Functional Performance Specifications.

All three Vehicle submissions have been assessed as being pre-qualified.

The responses to the Civil RFQ were evaluated in a three-stage process:

- Stage 1 - Mandatory Submission Requirements

- Stage 2 - Insurance and Surety Evaluation

- Stage 3 - Technical Evaluation

The Stage 1 requirements consisted of the following documentation:

- Declaration of Team Composition and Consent Form

- Submission Form

- Conflict of Interest Declaration from each Respondent and Team Member

- Evidence of Ability to Obtain Bonding

- Evidence of Ability to Provide Insurance

In Stage 2 the Respondents were evaluated according to their demonstrated capacity to provide surety and insurance for a project of the scope and magnitude of the North-South Light Rail Transit Project. This evaluation consisted of a review and confirmation of the Evidence of Ability to Obtain Bonding and Evidence of Ability to Provide Insurance.

Stage 3 was comprised of an assessment of each Respondent's Technical Evaluation Criteria as set out in the Technical Evaluation Criteria Categories Weighting Matrix of the RFQ document. In order to pre-qualify, Respondents were required to achieve a score of at least 65% of the maximum available points.

All five Civil submissions have been assessed as being pre-qualified.

REQUEST FOR PROPOSAL (RFP) FRAMEWORK

The next step in the procurement process is to request proposals from the qualified respondents for the implementation of the North/South LRT project (Document 1). It is proposed that the following framework form the basis for the RFP document.

Consortia creation:

Ultimately, each consortium submitting a proposal in response to the RFP must consist of a qualified civil respondent and a qualified vehicle respondent to ensure that the City receives an integrated system and that the integration risk is transferred to the consortium.

The rationale for the issuance in the first instance of two separate RFQ’s for the supply of the LRT vehicles and provision of the civil works was primarily to qualify vehicles that could operate in the Ottawa climate, without compromising the ability of civil teams to compete for the construction of the civil works. Now that there is clarity as to which vehicles are acceptable to the City, there exists an opportunity for each qualified civil respondent to create a consortium with a vehicle supplier without risk of being disqualified through the rigorous qualifications that the City established for the vehicle respondents.

In reviewing the qualified respondents from both lists, staff is satisfied that there exists a strong base for the creation of a number of competitive consortia. Since this is the case, there is no reason for the City to impose artificial rules on the establishment of these consortia. It is therefore the intention to let the marketplace decide.

As a result, the City will not require that exclusive relationships be entered into between the vehicle respondents and the civil respondents. It will therefore be possible for vehicle respondents to associate with more than one civil respondent, however, in order to keep the number of possible submissions within a competitive framework, it will not be possible for civil teams to associate with more than one vehicle supplier. This approach will allow for the creation of up to five consortia and is expected to maintain a competitive environment for the procurement process.

The consortia will be required to submit to the City within a period of four to five weeks from the issuance of the RFP a complete list of their key team members. These key members will include for example the system integrator, lead civil designer, and lead architectural designer. The City will review the team members being proposed and will have the ability to request changes in the case where certain teams, in the opinion of the City, do not have the specific, or the right combination of experience and/or expertise to compete successfully in the process.

Honorarium:

In developing proposals for the implementation of this project, each consortium will commit significant time and resources and will look at innovative and competitive ways to meet the performance specifications. It is a best practice for P3 projects of this scope and scale to provide an honorarium to each compliant, but unsuccessful consortium to offset part of their cost in responding to the RFP, and to acquire access to their design work.

Different design solutions will be developed by each consortium for the best implementation of the City’s LRT system and although only one consortium will be retained at the conclusion of the procurement process, the value of the design solutions proposed by the unsuccessful teams can be significant and is of value to the City. With the provision of an honorarium, it will be possible to access the design work of unsuccessful consortia for possible integration of some of their design elements into the final design approved by the City for implementation.

For a project of this nature, it is recommended that the honorarium be set at $1.0M and be paid to each compliant but unsuccessful consortium. Funding for the Honoraria will be identified as part of the 2006 capital budget.

Operation of LRT System:

In its March report to Council on this project, staff reported that discussions would be held with ATU Local 279 to discuss the operation of the LRT system, as per a Letter of Intent forming part of the existing collective agreement between the City and ATU Local 279.

These discussions have been initiated and are on-going and as a result it is recommended that the RFP be developed without including, at this time, the operation component for the LRT system. This can be added in the RFP prior to its closing as an additional requirement, depending on the outcome of the discussions with ATU Local 279.

Value for Money Assessment:

In its request for proposals, the City will be seeking to encourage innovation, quality, and design excellence. This is fundamental to the development of a competitive and successful public-private partnership and the delivery of an overall LRT design that will not only allow for effective and efficient transit operations but which will provide the appropriate ‘look and feel’ and the right environment for transit riders, tourists, and adjacent property and business owners.

The station architecture, streetscaping, landscaping, and overall urban design consideration will be particularly important in designing a system that will be both highly functional and aesthetically pleasing. Given the nature of the LEED Green Building Rating System, it is not expected that platforms, stations, and maintenance facility will be designed to that standard, however, the RFP will encourage designs that have a high regard for energy efficiency and environmental considerations.

As is normally the case in these projects, the above considerations will need to be tempered by the reality of the funding available for this project. The City will strive to achieve a balance between these elements in the RFP through a value for money assessment framework where design quality, innovation, and pricing, rather than pricing alone, will be key factors in determining the selection of the preferred respondent to the RFP.

Permitting and Approvals:

The design, construction, and maintenance of the City’s 27 km LRT project with all necessary systems, stations, and vehicles will require a number of permits and approvals from the City and other agencies. Obtaining these permits and approvals is an important consideration in the delivery of the project and it is therefore important to have clarity around these elements in the RFP.

Since City Departments involved in permitting and approvals operate on a cost recovery basis, staff do not recommend any exemptions to any standard City permitting or approvals costs or fees related to the LRT project, except for any development charges if applicable. It is recommended, though, that LRT related permit applications or approvals be treated on a priority basis having due consideration to the timeliness and thoroughness of the submissions, and review and resolution of issues arising from the applications. In some cases this may result in the reallocation of internal resources or the creation of review task forces to assist with this process.

The City will also commit to using its reasonable best efforts to assist the proponent in its requirement to obtain necessary permits and approvals from other levels of government and other agencies.

Risk Distribution:

A fundamental element in successful public-private partnerships is the distribution of risk to the party in the best position to control or manage that risk. An improper risk distribution model can have a significant negative impact on the pricing of the project and may create unnecessary tension in the public-private partnership. The following is a list of the major risks associated with this project and the intended allocation of these risks between the City and the successful proponent.

Systems and Civil Works Integration

The proponent will bear the full risk of proper design and construction integration between the various elements of the project including the civil works, vehicles, track, LRT systems, and all other project elements.

Regulatory Approval Risk

The City will retain all risks associated with the environmental approval of the project under both provincial and federal legislation. The proponent will be responsible and assume the risk in obtaining all permits and approvals, including any resulting from the EA process, whether from the City, other levels of governments, or any other agency.

Land and Right of Way Acquisition

The City will acquire or secure all permanent lands required for the construction of the projects and will make them available to the proponent at no cost. The proponent will be responsible for the acquisition of any land or access required temporarily for construction purposes. Where necessary, the City will use its reasonable best efforts to assist the proponent in this regard.

Construction and Delivery Schedule

The proponent will have control of the work methods and procedures, and will bear the risk related to the cost of construction, as per the negotiated price, and the risk to deliver the project in accordance with the project schedule.

Geotechnical

The City has initiated a program of geotechnical investigations along the LRT alignment, which will form the basis for the development of a Geotechnical Baseline Report. As the subsurface soil conditions along the corridor are generally well known, and since there is actual development along most of the corridor, the proponent will bear, despite the provision by the City of the Geotechnical Baseline Report, all geotechnical risk and all scheduling and coordination risks relating to all geotechnical conditions.

Contaminated Soil

The City will assume the risk related to the containment or removal of any contaminated soil not indicated in the Environmental Condition Baseline Report, or quantities in excess of those identified. The proponent will assume the risk of all scheduling and coordination related to this element.

Utilities Relocation

Significant utility relocation is expected, mainly within the downtown portion of the project. Standard practice by most utilities is to control the diversion of their plant directly with their own forces or contractors. As a result, it is intended that the City will bear the cost of relocating regulated utilities, while the proponent will assume the cost and relocation risk for all other utilities. The City will in turn request of the regulated utilities that they assume all or part of their relocation costs, in accordance with applicable legislation. The risk associated with the scheduling and coordination of the relocation of all utilities will remain with the proponent.

Systems Performance and Maintenance Risk

The proponent will bear the risk relating to the performance and maintenance of all major elements of the project for a fifteen-year period. This risk allocation is fundamental to the construct of the public-private partnership for this project. Under this risk allocation, the cost and quality of design and construction have to be balanced against the future maintenance cost of the system, resulting in a more optimal approach for the design and delivery of the project.

Latent defects

Hidden defects, resulting from design and/or construction practices that become apparent during the fifteen-year maintenance period will be at the proponent’s risk. This risk allocation is also fundamental to the construct of the public-private partnership for the same reasons identified above under systems performance risk.

Inflation

The proponent will bear inflation costs during the construction period. The City will bear this risk during the maintenance period.

Change in Codes and in Law

Generally, risk related to changes in codes and in law during the construction period will be borne by the proponent and risk related to these changes during the maintenance period will be borne by the City.

The above discussion on risk allocation will form the basis for the construct of the RFP, and for a series of discussions with the qualified respondents. As mentioned previously, each risk identified above which is transferred to the proponent carries with it a premium that will affect the project cost. As the procurement process proceeds, it is anticipated that this risk allocation profile may be refined to optimize the overall value to the City.

Land Development in LRT Corridor:

The primary goal of the LRT system is to increase the share of people using public transit. One of the most successful approaches to achieve this is to support transit-oriented development at the stations. This is characterized by compact, mixed-use, pedestrian-friendly land uses. Typically, the densities will be higher than what is currently in the vicinity, but the intensity of use will vary depending on the station location.

The City has major land holdings along the corridor at Gladstone Street (Loretta Avenue), at Bayview Road and at Nicholas Street (Arts Court). The City has initiated a process to assess the development potential at these locations (Council has already approved a concept plan for development at Bayview) with a view to initiating public-private partnerships for the development of these sites.

Where this can occur at the same time as construction of the LRT system, the proponent will be given the opportunity to become involved in these developments in order to enhance their integration. The City is also investigating opportunities for achieving transit-oriented development on privately-held properties and for integrating stations with existing or proposed buildings.

Communication and Consultation:

The Proponent will be required to design and implement a plan to guide the communication and information needs of the community. This includes a process for keeping residents, transit riders, motorists, businesses, and other interested parties continuously informed throughout the construction process. It will also include a strategy to involve communities in the design of stations, their connections to the community, downtown streetscaping and the provision of public art.

NEXT STEPS

Once the Environmental Assessment for the project has received Council approval, the Request for Proposal (RFP) will be issued to the Respondents who have been qualified under the RFQ process. Proposals for the vehicle supply, design, construction, maintenance and potentially operation of the light rail system will be accepted only from consortia that include one Qualified Respondent from each of the Vehicle RFQ and the Civil RFQ. A Best and Final Offer (BAFO) component may be incorporated into the selection process, depending on the number of submissions received and scope adjustments required. The results of that process will be reported back to Corporate Services and Economic Development Committee and Council for information and approval to proceed to the negotiations stage of the procurement process, and to implementation.

PROJECT SCHEDULE

At this time, the following timelines are being pursued for this project:

§ Approval of EA Report Summer 05

§ Release of RFP to short-list of respondents Summer 05

§ Submission of EA to Ontario and Canada for approval Fall 05

§ Approval of EA by Ontario and Canada Fall 05

§ Proposals received from private sector consortia Winter 05

§ Selection of preferred private sector consortium Spring 06

§ Execution of project agreements Summer 06

§ Construction start Summer 06

§ Construction completion – in service Fall 09

ENVIRONMENTAL IMPLICATIONS

A Provincial and Federal Environmental Assessment process is currently underway for this project. Terms of Reference were approved by the Ontario Minister of the Environment in September 2004. All environmental issues related to this project will be assessed as part of this process.

RURAL IMPLICATIONS

Rural implications for the project have been assessed through the development of the Transportation Master Plan. The EA process will also address any additional implications. Generally the implementation of the project will greatly benefit all rural communities in the south end of the City.

CONSULTATION

Public Consultation has been undertaken for the development of the Transportation Master Plan. An extensive consultation process is currently underway under the Environmental Assessment process.

FINANCIAL IMPLICATIONS

Funds in the amount of $724.7M are currently provided for this project in the Long Range Financial Forecast. These funds include the $400M commitment from the Province and Federal Government. Following the execution of the Memorandum of Understanding in April 2005 between the City, Canada, and Ontario, all parties have initiated the development of the formal contribution agreements.

Payments for the delivery of the project are expected to be made on a project milestone basis; however, this will be further discussed between the City and the senior levels of government, and the qualified respondents. This is an important issue because of the cost of the project and the three-year delivery schedule. In these types of project, the timing and conditions related to payments to the proponent affect the construction financing charges. These can be significant and need to be considered and managed.

With an expected revenue service date of Fall 09, an operation budget will be required to operate the system as of that date. Projected annual costs to operate the North/South LRT line have been developed by the City’s Transit Services Branch and the City’s consultant and are expected to be in the order of $16-18 million, off-set by up to $14 million in bus operating cost reductions and savings from the removal of the existing O-Train.

SUPPORTING DOCUMENTATION

Document 1 North-South LRT Project July 2005

Appendix A Current Respondents Team's Compositions

DISPOSITION

Following approval of this report, and Council approval of the Environmental Assessment for the North-South Light Rail Transit Project, staff will continue the procurement process for the selection of a private sector consortium and will issue the RFP to the qualified respondents.

Change in Codes and in Law

Communication and Consultation:

NEXT STEPS

PROJECT SCHEDULE

ENVIRONMENTAL IMPLICATIONS

RURAL IMPLICATIONS

Document 1

NORTH-SOUTH LRT PROJECT JULY 2005

· SNC – Lavalin Engineers & Constructors Inc.