HomeMy WebLinkAboutFCS-15-101 - Sole Source Gas Pipeline Reconstruction - Ottawa Street LRT
REPORT TO: Committee of the Whole
DATE OF MEETING: 2015-06-29
SUBMITTED BY: Michelle Palmer-Novakovic, Director of Supply Services
519-741-2200 ext. 7214
PREPARED BY: Michelle Palmer-Novakovic, Director of Supply Services,
519-741-2200 ext. 7214
WARD(S) INVOLVED: Ward 9
DATE OF REPORT: 2015-06-17
REPORT NO.: FCS-15-101
SUBJECT: Sole Source – Gas Pipeline Reconstruction, Ottawa Street LRT
___________________________________________________________________________
RECOMMENDATION:
That the Corporation of the City of Kitchener enter into an agreement with Aecon Utilities, A
division of Aecon Construction, Toronto, Ontario, for the Gas Pipeline Reconstruction, Ottawa
Street LRT in the amount of $1,428,078., plus H.S.T. of $185,650.14, for a total of
$1,613,728.14.
And further that the Mayor and Clerk be authorized to execute a cost sharing agreement with
the Regional Municipality of Waterloo in the amount of $636,819.; said agreement to be to the
satisfaction of the City Solicitor.
BACKGROUND:
In February 2014, Aecon Utilities, A division of Aecon Construction (Aecon) was awarded
contract T13-089 for gas pipeline construction. This contract commenced March 16, 2014 and
was for a one year term with the option to renew, upon mutual agreement, for two terms of 12
months each.
In advance of the contract term ending March 15, 2015, discussions commenced with Aecon
regarding the renewal of the contract. In December 2014, Aecon agreed to maintain 2014/2015
pricing for new and replacement main/services during 2015/2016, but requested additional time
to complete an ongoing LRT project before submitting pricing for LRT work. New main/services,
replacement main/services, and LRT projects were each projected to account for approximately
30-35% of overall 2015/2016 workload.
In March 2015, Aecon submitted new pricing for LRT projects for the 2015/2016 period, which
represented an increase of approximately 50%. After further negotiation, Aecon Utilities
proposed a 25% increase for certain large LRT projects (including Ottawa, Duke/Frederick, and
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the high pressure main crossing Courtland). This increase for a renewal was not acceptable to
City staff and staff proceeded with the tender process to competitively bid the requirement.
In April 2015, in consultation with Grandlinq Contractors, the required schedule for the large
LRT projects was determined to be July to October 2015 for Ottawa, December 2015 to March
2016 for Duke/Frederick, and Summer 2016 for the Courtland crossing.
This work is scheduled to begin in July 2015, weather permitting.
REPORT:
Tender (T15-046) for Gas Pipeline Reconstruction related to LRT Construction (Ottawa and
Duke / Frederick) was advertised publicly on the City of Kitchener website and the internet
through the Ontario Public Buyers Electronic Tendering Information System. Documents were
downloaded by ten (10) interested parties and by the closing date of Thursday May 14, 2015,
two (2) tenders had been received.
Tender T15-046 for Ottawa and Duke/Frederick referenced the schedule released in April 2015.
The Courtland crossing was not included in the tender because it is anticipated to be part of the
2016/2017 workload.
Both tenders received were significantly in excess of the available budget. Article 9 -170.9.1 (e)
of the Purchasing By-law allows for acquisition by negotiation where the lowest bid meeting the
specifications is excessive in total cost and / or exceeds the estimated cost by at least 10%. City
staff proceeded with cancelling T15-046 and began negotiations with Aecon, focusing on the
Ottawa project because it is most critical to Grandlinq’s schedule. In collaboration between the
Region, Grandlinq Contractors, Aecon, and City staff, risks to Aecon related to work by multiple
contractors, traffic diversion, and working hours were mitigated. The remaining risks related to
local traffic and proximity of other underground utilities could not be mitigated, which have
resulted in an increase cost of 17% of the construction costs over the 2014/2015 contract
prices. However, due to design changes, the City has been able to mitigate the increase in
construction cost.
Staff involved in the negotiations were S. Eastman, Utilities Engineer, T, Gaber, Manager of
Operations- Utilities, L. Stecho, Supervisor of Purchasing and M. Palmer-Novakovic, Director of
Supply Services, who concur with the above recommendation.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
Theme: Financial Management
Strategic Direction: Ensure responsible use of public funds within a supportive policy
framework.
The City of Kitchener’s purchasing policies and practices ensure openness, fairness and
transparency in the procurement of goods and services.
FINANCIAL IMPLICATIONS:
The net cost for this proposal (A), is fair and reasonable for a purchase of this scope and but the
upset limit is beyond the budget allowance (B) provided within the budget. Additional funding is
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provided by the existing balance in the Gas Capital Reserve Fund. The amount available in this
account is sufficient to fund the transfer.
The Region of Waterloo is utilizing a methodology outlined in the Public Service Works on
Highways Act as the cost sharing mechanism of this work. This mechanism has the Region’s
share of utilities replacement work, initiated by the Region, to be 50% of labour and labour
saving devices. The remainder of the cost will be borne by the City.
Financial Summary
Gas Pipeline Reconstruction related to LRT Construction - Ottawa St
Capital
Estimated Cost
Negotiated costs, including HST 1,613,728.14
less: HST rebate (185,650.14)
Net Cost Being Awarded 1,428,078.00 A
Costs Incurred to Date -
Projected Costs : Staff Time -
Estimated Cost 1,428,078.00 C
Funding available for LRT
Balance in Account 705,571.92
Recovery from Region of Waterloo 636,819.00
Budget for this Purchase
1,342,390.92 B
Estimated Surplus/(Deficit) (B - C)
(85,687.08) D
Transfer from Gas Capital Reserve Fund 85,687.08
Total Estimated Surplus/(Deficit) - E
COMMUNITY ENGAGEMENT:
INFORM - Potential vendors are informed of bid opportunities through the public posting of bid
documents as outlined in the City’s Purchasing By-Law. Vendors, local media and the general
public are informed of purchasing recommendations to Council through the public reports which
are included with the Council agenda the week prior to the Council meeting.
ACKNOWLEDGED BY:
Dan Chapman, Deputy CAO & City Treasurer, Finance and
Corporate Services
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