2015-11-06_Agenda Packet--Dossier de l'ordre du jourCity of Saint John
Common Council Special Meeting
AGENDA
Friday, November 6, 2015
4:00 p.m.
Council Chamber
Please use Chipman Hill entrance
S'il vous plait utiliser 1'entree Chipman Hill
Call to Order
Pages
1.1 Safe, Clean Drinking Water Project - Approval of Preferred Proponent and 1 -7
Project Agreement
1.1.1 Safe, Clean Drinking Water Presentation 8-27
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COUNCIL REPORT
M&C No.
2015-229
Report Date
October 30, 2015
Meeting Date
November 06, 2015
Service Area
Saint John Water
His Worship Mayor Mel Norton and Members of Common Council
SUBJECT: Safe Clean Drinking Water Project — Approval of Preferred Proponent
and Project Agreement
OPEN OR CLOSED SESSION
This matter is to be discussed in open session of Common Council.
AUTHORIZATION
Primary Author
City Commissioner
City Manager
Melanie Tompkins
Dean Price
William Edwards
Jeff Trail
RECOMMENDATION
WHEREAS on July 22, 2014, the City issued a request for qualifications (the
"Request for Qualifications") for the design, construction, financing, operation,
maintenance and rehabilitation of a water treatment plant and storage
reservoirs, and the design, construction and financing of water transmission
system improvements in the City of Saint John (the "Project");
AND WHEREAS six respondents submitted a response to the Request for
Qualifications;
AND WHEREAS all respondents were evaluated against the evaluation criteria set
forth in the Request for Qualifications;
AND WHEREAS the Request for Qualifications provides that the three highest
scored respondents will be invited to participate in a Request for Proposals
process for the Project;
AND WHEREAS the three highest scored respondents to the Request for
Qualifications were Port City Water Partners, Port City Water Partnership and
Port City Water Solutions (collectively, the "Proponents" and each, a
"Proponent");
AND WHEREAS on November 3, 2014, Common Council adopted a resolution
inviting the Proponents to participate in the request for proposals process for
the Project and, on January 8, 2015, the City issued to the Proponents a request
for proposals for the Project (the "Request for Proposals");
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AND WHEREAS in accordance with the requirements of the Request for
Proposals, on July 29, 2015 each of the Proponents submitted a technical
proposal for the Project and on October 7, 2015 each of the Proponents
submitted a financial proposal for the Project;
AND WHEREAS the Request for Proposals provides that from among the
proposals that are technically compliant and financially compliant, the
Proponent that offers the lowest cost on a net present value basis will be
provisionally selected to carry out the Project (the "Preferred Proponent");
AND WHEREAS all Proponents were evaluated against the evaluation criteria set
forth in the Request for Proposals and, based on such evaluation, the submission
review committee responsible for the review and evaluation of the proposals
and the steering committee for the Project have identified to the City Manager
Port City Water Partners as the Preferred Proponent;
AND WHEREAS the City has negotiated with the Proponents the final form of a
project agreement which sets out the terms and conditions upon which the
successful Proponent will carry out the Project (the "Project Agreement"), which
agreement was provided to the Proponents on July 16, 2015, subject only to the
addition of material which is necessary to fully and accurately reflect the
Preferred Proponent's (a) technical and financial proposals, and (b) corporate
and sub -contracting structures, the latter being determined, in accordance with
the RFP solely by the Preferred Proponent;
AND WHEREAS the Request for Proposals requires that the City treat each
Proponent's proposal as confidential, and disclosure of the terms and conditions
set forth in the Project Agreement prior to entering into the Project Agreement
with the Preferred Proponent and the completion of the Preferred Proponent's
financing for the Project could compromise the procurement process and the
competitive tension among the Proponents to the financial detriment of the City;
AND WHEREAS accordingly, on November 4th, 2015, at a meeting of Common
Council closed to the public (the "Closed Meeting"), the Project Agreement, the
Preferred Proponent's technical and financial proposals and a presentation from
the City Manager regarding the foregoing matters and recommending that Port
City Water Partners be declared the Preferred Proponent, were presented to and
discussed by Common Council;
NOW, THEREFORE, BE IT RESOLVED that, on the recommendation of the City
Manager, Port City Water Partners is declared the Preferred Proponent and the
City Manager is hereby directed to notify the Preferred Proponent of the same;
AND FURTHER that Common Council hereby directs the City Manager to make
those additions to the Project Agreement which are necessary to fully and
accurately reflect the Preferred Proponent's technical and financial proposals, as
well as the Preferred Proponent's corporate and sub -contracting structures, the
latter two items being as determined by the Preferred Proponent;
K
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AND FURTHER that Common Council hereby authorizes the Mayor and Common
Clerk to duly execute the Project Agreement and all agreements attached as
schedules to the Project Agreement to which the City is contemplated to be a
party (the "Ancillary Agreements"), with only such additions as are required to
fully and accurately reflect the Preferred Proponent's technical and financial
proposals, as well as the Preferred Proponent's corporate and sub -contracting
structures, the latter two items as determined by the Preferred Proponent;
AND FURTHER that, except as expressly contemplated herein, there shall be no
substantive change to the Project Agreement or to the Ancillary Agreements,
and any proposed substantive change shall be put before Common Council for
approval prior to execution of the Project Agreement and the Ancillary
Agreements;
AND FURTHER that City staff is hereby directed to make the final executed
version of the Project Agreement publicly available on the City's website within
60 days following the completion of the Preferred Proponent's financing in
connection with the Project;
AND FURTHER that Common Council hereby authorizes the City Manager to take
such further and other action as is consistent with this resolution and as may be
necessary or desirable to complete the transactions hereby approved and
authorized.
EXECUTIVE SUMMARY
The purpose of this Report is to advise Common Council of the results of the
procurement process related to the Safe Clean Drinking Water Project
("SCDWP") and seek approval of the Preferred Proponent and Project
Agreement which is to govern the contractual relationship between the
successful Proponent and the City during the construction and operating period
of the Project (a total of 33 years).
PREVIOUS RESOLUTION
At its meeting held on November 3, 2014, Common Council resolved as follows:
"Resolved that as recommended by the City Manager in the submitted report
M&C 2014-185: Request or Qualifications Evaluation Process — SCDWP, Council
adopted the following resolution:
WHEREAS the City issued a Request for Qualifications on July 22, 2014 for the
SCDWP; and
WHEREAS six respondents submitted a response to the Request for
Qualifications; and
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WHEREAS all respondents were evaluated against the same evaluation criteria;
and
WHEREAS the Request for Qualifications provides that the three highest scored
respondents will be invited to participate in the Request for Proposal process of
the SCDWP; and
WHEREAS the three highest scored respondents are Port City Water Partners,
Port City Water Partnership and Port City Water Solutions;
NOW THEREFORE BE IT RESOLVED that Port City Water Partners, Port City Water
Partnership and Port City Water Solutions be invited to participate in the
Request for Proposal process of the SCDWP."
STRATEGIC ALIGNMENT
The Safe, Clean Drinking Water Project is Common Council's number one
Priority.
The proposed recommendation will allow Council to move the SCDWP to its next
stage; that is, the finalization of the Project Agreement and financial close with
the highest ranked Proponent with a goal to have the design and construction on
the Project begin in February of 2016.
REPORT
The SCDWP is required to ensure the provision of good quality water to meet the
City's domestic, industrial and fire protection needs. The Project's objective
include improvement of water quality, reliability of water quantity and delivery,
value for money, the maintenance of a functional system during construction
and an on-time on -budget delivery of the Project.
The SCDWP consists of two main components: the design, construction,
financing, operation and maintenance of a new water treatment plant and
storage reservoirs adjacent to the Little River Reservoir; and the design,
construction and financing of improvements to the water transmission and
distribution system, with completion of construction expected in 2018. The
thirty-year operation period of the water treatment plant is to start at the
substantial completion of the entire Project.
The City set out to select a private sector partner to undertake this work as a
public private partnership ("P3"). The selection process and procurement model
most widely used in the Canadian market for this type of project is a two-stage
process consisting of a Request for Qualifications ("RFQ") followed by a Request
for Proposals ("RFP").
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The most important part of such a procurement process is its integrity. In order
to show that the City is a good and reputable partner, it must run a rigorous
process. The integrity of the process is necessary so as to ensure that the
bidders in the market will want and choose to engage in a partnership with the
City.
A process that will invite the trust of the bidders and the market is one that is
open, fair, transparent and consistent.
The City hired the services of Grant Thornton to act as a fairness advisor and
ensure that the City honours the principles of an open, fair, transparent and
consistent procurement process. Throughout the procurement process, the
fairness advisor was present at all meetings and communications between the
City and the proponents, he observed the procurement process from beginning
to end and ensured that the process was implemented in a manner that was fair
and equitable to all proponents. The fairness advisor worked closely with the
City's project team, he established and shared understanding and acceptance of
fairness principles among the project stakeholders, he planned for and executed
key fairness check points and interventions and identified any concern in a pro-
active manner and worked to resolve fairness concerns, if any, before they
developed into problems. At the end of the process, he will issue a fairness
monitor report to the City. This report is expected for the end of November
2015.
The process that the City unfolded is one that is recognized by the industry, It
was thorough and guided by advisors who are expert in the procurement field,
and produced good results for the City.
The first stage of the procurement process is the RFQ where registered parties
are invited to submit a response to pre -qualify for the Project. The purpose of
the RFQ is to arrive at a short list of respondents who have demonstrated that
they have the ability, both technically and financially, to deliver the Project. The
City received six responses to the RFQ and in November of 2014, Council invited
the three highest ranked Proponents at the RFQ level to participate in the RFP.
Between November 2014 and January 2015, the Project team and its advisors set
out to draft the RFP, and a first version of the Project Agreement that is to
govern the legal relationship between the successful proponent and the City,
both for the construction and operation period of the SCDWP. The RFP was
issued on January 8, 2015.
The RFP stage is itself a two-stage process. Once a proponent has been qualified
to partake in the RFP stage, it is invited to submit a technical submission. The
City then evaluates the Proponent's technical ability to deliver the Project
against an objective, pre -established criteria disclosed to the proponents. This
5
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evaluation of the technical submission is done on a pass -fail basis. Only those
Proponents who pass the technical evaluation are invited to submit a financial
submission. Like the technical submission, the financial evaluation is done on a
pass -fail basis based on a pre -determined and disclosed criteria. Once the
Proponents have passed the financial evaluation, the Proponents are ranked
based on their net present value of the total cost of the Project. The highest
ranked Proponent is the one that offers the lowest net present value. Once the
highest ranked Proponent has been identified, the City then proceeds to the
finalization of the Project Agreement (Commercial Close) with that Proponent
and ultimately to financial close. Since the Project is being financed privately,
the deal is not closed until the financing is made available to the Proponent on
financial close.
In this case, the City received and reviewed comments on the draft of the Project
Agreement between February and July of 2015. Pursuant to the RFP, the
Proponents are offered opportunities to review the draft Project Agreement and
provide comments on it and then meet and discuss their understanding of or
concerns with the draft Project Agreement. Such exchange during the course of
six months inevitably led to changes to the draft Project Agreement and addenda
to the RFP. On July 16, 2015, the City issued the bid version of the Project
Agreement incorporating some of the changes proposed by all Proponents. The
City received the Proponents' technical submission on July 29, 2015 and
proceeded to an eight-week evaluation period of the technical submissions. The
technical submission of each of the Proponents were divided in six different
categories for the purpose of evaluation: 1) design of the water treatment plant
and storage reservoirs, 2) design of the water transmission and distribution
system, 3) integrated management systems, 4) operation maintenance and
rehabilitation, 5) organization and management and 6) construction. Six
evaluation teams were therefore created. Each team evaluated one of the
aforementioned components of the Proponents' technical submission. After the
technical evaluations were completed, and reviewed by the due diligence panel,
the Proponents having passed the technical test, were invited to submit their
financial submissions on October 7, 2015. An evaluation team was formed to
evaluate the financial submissions. After the financial evaluation was
completed, the financial evaluation team ranked the Proponents in accordance
with their net present value of the total cost of the Project, the highest ranked
Proponent being the one offering the lowest net present value.
As a result of the completion by the City of its evaluation of both the technical
and financial submissions, Port City Water Partners has been identified as the
highest ranked Proponent. Port City Water Partners is technically compliant,
financially compliant, below the City's affordability cap, and offers the lowest net
present value of the total cost of the Project.
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As mentioned previously, the procurement process for the SCDWP has not yet
completely unfolded. It will only be complete once the preferred proponent
reaches financial close. This is not scheduled to occur until February 2016.
Confidentiality is key to the proper unfolding of the procurement process of any
project. Confidentiality is necessary to maintain the integrity of the
procurement process (by protecting the confidential nature of the information
related to the Project, and supporting the City's objective to run a "fair process",
and increases the value for money (by avoiding collusion and promoting
competitive tension through the prevention of premature sharing of pricing and
other information between Proponents and by maintaining the City's negotiating
leverage).
The SCDWP is the largest municipal infrastructure project in New Brunswick
history. It is also Council's top priority. It is imperative that confidentiality be
maintained until financial close has been achieved in order for the integrity of
the procurement process to be maintained.
The RFP, Project Agreement and Value for Money Analysis will be made available
to the public after Financial Close.
SERVICE AND FINANCIAL OUTCOMES
The Preferred Proponent's proposal offers good Value for Money for the City.
INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS
The Project team has been working closely with the fairness advisor and the
City's legal and procurement advisors to ensure that the process is fair and
transparent and that the Project is a success.
There are three funding partners to the Project: PPP Canada, the Regional
Development Corporation (Province of New Brunswick) and the City. The City
has received commitments for contributions of up to 25% of eligible costs (to a
maximum of $57.3M from each of its funding partners, for the Project.
ATTACHMENTS
Nil
7
Safe Clean Drinking Water Project (SCDWP)
Project Briefing Session for Common Council
November 6t"
"I.
ee
• Introduction (William Edwards)
• Project Overview (Dean Price)
• Procurement Process Overview (Johanne Mullen /
Melanie Tompkins)
• Result (William Edwards)
•
Next tops in Process (William Edwards)
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Pre -Design
Reports
Developing legal
and technical
requirements
• Improve water quality
• Ensure reliable water quantity and delivery
• Value for Money
• City retains control and ownership of system
• Maintain functional system during construction
• On-time, on -budget
• Accelerated project delivery
• Quality, cost and lifecycle requ
ce go
Three Funding Partners:
• PPP Canada Inc.
• The Province of New Brunswick (RDC)
• The City of Saint John
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Two part project - Single contract for all work
Primary Infrastructure - Design Build Finance Operate Maintain
(DBFOM)
• Water Treatment Plant (WTP)
• Storage reservoirs
Additional Infrastructure — Design Build Finance (DBF) Ce
• Source Improvements (dams and intakes) '� C
Aw% ►
• Transmission and Pumping (includes well site development and
Spruce Lake PS upgrades)
• Structural Pipeline Rehabilitation
13
iF f `-.. -1%, - I sWMW
14
300
250
200
2150
100
50
0
— The PPP payment profile is different to the traditional procurement
payment profile.
Illustrative PSC Cashflows
1 6 11 16 21 26
300 Illustrative PPP Cashflows
250
200
■ PSC 4A150 100 ■ P3
50 -
0 ,�-
1 6 11 16 21 26
Year
Year Ce y
— PPP payments are on a 'no service no payment' principle.
— PPP payments commence once the facilities are available for use
(however recent trends are for an upfront capital contribution from_
Government).
15
DBA*
OA*
LA =
Lending Agreements
LDA =
OPERATIONS
DESIGN BUILD
CONTRACTOR
CONTRACTOR
Design Build Agreement
OA* =
(O&M Contractor)
EQUITY
A PROVIDER
MA*
MAINTENANCE
CONTRACTOR
(Rehabilitation)
16
PROJECT AGREEMENT
FINANCING AGREEMENTS
SUBCONTRACTS
PA =
Project Agreement
LA =
Lending Agreements
LDA =
Lenders' Direct Agreement
ECA =
Equity Contribution Agreement
DBA* =
Design Build Agreement
OA* =
Operations Management (Soft FM)
Agreement
MA* =
Maintenance FM) Agreement CAP'
(Hard
*Note: Respondents may elect to pursue different
— The P3 delivery process has the following key stages:
Financial an
Project approvals RFQ RFP Commercial Contract
Planning Close Management
— P3 process needs to be Transparent and Fair:
• Mechanism to deal with conflicts of interest;
• Ensures confidentiality;
• Sets objective evaluation criteria that are clearly e�,, Is
communicated to all Proponents r el
• Proponents have equal access to information'
AL • Appointment of an independent fairness advisor to
30
monitor the process;
• Ensures appropriate governance.
17
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Short - Listed
Respondents
V
j
Qualifications
1; 4 i I RFP Submission
Proposals
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Common
Council
Approval
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411
ProjectA
P►greement
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Drafting of RFP
& PA
Issuance of RFP
(w. attached draft PA)
,- .2 Review of PA Comments
O
,r a; w. Short Listed Proponents
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RFI
Process CCM°S
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Issuance of Bid Version of PA
November 2014 - January 2015
January 8, 2015
January 8 - July 16, 2015
—•w July 16, 2015
r
July 29, 2015
-tober 7, 2015
W10
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et of Interest Committee
Completeness
Total of 21 people evaluating
Design 1 Design 2 IMS
(WTP)
OMR O&M Construction
Due Diligence
(Technical Evaluation)
July 29 — September 25, 2015
e4Pk
September 22-23 & 28-30, 2015
A,
Conflict of Interest Committee
Completeness
Due Diligence (Financial Evaluation)
Identification of Highest Ranked
Proponent
?21
-
October 7 — 20, 2015
October 21-22, 2015
October 23, 2015
_
ember 6, 2015
The RFP process involves a high degree of confidentiality
• Maintains integrity of the procurement process
— Protects confidential nature of information related to the project
— Supports City's obligation to run "A Fair Process"
• Increases Value for Money (VFM)
— Avoids collusion/promotes competitive tension by preventing pre -mature sharing of
pricing and other information between proponents
— Maintains City's negotiating leverage
RFP, PA, VFM Analysis will be made available to the public after Financial
Close
22
Highest Ranked Proponent: Port City Water Partners
• Technically Compliant
• Financially Compliant
• Low bid
• Below affordability cap
AM .ft& ce
Equity Sponsors _Shareholder's
Agreement
%r Brookfield (50%)
NAC. acciona (40%)
(� 0%) qua
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Financial Advisor
Brookfield Financial
Design -Build
accion , ()acciona
(50%) (5051,)
SAINT JOHN
Project Agreement
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PORT CITY
Mj bi PAH i libib
Interface
Agreement
Credit Lenders
Agreement
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Life Financial
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Highest
Ranked
Proponent
Public
Sector
Comparator
• VfM r
• On
Firm, Fixed price, date certain proposal f
• Bid price includes construction and WTP operating costs for 30 yrs
25
N Customizing of PA to Preferred
0 Proponent
a
4-0
ECommercial Close (Execution
of Project Agreement)
0
0. Financial Close
Start of Design and
Construction Period
L
Saint John West Milestone
Completion Target Date
L
0 Substantial Completion Target
Date
I&V I
Nov. 2015 -Jan. 2016
January 14, 2016
February 1, 2016
February 2016
November 2017
November 2018
tw
0 Hand -Back Date 30 Years After Substant
Q a Completion Date
26
ce A
• City maintains ownership of lands and infrastructure (WTP + Transmission
System)
• City maintains control over water and water rates
• No Privatization
• All existing Public Sector Employment maintained
• Private Partner retains and manages major project risks including on-time, on -
budget delivery ce
• Payment is performance-based, not, guaranteed *R - ell
• City set strict performance requirements — including water quality and reliable
delivery
• City remains accountable / responsible for water service provided to the public