This isn’t news to anyone, but I wanted to give a bit of the flavour of the discussion at last week’s TTC meeting on this issue.
The TTC has a very bad habit of bringing forward Capital Budget projects that are incomplete — projects that look to be self contained when they are really only the first in a series. A simple example is a bus purchase that begets a new garage and a requirement to hire, train and pay more staff. In theory, we are supposed to see the full project impacts and estimated costs at the outset, but it doesn’t always work out that way.
The TTC’s budget estimate for the 234-car project was $755-million, and to this day it is unclear exactly what was included in this estimate. Originally, I had been told that things like carhouse modifications at Wilson were part of this cost, but remarks last Wednesday make me wonder. In any event, the entire amount was not intended just to buy new trains. Siemens used this as a wedge issue claiming that they could easily save the TTC $100-million on the purchase. They then exploited the political situation by feeding information to Mayor Miller’s enemies in support of an open tender on the cars.
The TTC negotiated with Bombardier, and then sent their bid off for review by two consultants: Booz Allen Hamilton, and Interfleet Technology. Both of them concurred that the price quoted by Bombardier was inline with prices for other comparable equipment in North America. In fact, the base car price is lower than the inflated price of a T-1 car in current dollars. Now things get interesting.
The price widely quoted in the media from Bombardier is $499-million, but it does not include the following items:
- “Other contract items” including a cab simulator, computer based training, tunnel profiling, spares, special tools and test equipment and a test track.
- “Additional options” including more spare equipment, a battery maintenance system and active route maps (electronic maps that show you where you are).
- Contract Security
- Costs for TTC and other parties (e.g. inspection services)
- Contract change allowance
- Wilson Carhouse Upgrade
To what extent, if at all, the price named by Siemens contained any of the above, we will never know. A few explanations are in order.
“Other contract items” are items that would be included as requirements in a specification, but which were not part of the cars themselves.
“Additional options” are items that would be included as such in a specification and which the TTC could choose to accept or reject.
Taxes include both the partial GST applicable to municipalities plus the PST. The TTC will ask that Ottawa rebate all of the GST as an additional contribution to the project.
“Contract security” is the cost of insurance to protect against the possibility that the manufacturer is unable to supply the vehicles and the TTC has advanced funds via progress payments. On the T-1 contract, this cost was absorbed by the Province of Ontario, and represents no actual cost to the Province unless Bombardier defaults. The TTC will investigate this arrangement as a means of reducing the project’s cost.
“Contract change allowance” covers the “oh rats we forgot …” problems as well as anything arising during manufacture or acceptance that was not properly covered in the specification. This line accounts for $55-million and suggests a fair amount of amnesia or bad design may be on the loose if it’s all spent. Such a provision would be found in any contract regardless of the supplier. We can only hope that the TTC does not actually have to spend it.
Finally, we discover that the car project comes to a total of $710-million (including the factors discussed above) of which $211-million is all of the add-ons. However, this leaves $45-million unspent, and a new item, the Wilson Carhouse Upgrade Project (one of those “oh we forgot” items) sneaks in as part of the overall scheme. Its $63-million cost puts them a tad over, but that’s no worry if we can get that GST rebate, have the Province backstop the contract security and avoid spending all of that contingency.
This is a good example of how unexpected costs show up routinely in TTC budgets and why it’s so hard to find out what the full cost of any project really is.
I won’t go into the deputations at length. Most of them were supportive of the purchase including the Mayor of Thunder Bay, the President of the Thunder Bay Chamber of Commerce and several representatives of unions affected by the award of work to Bombardier’s plant.
Two Councillors appeared in opposition, and I have to give them marks for going down with the ship. For months, they have used Siemens’ numbers to buttress their case that the Bombardier deal is uncompetitive, only so see that claim undermined by both the bid value and by the consultants’ reports.
Councillor Minnan-Wong led off by saying that his constituents were unhappy with fares and service and implied that somehow if the contract were properly tendered we could change this. Here he mixes the operating and capital budgets in a way that I, as an advocate, could never get away with. The only possible value of saving money on subway cars would be to buy more buses, but council’s right wing doesn’t even seem to happy even with that.
Minnan-Wong implied that the consultants’ reports were worthless because “consultants will write what you want”. This really shows how desperate a position he is in if an attack on well-respected industry reviewers is the best he can do. He went on to quibble that a “reasonable price” (the consultants’ words) is not necessarily the “best price”. As for jobs in Thunder Bay, Minnan-Wong only cares about Toronto. He should think about this the next time he seeks financial aid from Queen’s Park or Ottawa.
The Commission as a whole, right and left wings, went on the attack. Commissioner Li Preti asked whether, if the order were tendered to any bidders, we could get a significantly better price given that the bid is cheaper than what we paid for the T-1 cars. Commissioner de Baeremaeker asked how Minnan-Wong could claim the cars are overpriced when the consultants state that the TTC price falls just below the North American trend line. Things got tangled here with Minnan-Wong trying to use the consultants’ material to support his own position even though moments earlier he suggested that their opinions were suspect.
Next up was Councillor Stintz. She often presents well, but today her tone was shrill and the desperation of her position quite evident. First, she retraced the history of the order and its change from public tender to sole source bidding. In the process, she alleged that in June 2005, Commissioner Mihevc had claimed that “it’s not our job to get jobs for Thunder Bay”. The validity of this statement was never challenged. Stintz, like Minnan-Wong, dismissed the consultants’ reports.
Next, Stintz asked where the cars would actually be manufactured, and suggested that Bombardier’s recent designation as a preferred supplier to the Chinese State Railways could mean that subway car components would be manufactured in China. That’s a big leap, and later speakers demolished that premise.
Finally, Stintz invoked the Bellamy Commission report on the city’s computer leasing scandal as justification for always going to public tender. Chair Moscoe stomped on that claim with a long quote from Madame Justice Bellamy making clear that she recognized specific cases where sole sourcing was appropriate and in the city’s interest. In particular, Justice Bellamy recognized that price is not the only measure on which a contract might be awarded both for reasons of quality and in order to promote other municipal goals.
Notable by her absence as a speaker was mayoral hopeful Jane Pitfield who so fouled up her last attempt at attacking this deal back in July. She was hovering around and chatting with the media, but had the good sense to keep her mouth shut rather than speaking at the meeting.
Toronto needs new subway cars, and we’re unlikely to save any money by retendering the whole package to all comers. The huge problem here is that funding commitments still have not been received from Queen’s Park or Ottawa even though both of them have an interest in sending work to Thunder Bay. If Council puts off a decision, this will let senior governments off the hook for another year or more.
We can expect a raucous debate when this issue reaches Council later in September, and intemperate, unparliamentary statements are quite likely. This is great political theatre, but it does nothing for the transit system.
The “where will the components be made” is actually a fair question. BBD has been outsourcing more and more aircraft parts to Mexico of late while leaving final assembly in Canada. It’s not impossible to believe the same could happen on the subway contract.
It’s long been recognized in politics that appearances are as important as a strictly “bottom line” approach. I can’t help thinking (consultants’ reports or not) that a clean tendering process, including all of the costs so that apples to apples comparisons could be made, would have been best. Bombardier may well have come out the winner, and if so, fine of course.
As it stands, there will be a significant number of people who will be left with questions as to whether this is completely above-board or not. this will be especially true if it later turns out that some parts are being made in China (or wherever) after all.
A competitive bid for the subway rail car will ensure the lowest initial price, however a single source contract can help to reduce the overall lifetime operating costs. Purchase of a similar vehicle reduces training, tools, shop space, warehouse space, and retains a consistent level of expertise.
Training: Minimal training of TTC mechanics on the new T2 subway cars would be required that would include only the differences and upgrades to new car subsystems. Many of the parts, repair, and troubleshooting techniques would be similar or identical to the existing rail cars. A defined level of employee technical expertise has already been established and can be maintained.
Training on a new vendor’s subway car would be both expensive and time-consuming as each and every mechanic and serviceperson would require extensive training on new and complex subsystems. Service delays during the “learning curve” must be anticipated.
Spare Parts and special tools: A new vendor’s subway car would require an entire duplication of stock spare parts. In addition to the initial cost of the spare parts are the warehousing costs including storage space. Additional shop space and employees would required for new and duplicated test benches and additional tools to repair new motors, trucks, wheel turning machines, propulsion controls, etc.
All of that is true, but that’s not a reason not to have bids. The bidding process doesn’t have to specify lowest bid wins, just have a rational process for deciding a winner.
For example, when Airbus was trying to get traction they offered things like free training to get into Boeing only airlines. The TTC could have gotten multiple bids and then in conjunction with the bidders come up with a figure for changeover from each bidder including BBD.
I think if Toronto is spending its own money that’s one thing, but they are spending Prov and Fed money (we hope) and they should have insisted on a bidding process. The only problem is that that would have opened them up to accusations of hypocrisy over the new C-130/C-17 aircraft contracts.
In the European Union you can hardly order stationery on any level of govt money without putting in the Official Journal.
I think you should consider the arguments made in favour of open bidding more carefully. Open bidding doesn’t mean that the final selection is based on price alone. I’ve been part of teams who have responded to government RFQs where requests clearly state that the location of the respondent will be a factor in the selection.
Mdme. Bellamy may well have stated that procurement is not always based on price. Yes – quality is a factor. However, the record of Bombardier sourced equipment from Thunder Bay is not great. The Canadian Vicker subway cars built cars on the Montreal Metro are proving more durable and reliable than Toronto’s TB sourced equipment. By any measure, the TB produced streetcar equipment is at the bottom rung when it comes to cost of maintenance and relaibility – and in sharp contrast to equipment in use in Calgary and Philly that have approx the same average age.
Bomardier TB’s record is one of passable quality at best.
Steve: The real junk on the TTC that came from Thunder Bay derives from the era when that plant was owned by the Ontario Government, not by Bombardier. The streetcars are a joke — they were designed as high speed interurban cars rather than as local streetcars even though the TTC and Hawker-Siddeley had been working on an updated PCC design in the 1960s. They are too heavy, and many of the componnts are hard to source because of choices made in the original design.
As for the subway cars, the worst of the H-series actually date from the UTDC era. When you consider the poor subsystem co-ordination and the need to replace the trucks under one set of cars, you can see the hand of designers who have no idea of what they are doing.
To date, the T-1 cars have been well-behaved at least in part because the TTC didn’t have a Provincial agency ramming crap down their throats.
In terms of ‘other municipal goals’ – it’s hard to see how single sourcing advances anything in Toronto. While there may be more jobs in final assembly in TB, we lose the potential of jobs at the TTC – i.e. to operate the extra buses or other vehicles that could have been procured with the savings.
It doesn’t necessarily follow that being a councillor who is a transit booster is better that being one who demands accountability from the system. In an earlier post, who defended Councillor Moscoe – in large part because of his passion for transit.
However, a job of commissioner is not necessarily to be passionate – in fact, this can be a detriment. The TTC has long term problems – many of which you point out in this space. These include:
– poor service reliability
– absenteeism of approaching 10% in a number of departments
– poor labour morale
– mishandling of capital projects (including the imcomplete financial assessments)
– unit cost per passenger spiralling upward faster than inflation
– inability to keep top managers
When these problems persist and become long term, they are governance problems. When commissioners act simply as advocates and cheerleaders, and do not address performance issues, they lose credibilty. This in turn harms the ability of the TTC to compete for capital funds.
I believe we’d be better off with councillors on the commission who are more focussed on obtaining value-for-money.
Steve: The problem with the phrase “value for money” is usually interpreted by Councillors of that particular bent as spending as little as possible on transit. My big beef with the entire Commission and Council is that they are prepared to waste billions on subway expansion while starving the system of funds. If we want to talk about the money that might be better spent on buses, the savings from not building ruinously expensive subway lines makes whatever we might “waste” on Bombardier small change. Issues with service reliability can be traced to underspending on operations and an attitude that we can always make do with less.
By the way, Bombardier is building subway cars for Montreal now, not Vickers, and it was a sole source contract.
I fully agree that TTC management have gotten away with misrepresenting project costs and options to the Commission for years. This was particularly true when the prevailing political winds were right-wing and good business practices should have prevailed. However, nobody seems willing to seriously houseclean, whether it’s the so-called spendthrifts of the left or the self-appointed guardians of the public purse of the right.
re: Steve’s comment above on value for money – you are exactly right.
The issue *should* be – there is a pot of x million dollars, do we get Bid A which uses the whole pot or Bid B which is $50m less so we can use that $50m to get more buses, streetcars, etc. with that money.
Unfortunately that’s not how municipal budgeting seems to work and shows the naivete of the Scarborough councillors and their notions that “if we save the city money by going RT we’ll get miles more LRT” because of a perception that Scarb is “owed” $1bn in transit – let’s see how that goes…
This is also because such an approach would impact the operating as well as capital budget, something that confuses the hell out of Toronto councillors and everyone else involved in Toronto City finances.
No matter how the subway car decision plays out in time, Toronto city council & the TTC leave the impression of irresponsible spending then crying fowl over lack of federal and provincial funding. Local government is not entirely at fault.
One has to wonder at the province’s decision to fund the Spadina subway extension to York U. while unresolved TTC problems like the Scarborough RT and service remain. How politicians address problems is similar to fixing a house with a leaky roof. Politicans would build an addition to the house.
I’m not saying that the T-1 cars supplied from T-B in the past are not good quality. I’m not saying that Bombardier T-B should be excluded from bidding because of problems with past products. However, there is not an exemplary (emmphasis on this last word) record of quality that would indicate the propriety of by-passing competitive bidding.
To draw a parallel, the contractor that rebuilt my back deck did a good job – but not an exemplary one. I would consider using him again – but I’d still look at alternatives. I’d certainly let him know that there were others being considered! If he had wowed me, I’d just ask him for quote and go with that. Now, I’d say that the Montreal MR-63 cars would seem (based on published reports) to have provided exemplary performance.
Yes – the new Montreal cars will likely be Bombardier produced. However, the STM have an out – if they cannot agree to terms by a given deadline. This gives the STM a degree of leverage in negotiating final terms.
Steve: The TTC had the same situation with Bombardier. Actually to put this in context, the round of really heavy negotiations about quality was what led to the T-1 cars.
I’m not sure of the dynamics of the STM deal; however, in the case of the TTC and Bombardier, I don’t see the TTC as having much in the way of negotiating leverage.
The last thing Commissioners should be doing is saying how happy they are with the price – even if they really think it is! They should be sending negotiating signals indicating that they’d like things improved (or they’ll walk away) – perhaps a slightly lower price, perhaps some sweeteners such as elongated payment terms, guaranteed prices on spare parts, or even life-cycle cost guarantees.
Steve: Actually, the Commissioners are not supposed to be involved in the negotiations by sending signals at all. That applies whether it’s an open or closed tender — you can’t have the politicians acting as a parallel negotiating conduit unless management are really screwing up.
The comment about savings on one hand being available for other possibilities applies in all decision making.
RE: N. Clawson’s comment about the “durability” and “reliability” of the Vickers-built metro cars in Montreal.
Yes, it is quite a miracle that these original Vickers from 1966 are still (though not for long) serving dutifully as the backbone of Montreal’s metro system. But you seemed to have fogotten that over 1/2 of Montreal’s metro fleet are MR-73 built by Bombarider in 1974 – and these are much more preferred by Montrealers.
Also, Montreal being one of the few cities in the world that operate rubber-tired cars, a lot of effort were put into the system to prolong its service life.
Myself as an ex-Montrealer who used to ride the Green line (1966 Vickers) everyday and the Orange line (1974 Bombardier) on weekends, I can tell you that the TTC subway cars are much more comfortable and spacious than Montreal’s.
As for reliability, Montreal metros are known to breakdown often. Delays and shut-downs are common place in Montreal, and these inconveniences (minor or major) have become a part of the daily life of a metro user like myself.
As the saying goes, grass is always greener on the other side.
Why can’t the TTC just admit that they are buying from Bombardier in the first place? No matter how many tenders are put in, we all know that Bombardier will get the contract. Toronto will just be doing the work of the federal and provincial government in keeping Bombardier viable. Remember, in countries like France, the central government provided a bailout of Alstom. We are all in the business of protecting key national industries.
Bombardier products are good to begin with. If it is good enough for export, it is good enough for Canada. Remember, T1 metro technology is used in Ankara, Turkey. According to the Bombardier’s website, they have the highest dispatch reliability. There is very little reason to shop any where else.
Toronto should still try to do something to lower the cost. Export Development Canada (EDC) is flush with cash and Toronto should use it to its advantage. Air Canada purchased 45 Bombardier CRJ jets through GE Capital in the US. GE Capital used the EDC to provide generous payment terms (low interest rates, bridge loans) and financial assistance to lower the prices. Rumours has it that the CRJ jets were subsidized by the EDC to the point where it was less than the production cost. If Air Canada placed the order in Canada, export financing would not apply. The TTC ought to pull a trick like this one to save some money.
Steve: Many years ago, Vancouver tried the trick of leasing equipment through a company that would be able to write off costs against other income streams. By passing part of this tax saving on to the transit system, they would, in effect, be providing a tax subsidy from Ottawa to the municipality. When the feds got wind of this, they changed the rules so that such arrangements would not be eligible for tax writeoffs. Now, this type of scheme only works if the vehicles are bought by a foreign corporation in a jurisdiction that allows this sort of write-off.
The figures I have – from a 2003 report – show that even though the average age of the STM fleet of MR-63 and MR-73 (built by Bombardier but not at T-B) is much older than the TTC subway car average, the maintenance costs were lower:
STM: 121,965 vehicle KM/Maintenance employee
TTC 97,462 vehicle KM/Maintenance employee
Likewise, the STMs spare ratio was slightly lower.
STM annual report show 98% service reliability on the Metro (standard is a 5 minute delay.) The majority of service delay are passenger-related.) I don’t have a similar # fo the TTC – but there are plenty of service disruptions.
Steve: All of this is quite academic when one looks at the problems we have in comparing stats from system to system because they (a) have different ways of managing their staff and (b) different ways of counting them. The lower TTC figure may reflect bad maintenance practices, or it may reflect a different way of counting who “maintains” the trains, but it does not prove that cars made by Bombardier are inherently worse. Indeed some of the most troublesome subsystems are not provided by the car builder but come from 3rd party suppliers.
One big problem the TTC had with cars designed when Thunder Bay’s plant was owned by the UTDC was horrendous subsystem integration screwups. The braking system didn’t talk to the control system, for example. This was thanks to the UTDC’s engineering staff not Thunder Bay’s quality of car building, and of course all of it predated Bombardier’s involvement in the company. The T1 cars are much better behaved, but they are still barely half of the fleet.
The relative comfort is not the point of debate here. Neither service is particularly comfortable when full. The TTC seats are cushier – but the STM has smoother acceleration and deceleration.
In terms of TTC commissioners not being involved in negotiations – well, they have to keep completely quiet. How likely is this? A board can send signals without meddling in negotiations with specific suppliers. It can state general principles such as “We’re looking to get better value from our supplier base”, “We’re looking to get more certainly on life-cyle costs on capital projects”. In case of Bombardier, the horse has already bolted from the barn. In order to negotiate, you have to demonstrate that you’re willing to walk. Instead the TTC Commissioners have done the opposite.
I’m not saying that Bombardier T-B can’t or hasn’t made quality products. The debate is whether the demonstrated record of quality has been sufficient for the TTC not to consider alternate suppliers. Normally, the quality ratings for production facilities (e.g. ISO qualifications , QS-9000) are attributed to the physical plant. New ownership might indeed cause the plants quality to improve over time – but the quality doesn’t automatically transfer over. (A Chrysler is not a Mercedes just because Mercedes-Benz bought Chrysler.)
Steve: As I have said before, Thunder Bay builds good cars. The problems the TTC has had with previous cars, notably the H5 and H6 series, were due to engineering cock-ups by the UTDC, and a lack of sufficient involvement by the TTC in design reviews. This changed under David Gunn and led to the much superior T1 car.
I introduced the relative statistics in response to the prior post that indicated that the STM’s cars were being kept running by unduly hight maintenance costs. While there is no perfect comparison in most fields of human endeavour, the comparison here (compiled by a specialized transportation consulting firm) shows that this is not the case. Prima facie, the overall STM subway car fleet has a better reliability/maintenance record than we have here.
Steve: In fact, there are huge differences in how systems track costs, and some of the information compiled by that consultant is suspect. I’m not going into a detailed analysis of that report here but simply point out that there are enough oddities when you look through some of the info for other systems that there are problems in the raw data. For one thing, the TTC data predates the period when most, possibly all, of the T1 cars were in service and reflects the much higher cost of the cars they replaced.
I’ll not disagree that Thunder Bay plant has made a good product in the T-1. I would certainly hope that the maintenance costs have gone down since the report. In terms of the specific comparison, the STM fleet was older in average age at the time.
Perhaps the TTC professional management thought that the T-1’s track record (excuse the word play) was not yet long enough in terms of quality (or certainly durability) – and did not yet conclude that it was good enough to indicate skipping competitive tendering from other suppliers.
Data in consultants’ reports are always imperfect. However, the sfaffing counts and KM travelled data appear reasonably consistent with other sources. The bigger problem with that report is that some of the conclusions seem at variance with the data. This and likely the reports used in the sole-sourcing analysis are written by consulting companies with a strong interest in getting more business with the City and TTC – so the conclusions are quite likely sugar-coated to keep the purchaser of the report happy.
Hey I was wondering, if it is true, I recently read some where that the TTC’s artic trains are not going to have an artic joint but instead a wider gangway so passengers can travel between the cars. Is this true, if so why would the TTC even call these new subway trains artics? With out artic joints it basically beats the purpose of calling them artics. So is this true?
Steve: Yes the new trains will have gangways between the cars, and yes, this has to be an articulated joint because everything bends when you go around corners. However, I believe that the trucks are staying in the same place as on the T1 cars. This means that the gangway is suspended between the ends of adjacent cars rather than sitting on top of a truck as it does for the ALRVs.
So will these articulated joints be the ones that are fully covered, like the one used on buses?
Steve: Yes. We’re not talking about an open gap where you can leap out into the tunnel. The passenger comparment will be continuous through the length of the train.
The original floors installed in the Montreal MR73 Subway cars were a disaster and the STM adopted the Abrastop™ CQuartz Composite Flooring to reolve the problems as far back as October 1985. These same floors have kept the STM from having to change out any rotten sub-floors and also kept the metal exterior skins from rusting. The whole car Floor is like a bathtub. The entire subway fleet as well as the entire LFS-Novabus Fleet have been so equipped and there is no floor changeouts as continually happens in TTC Subway cars and Busses.
The Scarborough line of LRV’s have tried 3 cars with the same flooring as has Vancouver in the Skytrains but TTc have never carried this any further, having acepted replacement of Rubber Flooring and underfloor rot as a fact of life. This perhaps explains some of the service cost and availability discrepancie between Montreal and Toronto. Another important fact is that this Flooring is a 100% Canadian Product while Rubber comes from RCA in Ohio as well as from France, Italy and Spain.
Re “Articulation” and vehicle mile per maintenance employee.
re Jeff’s question about the articulation:
I was taken aback by this term at first but after riding on three different systems with them they are the only way to go. It is really strange standing at one end of the train and looking down to the other end 6 cars away. I guess the TTC will have to think about how they group these; married pairs seem to be out but what about groups of 3. This would eliminate one compressor and one MG set or what ever they call the solid state device that replaced it. One comment in passing is that in London and in Hong Kong there was only power collection in one car of the married group instead of on all three cars. Would a group of three be a “ménage a trois”?
Re N Clawson comment about vehicle km per maintenance employee:
Would not a better stat be passenger km per maintenance employee as the capacity of the T1’s is probably 50% greater than that of the Montreal metro cars; that is assuming you had similar criteria for measuring in each system.