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.