Item - 2022.IE27.3

The Infrastructure and Environment Committee recommends that:

1. City Council authorize the Chief Engineer and Executive Director, Engineering and Construction Services and the Chief Procurement Officer, Purchasing and Materials Management to apply Proposal Fees and Break Fees to the Design-Build procurements for the Gardiner Expressway Rehabilitation Contracts 2 and 3, respectively, based on the conditions set out in Appendix A and Confidential Attachment 1 to the report (December 20, 2021) from the Chief Engineer and Executive Director, Engineering and Construction Services and the Chief Procurement Officer, Purchasing and Materials Management.

2. City Council direct the Chief Procurement Officer to consider creating a Proposal Fee and Break Fee Policy for large scale construction projects, after the completion of the procurement process for Gardiner Expressway Rehabilitation Contract 3 and report back to Council through the General Government and Licensing Committee.

3. City Council direct that Confidential Attachment 1 to the report (December 20, 2021) from the Chief Engineer and Executive Director, Engineering and Construction Services and the Chief Procurement Officer, Purchasing and Materials Management remain confidential in its entirety, until the procurement processes for all sections of the Gardiner Expressway Rehabilitation Project are complete.

The Infrastructure and Environment Committee, in accordance with Section 71-11.1.C of the City of Toronto Municipal Code Chapter 71 (Financial Control By-Law), authorized an amendment to Purchase Order Number 6045739 with Blake, Cassels and Graydon LLP, for the continued provision of expert external legal advice and litigation support, as necessary, for the execution and administration of the required agreements in respect of the on-going Gardiner Expressway Rehabilitation Project in the amount of $3,800,000 net of all taxes and charges ($3,866,880 net of Harmonized Sales Tax recoveries), recommended by the City Solicitor as appropriate for the scope of services required, revising the current value from $1,500,000 net of all taxes and charges ($1,526,400 net of Harmonized Sales Tax recoveries) to $5,300,000 net of all taxes and charges ($5,393,280 net of Harmonized Sales Tax recoveries).

The purpose of this report is to recommend to Council the use of a proposal and break fee mechanism in the procurement for the Gardiner Expressway Rehabilitation Contract 2: Dufferin Street to Strachan Avenue, and Contract 3: Highway 427 to Humber River. It is proposed that Contracts 2 and 3 be procured as Design-Build so as to shift the design risk from the City to the proponent, which would be contracted to provide both design and construction services. In order to evaluate the design element of prospective proposals, proponents will be required to do significant design work (up to 30 percent) to develop a proposal which can be evaluated by the City. Based on market soundings and recent experience with other major public infrastructure projects, qualified bidders capable of undertaking such projects would expect proposal fees to partially compensate unsuccessful proponents for the effort expended on their proposal preparation. Similarly, a pro-rated break fee would also be included in the process in the unlikely event that City Council chose to cancel the procurement at some stage prior to contract award. 

The up-front cost to the City of such fees is compensated by the benefits of shifting the design risk from the City to the proponent, in terms of schedule and avoiding additional costs to the project from change orders arising due to constructability and design related issues with a City-provided design. 

This report also requests authority to amend an existing Purchase Order issued to Blake, Cassels and Graydon LLP for expert legal advice for the preparation of procurement documents, contractual agreements and litigation services to support the rehabilitation of the Gardiner Expressway. The total value of the amendment to Purchase Order Number 6045739 issued to Blake, Cassels and Graydon LLP, being requested is $3,800,000 net of all taxes and charges ($3,866,880 net of Harmonized Sales Tax recoveries), revising the current purchase order value from $1,500,000 net of all taxes and charges ($1,526,400 net of Harmonized Sales Tax recoveries) to $5,300,000 net of all taxes and charges ($5,393,280 net of Harmonized Sales Tax recoveries).