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Value for Money Assessment

Eglinton Crosstown Light Rail Transit
February 2016
 Table of Contents

I. EXECUTIVE SUMMARY 2
Infrastructure Ontario
ÐÐ 2
Alternative Financing and Procurement in Ontario
ÐÐ 2
Achieving Value for Money
ÐÐ 2
External Review
ÐÐ 3

II. PROJECT HIGHLIGHTS 4

Eglinton Crosstown LRT
ÐÐ 4
Background 4
ÐÐ
Objectives 5
ÐÐ
Project Scope
ÐÐ 5
Economic Benefits & Job Creation
ÐÐ 5

III. ACHIEVING VALUE FOR MONEY 6

Value for Money Concept
ÐÐ 6
Calculating Value for Money – Inputs & Assumptions
ÐÐ 6
Eglinton Crosstown LRT Value for Money Results
ÐÐ 9
External Review
ÐÐ 10

IV. PROJECT AGREEMENT 11

V. COMPETITIVE SELECTION PROCESS 12

Procurement Process
ÐÐ 12
Construction and Maintenance Phases
ÐÐ 14

VI. CONCLUSION 15

VII. EXTERNAL CONSULTANT LETTERS 16

Infrastructure Ontario
1 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 I. EXECUTIVE SUMMARY

This report provides a summary of the procurement process for the Eglinton Crosstown Light Rail Transit (LRT)
project and demonstrates how value for money was achieved by delivering the project using Infrastructure
Ontario’s (IO) Alternative Financing and Procurement approach.

hh Infrastructure Ontario
IO is a Crown agency owned by the Province of Ontario that provides a wide range of services to support
the Ontario government’s initiatives to modernize and maximize the value of public infrastructure and realty.
Projects delivered by IO are guided by five key principles: transparency, accountability, value for money,
public ownership and control, and public interest are paramount.

hh Alternative Financing and Procurement in Ontario

IO delivers public infrastructure projects using a project delivery model called Alternative Financing and
Procurement (AFP). The AFP model brings together private and public sector expertise in a unique structure
that transfers to the private sector partner the risk of project cost increases and scheduling delays typically
associated with traditional project delivery. The goal of the AFP approach is to deliver a project on time and on
budget and to provide real cost savings for the public sector.

All projects with a cost greater than $100 million are screened for their suitability in being delivered as an AFP
project. The decision to proceed with the AFP delivery model is based on both qualitative considerations (e.g.,
size and complexity of the project) and a quantitative assessment. The quantitative assessment, called Value
for Money (VFM), is used to assess whether the AFP delivery model will achieve greater value to the public
compared to a traditional public sector delivery model. VFM compares the estimated total project costs of
delivering public infrastructure using AFP relative to the traditional delivery model.

hh Achieving Value for Money

The VFM assessment of the Eglinton Crosstown LRT indicates an estimated cost savings of $2.18 billion or
22 percent (in present value terms) by using the AFP approach compared to traditional delivery.

$12000
$9,891 $7,709
$10000
VFM of
$2,181 million or 22% Retained Risks
$8000 $3,243
$561 $29 million AFP Ancillary costs
$6000
Base Project costs
$4000
$6,648 $7,120
$2000

* $ Millions, Present Value

$-
Traditional AFP

Infrastructure Ontario
2 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 I. EXECUTIVE SUMMARY

hh External Review
As part of the procurement process and VFM assessment, three external parties were retained by IO:

Ernst & Young was retained to complete the VFM assessment; and,
``
JD Campbell and Associates (for RFQ phase) and SEG Management Consultants (for the RFP phase
``
onwards) acted as the Fairness Monitor for the project.

Infrastructure Ontario
3 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 II. PROJECT HIGHLIGHTS

hh Eglinton Crosstown LRT

Courtesy of Metrolinx/Crosslinx Transit Solutions

To deliver the Eglinton Crosstown LRT, an integral component of Metrolinx’s long-term

Purpose
plan for an integrated transportation network in the Greater Toronto and Hamilton Area.

Project Owner Metrolinx

Private Partner Crosslinx Transit Solutions

Location Toronto

Project Type Design-Build-Finance-Maintain (DBFM)

Infrastructure Type Transit

Contract Value $9.1 billion (nominal/including inflation)

Construction Period 2015 to 2021

Length of Project
36.2 years: 6.2 years construction + 30 years maintenance and rehabilitation
Agreement

Estimated Value for Money

$2.18 billion or 22%
(Present Value)

hh Background
The Eglinton Crosstown is a light rail transit line that will run across Eglinton Avenue in Toronto between
Mount Dennis (Weston Road) and Kennedy Station. The 19-kilometre corridor will include a 10-kilometre
underground portion between Keele Street and Laird Drive. The LRT will have 25 stations and stops, linking to
bus routes, three subway stations and various GO Transit lines.

The LRT is a significant provincial investment in support of Metrolinx’s Regional Transportation Plan for the
Greater Toronto and Hamilton Area (GTHA). It is a signature transit project in the Toronto area that will offer
new reliable transit to Toronto residents, integrate transit services, help manage congestion, connect people to
jobs and improve the economy and residents’ quality of life.

Infrastructure Ontario
4 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 II. PROJECT HIGHLIGHTS

hh Objectives
Through the Moving Ontario Forward plan, the province is investing in priority rapid transit projects that
will connect to GO Transit and other transit systems across the GTHA. These projects will increase transit
ridership, reduce travel times, manage congestion, connect people to jobs and improve the economy.

The Eglinton Crosstown LRT is expected to provide service that is up to 60 percent faster than bus service
today. The LRT will enhance access to public transit and help manage congestion to produce significant
benefits for commuters as well as revitalize development along the Eglinton Avenue corridor.

Overall key objectives of the Eglinton Crosstown LRT include:

Increase urban transit capacity

`` Design excellence
``
Manage congestion
`` A maintained asset for the long-term
``
Seamless customer experience
`` Deliver on time, on budget
``
Minimize disruption during construction
`` Public ownership
``

hh Project Scope
The project agreement with Crosslinx Transit Solutions contains their requirements to:

Design and Construct – lead the design and construction of the Eglinton Crosstown LRT for
``
completion in September 2021;
Finance – secure sufficient financing to finance the construction and capital costs over the term of
``
the project;
Maintain – provide facility management and lifecycle maintenance of the LRT system and components
``
for a 30-year service period as per maintenance performance standards in the project agreement; and
Third-Party Certification – obtain a third-party independent certification that the LRT system is built to
``
the requirements of the Province as outlined in the project agreement.

hh Economic Benefits & Job Creation

The project is generating economic stimulus by creating and supporting jobs. At the peak of construction,
Crosslinx estimates that 2,500 workers will be on the site daily, with more opportunities for subcontractors as
the project progresses.

In addition, the LRT project is the first AFP project to include Metrolinx’s Community Benefits program that
will help contribute to economic opportunities, training and workforce development, social enterprises and
procurement opportunities and neighbourhood improvements.

Benefits will also be visible along Eglinton Avenue. Planning for the LRT project is consistent with urban
design principles of the City of Toronto’s Eglinton Connects plan. Transit-oriented development, upgrades
to streetscaping, new trail connections and bike lanes at sites along the LRT corridor will support strategic
planning practices. Collectively, these features will help to contribute to revitalization and future development
initiatives along a significant east-west portion of the city’s landscape.

Infrastructure Ontario
5 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 III. ACHIEVING VALUE FOR MONEY

Value for money assessment for the Eglinton Crosstown

LRT project demonstrates a project cost savings of $2.18 billion or 22%

The VFM assessment methodology is outlined in Assessing Value for Money – An Updated Guide to
Infrastructure Ontario’s Methodology, which can be found at www.infrastructureontario.ca.

hh Value for Money Concept

The VFM compares the estimated total risk adjusted project costs, expressed in dollars measured at the same
point in time, of delivering the same infrastructure project under two delivery models: the traditional Design,
Bid Build (DBB) model and the AFP model.

MODEL # 1: MODEL # 2:
Traditional DBB Delivery (PSC) AFP Delivery

Estimated costs to the public sector of delivering Estimated costs to the public sector of delivering
an infrastructure project using a traditional the same project to the identical specifications
procurement delivery model. Total risk-adjusted using the AFP delivery model. Total risk-adjusted
costs are known as the Public Sector Comparator costs are known as AFP Costs.
or PSC Costs.

{ Value for Money $ = PSC Costs - AFP Costs or Value for Money % =
(PSC Costs - AFP Costs)
PSC Cost Costs }
The difference between the total estimated PSC costs and the total estimated AFP costs is referred to as
VFM. Positive VFM is demonstrated when the cost of delivery under AFP is less than PSC.

hh Calculating Value for Money – Inputs & Assumptions

The VFM is assessed and refined throughout the entire procurement process to reflect updated information
and Crosslinx Transit Solutions’ actual bid costs. All costs and risks in this report are expressed in present
value terms and have been discounted back to present terms.

The VFM assessment relies on a number of inputs and assumptions, including:

1.
ÐÐ Base Project Costs
ÒÒ1.1. Adjusted Base Costs (design, construction, lifecycle and maintenance)
ÒÒ1.2. Financing Costs
2.
ÐÐ AFP Ancillary Costs
3.
ÐÐ Retained Risks

Infrastructure Ontario
6 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 III. ACHIEVING VALUE FOR MONEY

1. Base Project Costs

bb1.1. Calculation of Base Costs

Traditional Delivery Model (PSC) AFP Delivery Model

Base Costs ($) Base Costs ($)

adjusted for: adjusted for:

Innovation Factor N/A Innovation Factor  to Construction

Costs

Lifecycle Cost Adjustment  to Lifecycle Costs Lifecycle Cost Adjustment N/A

Factor Factor

Competitive Neutrality  to Base Costs Competitive Neutrality N/A

Adjusted Base Costs Base Costs ($) +/- Adjusted Base Costs Base Costs ($) +/-
Adjustments Adjustments

Estimated Savings / (Costs) in Base Costs under the AFP Model PSC – AFP

Base costs include design, construction, and maintenance and lifecycle costs. In the estimation of base costs,
IO relies on external cost consultants to estimate the costs of the project. This becomes the starting point for
both the PSC and AFP models. These costs are then adjusted for:

An innovation factor – the VFM methodology includes an innovation factor which recognizes that the
``
base cost of the AFP model will be lower than the PSC model as a result of:
`` the use of performance based specifications in AFP projects allow contractors to consider innovative
and alternative ways to deliver a project, such that project costs are lower as compared to a traditional
delivery which uses more prescriptive specifications; and
`` increased competitive environment on AFP projects which have resulted in cost reductions

A lifecycle cost adjustment factor – experience suggests that typically governments will under-spend
``
on lifecycle maintenance for projects delivered under traditional delivery methods. Whereas, for DBFM
projects, the AFP model requires the private sector partner to meet specifications which ensures the
asset is well maintained over the project term. The VFM methodology captures this by reducing the
actual spend on lifecycle costs in the PSC model over the 30-year operating term and quantifying the
expected impact and costs of this deferred maintenance in the risk assessment. The net impact results
in an overall increase in PSC costs.
Competitive neutrality – the base costs under AFP delivery will also include a provision for certain
``
taxes payable by the private sector, namely taxes paid by the equity developers. The equivalent costs
will not appear under the PSC. These perceived cost advantages could be misleading. As a result,
an adjustment called the “competitive neutrality adjustment” is required to negate this potentially
misleading cost of AFP delivery. The adjustment consists of adding such costs to the PSC.

Infrastructure Ontario
7 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 III. ACHIEVING VALUE FOR MONEY

bb1.2. Financing Costs

Traditional Delivery Model (PSC) AFP Delivery Model

Financing Costs Public sector notional Financing Costs Private sector

financing costs financing costs

Estimated Savings / (Costs) from Financing under the AFP Model PSC – AFP

One of the common elements of the AFP model is the use of private finance for some or all of the project
period. Under the traditional delivery model, the public sector makes progress payments throughout
construction. Whereas under the AFP model, the government pays a portion of construction costs during
construction as interim payments and/or pays the entire amount at the end of the construction period and/or
through a series of regular service payments over the term of the concession agreement (for DBFM projects).
Financing costs are reflected as follows:

Traditional Delivery Model or PSC - the public sector notionally incurs an “opportunity cost” for having
``
paid earlier as compared to the AFP model. The notional public sector financing cost is calculated at
the current Provincial cost of borrowing or weighted average cost of capital. This cost is also reflected
in the discount rate used to assess and compare the project costs.
AFP Delivery Model – the private sector party borrows at private financing rates to pay for project
``
costs during construction and carries that financing until fully repaid by the public sector. This private
sector financing cost is ultimately passed through to the public sector as a cost and reflected in the
AFP model.

2. AFP Ancillary Costs

Traditional Delivery Model (PSC) AFP Delivery Model

AFP Ancillary Costs N/A AFP Ancillary Costs AFP costs

Estimated Savings / (Costs) from Financing under the AFP Model PSC – AFP

There are significant costs associated with the planning and delivery of a large complex project. The VFM
methodology quantifies the incremental ancillary costs arising under the AFP delivery model only. Ancillary
costs typically incurred include legal, capital markets, fairness, transaction, and the cost of IO services.

3. Retained Risks

Traditional Delivery Model (PSC) AFP Delivery Model

Retained Risks PSC costs Retained Risks AFP costs

Estimated Savings / (Costs) from Retained Risks under the AFP Model PSC – AFP

The concepts of risk transfer and mitigation are key to understanding the overall VFM assessment. To estimate
and compare the total cost of delivering a project under the traditional delivery model versus the AFP model,

Infrastructure Ontario
8 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 III. ACHIEVING VALUE FOR MONEY

the risks borne by the public sector, which are called “retained risks,” are identified and quantified. Details
on how retained risks are identified and quantified are in Assessing Value for Money – An Updated Guide to
Infrastructure Ontario’s Methodology, which can be found at www.infrastructureontario.ca

Project risks are defined as potential adverse events that may have a direct impact on project costs. To the
extent that the public sector retains these risks under both delivery models, they are included in the estimated
cost under the PSC and AFP model as “retained risks”. Risks retained under the AFP model are lower than
risks retained by the public sector under the PSC model. This reflects the transfer of certain project risks from
the public sector to the private sector and the appropriate allocation of risk between the public and private
sectors based on the party best able to manage, mitigate, and/or eliminate the project risk.

As a result of a comprehensive risk assessment, the following are examples of key project risks that have
been transferred or mitigated under the project agreement to Crosslinx Transit Solutions:

Project Schedule – risk of a longer construction period and resulting in a higher total program cost.
``
Scope Changes During Construction (directed by owner) – risk that the scope of work is changed by
``
the owner during construction.
Asset Residual Risk – risk that at the end of the lifecycle, the asset residual value is less than
``
expected because the quality of the asset is not equivalent to the handback requirements under
a concession contract.
Due Diligence (by the owner in preparation of tender in RFP) – risk that an insufficient level of due
``
diligence is undertaken and communicated to the proponents resulting in reduced tolerance to risk and
higher bid price.
Quality Management – risk associated with meeting design standards and codes as they relate to
``
long-term asset performance.

hh Eglinton Crosstown LRT Value for Money Results

The VFM assessment of the Eglinton Crosstown LRT indicates an estimated cost savings of $2.18 billion or
22 per cent by using the AFP approach compared to traditional delivery.

$ Millions, $ Millions,
Traditional Delivery Model (PSC) Present Value
AFP Delivery Model Present Value

I. Base Project Costs $6,648 I. Base Project Costs $7,120

(Adjusted Base Costs + Financing) (Adjusted Base Costs + Financing)

II. AFP Ancillary Costs N/A II. AFP Ancillary Costs $29

III. Retained Risks $3,243 III. Retained Risks $561

Total $9,891 Total $7,709

Estimated Value for Money (cost difference) $2,181

Estimated Percentage Savings 22%

Infrastructure Ontario
9 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 III. ACHIEVING VALUE FOR MONEY

$12000
$9,891 $7,709
$10000
VFM of
$2,181 million or 22% Retained Risks
$8000 $3,243
$561 $29 million AFP Ancillary costs
$6000
Base Project costs
$4000
$6,648 $7,120
$2000

* $ Millions, Present Value

$-
Traditional AFP

hh External Review
Ernst & Young completed the VFM assessment for the project. Their assessment demonstrates projected cost
savings of 22 percent by delivering the project using the AFP model versus what it would have cost to deliver
the project using a traditional delivery model (see letter on page 16).

JD Campbell and Associates (for RFQ phase) and SEG Management Consultants (for RFP phase and
onwards) acted as the Fairness Monitor for the project. They reviewed and monitored the communications,
evaluations and decision-making processes associated with the project, ensuring the fairness, equity,
objectivity, transparency and adequate documentation of the process. SEG Management Consultants certified
that these principles were maintained throughout the procurement process (see letter on page 17).

Infrastructure Ontario
10 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 IV. PROJECT AGREEMENT

hh Highlights of the Project Agreement

The Project Agreement signed between IO, Metrolinx and Crosslinx Transit Solutions defines the obligations and
risks of all parties involved. Key highlights that pertain to the construction and maintenance terms are below:

Contract Price Certainty – A $9.1 billion fixed-price contract (includes inflation at a contractually
``
determined rate on certain maintenance and lifecycle costs) to design, build, finance and maintain the
Eglinton Crosstown LRT for a 30-year period. Any extra costs incurred as a result of a schedule overrun
caused by the contract will not be paid by the Province.
Scheduling, Project Completion and Delays – Crosslinx has agreed to a substantial completion date
``
of September 2021. The schedule can be modified in limited circumstances in accordance with
the project agreement. A sizeable payment will be made by the Province at substantial completion,
providing further incentive for Crosslinx to complete construction on time.
Site conditions and contamination – Crosslinx is responsible for managing and where required,
``
remediating any contamination at the site. This includes contamination that was disclosed or
reasonably anticipated from site condition reports, or that is caused by Crosslinx or any of its parties.
Construction Financing – Crosslinx is required to finance the construction of the project and is
``
responsible for any additional financing costs if there is a delay reaching substantial completion of
the project.
Mechanical and Electrical Systems – Crosslinx is responsible for the performance and maintenance
``
of LRT-system infrastructure such as trackwork, signaling, communications, security, mechanical and
electrical systems as per the output specifications in the project agreement. Consistent operation and
periodic replacement of parts or systems (components, hardware, finishes and seals, etc.) is required
during the maintenance term.
Commission and Facility Readiness – Crosslinx must achieve a prescribed level of commissioning at
``
substantial completion within the agreed-to schedule. This ensures Metrolinx will be able to achieve
in-revenue service in September 2021.
Ongoing Maintenance and Lifecycle – Crosslinx must meet the performance requirements as
``
outlined in the project agreement, for the maintenance and lifecycle renewal of the LRT system and
its components. Crosslinx will face deductions to their monthly payments if they do not meet the
performance obligations during the 30-year maintenance term.
Asset Hand Back – upon expiry of the 30 year maintenance term, Crosslinx must hand back the
``
infrastructure to the Province in good working order within specific prescribed standards. Financial
penalties can be levied if the asset condition does not meet the prescribed requirements.

Infrastructure Ontario
11 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 V. COMPETITIVE SELECTION PROCESS

The procurement process for the Eglinton Crosstown LRT project, from RFQ to Financial Close, took 31
months to complete. The timeline also included re-scoping the procurement from a bundle of two LRT
projects (Eglinton Crosstown and Scarborough LRTs) to a single LRT project (Eglinton Crosstown).

After concluding a fair and competitive procurement process, Metrolinx and IO entered into a project
agreement with Crosslinx Transit Solutions to design, build, finance and maintain the project.

hh Procurement Process

i. Request for Qualifications | January 22, 2013

Metrolinx and IO issued a request for qualifications (RFQ) to solicit interested parties to design, build,
``
finance and maintain the Eglinton Crosstown LRT and the Scarborough LRT projects (as part of a
bundled procurement).
In May 2013, the RFQ period closed and the Sponsors received statements of qualifications from two
``
teams.
`` In May 2013, the City of Toronto decided not to proceed with the Scarborough LRT project. IO
and Metrolinx worked to re-package procurement documents and redefine Project Specific Output
Specifications for the Eglinton Crosstown LRT to meet the upcoming RFP issue date.
RFQ submissions were evaluated by IO and Metrolinx. High standards were set to ensure the pre-
``
qualified consortia exceeded the technical and financial standards required for this complex and large
project. The evaluation process resulted in two proponents being pre-qualified.

Crosslinx Transit Solutions Crosstown Transit Partners

ACS Infrastructure Canada

ÐÐ Bechtel Development Company, Inc.
ÐÐ

Aecon
ÐÐ Fengate Capital Management Ltd.
ÐÐ

EllisDon
ÐÐ Obayasi Canada Holdings, Ltd.
ÐÐ

SNC-Lavalin
ÐÐ OHL Concesiones S.A.
ÐÐ

Dragrados Canada
ÐÐ STRABAG Inc.
ÐÐ

IBI Group
ÐÐ Bechtel Development Company, Inc.
ÐÐ

ii. Request for Proposals | December 19, 2013

A request for proposals (RFP) was issued to the pre-qualified proponents, setting out the bid process
``
and proposed project agreements for the project.
The proponents spent an entire year to prepare high-quality, competitive submissions.
``

iii. Proposal Submission | January 30, 2015 (technical) and February 19, 2015 (financial)
The RFP period closed on January 30, 2015 for the technical portion of the RFP submission and on
``
February 19, 2015 for the financial portion of the submission. Both proponents submitted bids on time.

Infrastructure Ontario
12 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 V. COMPETITIVE SELECTION PROCESS

February-April 2015: bids were evaluated using criteria as set out in the RFP by an Evaluation
``
Committee comprised of subject matter experts from IO, Metrolinx and technical consultants enlisted
by the Sponsors. The extensive evaluation process resulted in Crosslinx Transit Solutions receiving the
highest score.
In April 2015, the ‘first-ranked proponent’ – also referred to as the First Negotiations Proponent –
``
Crosslinx Transit Solutions, was then notified of their standing.

iv. Preferred Proponent Notification | June 9, 2015

After successful negotiations with the First Negotiations Proponent, Crosslinx Transit Solutions was
``
selected as the preferred proponent. Crosslinx Transit Solutions best demonstrated the ability to meet
the specifications outlined in the RFP, including technical requirements, construction schedule, price
and financial backing, as well as maintenance and rehabilitation plans.

v. Commercial and Financial Close | July 21 – 24, 2015

Upon conclusion of negotiations and once a financing rate was set, a Project Agreement (contract) was
``
executed between Crosslinx Transit Solutions, Metrolinx and IO on July 24, 2015.
The entire Crosslinx team, including identified subcontractors, comprises more than 26 companies:
``

Developers Design and Construction

ACS Infrastructure Canada Inc.
ÐÐ Aecon Infrastructure Management Inc.
ÐÐ

Aecon Concessions, a division of

ÐÐ Dragados Canada Inc. (ACS Group)
ÐÐ
Aecon Construction Group Inc.
EllisDon Civil Ltd.
ÐÐ
EllisDon Capital Inc.
ÐÐ
SNC-Lavalin Constructors (Pacific) Inc.
ÐÐ
SNC-Lavalin Capital Inc.
ÐÐ
SNC-Lavalin Inc.
ÐÐ
Maintenance and Rehabilitation
IBI Group Inc.
ÐÐ
SNC-Lavalin Operations & Maintenance Inc.
ÐÐ
NORR Limited
ÐÐ
ACS Infrastructure Canada Inc.
ÐÐ
Adamson Associates Architects
ÐÐ
EllisDon Facilities Services Inc.
ÐÐ
Urban Strategies Inc.
ÐÐ
Aecon Buildings, a division of
ÐÐ
Aecon Construction Group Inc. Dialog Ontario Inc.
ÐÐ

Bombardier Transportation Canada Inc.

ÐÐ Sereca Fire Consulting Ltd.
ÐÐ

Thurber Engineering Ltd.

ÐÐ
Financial Advisors
Dr G. Sauer & Partners
ÐÐ
National Bank Financial
ÐÐ
Daoust Lestage, Inc.
ÐÐ
Bank of Nova Scotia
ÐÐ

Infrastructure Ontario
13 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 V. COMPETITIVE SELECTION PROCESS

hh Construction and Maintenance Phases

vi. Construction Phase | 2015 – 2021

The construction phase begins in July 2015 upon signing of the contract and will be carried out in
``
accordance with the project agreement and the builder’s schedule as approved by the Sponsors.
During the construction period, the builder’s construction costs will be funded through their own equity,
``
bond and lending arrangements, which will be paid in monthly installments based on the construction
program set out by Crosslinx Transit Solutions.
Project construction will be overseen by Metrolinx with IO providing contract management oversight.
``

vii. Maintenance Phase| 2021 – 2051

Following construction, the Eglinton Crosstown LRT is expected to become operational in September
``
2021. According to the project agreement, Crosslinx Transit Solutions will provide maintenance,
lifecycle, repair and rehabilitation services for a 30-year period.
System maintenance will be overseen by Metrolinx.
``

viii. Payment
Crosslinx Transit Solutions will receive monthly construction period payments (based on an earned
``
value methodology) and a substantial completion payment expected in September 2021.
During the 30-year maintenance and rehabilitation phase, annual service payments (by way of monthly
``
availability payments) will be paid to Crosslinx Transit Solutions. Payments will cover the capital and
service portions, lifecycle payments, volume payments, and gainshare/painshare on energy costs,
minus any performance deductions.

Infrastructure Ontario
14 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
 VI. CONCLUSION

This report provides a project overview and summary of the procurement process for the Eglinton Crosstown
Light Rail Transit project, and demonstrates that a VFM of $2.18 billion or 22 percent will be achieved by using
the AFP approach compared to traditional delivery.

Going forward, IO, Metrolinx and Crosslinx Transit Solutions will continue to work together to ensure the
successful delivery of the Eglinton Crosstown LRT.

Infrastructure Ontario
15 Value for Money Assessment – Eglinton Crosstown Light Rail Transit
Mr. John Traianopoulos 27 August 2015
Vice-President, Transaction Finance
Infrastructure Ontario
777 Bay Street, 9th Floor
Toronto, ON M5G 2C8

Dear Mr. Traianopoulos:

Re: Value for Money Analysis – Eglinton Crosstown LRT Project

Ernst & Young Orenda Corporate Finance (“EYOCF”) has prepared the Value for Money (“VFM”) assessment
for the Eglinton Crosstown LRT Project at the Financial Close (“FC”) stage. The analysis was prepared
following an Infrastructure Ontario (“IO”) VFM analytical framework, which is generally consistent with
approaches used in other jurisdictions.

The VFM assessment is based on a comparison of the total project costs of the Eglinton Crosstown LRT
Project under:

1. The Traditional delivery approach, as reflected in the Public Sector Comparator (“PSC”) model;
and

2. The Alternative Financing and Procurement (“AFP”) model estimation of the total project costs,
as reflected in the Adjusted Successful Bid.

The VFM assessment as noted above was prepared using the following information (collectively the
“Information”) within the VFM model:

i. A Risk Matrix developed for IO by MMM Group and adjusted to reflect project specific risks; and

ii. Construction and other cost estimates as reflected in the Successful Bid. Other VFM model
assumptions as provided by IO.

The cost information and underlying assumptions were not independently audited or verified for accuracy or
completeness.

The results of the VFM assessment demonstrate an estimated VFM cost savings of 22.1% by using the AFP
approach to deliver the Project in comparison to using the traditional delivery approach.

Yours sincerely,

ERNST & YOUNG ORENDA CORPORATE FINANCE INC.

A member firm of Ernst & Young Global Limited

  
 
30  June  2015  
 
Infrastructure  Ontario  
1  Dundas  Street  West,  Suite  2000  
Toronto  ON   M5G  2L5  
 
 
Attention:   Michael  Inch  
    Vice-­‐President,  Strategic  Sourcing  
     
 
Subject:     Fairness  Report  
  Eglinton  Crosstown  Light  Rail  Transit  (ECLRT)  –  RFP  Stage    
 
 
Infrastructure  Ontario  (“IO”)  engaged  SEG  Management  Consultants  Inc.  (“SEG”)  to  provide  Fairness  
Monitoring  Services,  specifically  to  monitor  IO’s  conduct  of  the  procurement  process  for  the  Eglinton  
Crosstown  Light  Rail  Transit  Project  (“Project”)  from  the  RFQ  transition  through  the  conclusion  of  the  
Project  RFP  process.  Our  mandate  was  to  confirm  that  the  Sponsors  met  the  fairness  and  transparency  
requirements  established  in  the  Project  RFP  and  other  related  policies  of  Infrastructure  Ontario  and  the  
Government  of  Ontario.  
 
Our  findings  are  based  on  first-­‐hand  observations  of  the  procurement  process,  starting  with  our  
engagement  in  January  2014  after  the  release  of  the  RFP,  through  to  the  completion  of  the  RFP  
evaluation  process  and  identification  of  the  highest  ranked  RFP  Proponent,  which  subsequently  was  
named  as  the  First  Negotiations  Proponent.  Our  review  also  took  into  account  the  documents,  policies  
and  provincial  directives  applied  during  the  RFP  processes  and  information  issued  to  the  Proponents  or  
provided  to  us  by  the  IO  project  and  procurement  representatives.  
 
In  our  role  as  Fairness  Monitor,  we:  
 
• Reviewed  the  Project  RFP  documents;  
• Attended  and  monitored  all  required  briefing  sessions,  presentations,  and  commercially  
confidential  meetings  with  the  Proponents,  which  included  a  review  of  the  protocols  for  the  
meetings,  the  application  of  the  meeting  protocols  for  all  participants,  and  advice  to  facilitate  
consistency  with  the  fairness  principles  and  the  RFP  documents;  
• Attended  and  monitored  the  conduct  of  commercially  confidential  site  visits;  
• Monitored  written  communications  with  Proponents  as  provided  to  the  fairness  team,  which  
included  RFP  Notices  and  Addenda,  Requests  for  Information  (RFI)  processed  prior  to  RFP  close,  
and  Requests  for  Clarification  (RFC)  processed  post-­‐submission;  
• Reviewed  potential  conflicts  of  interest  from  a  procurement  fairness  perspective  and  provided  
acceptance  of  appropriate  mitigation  measures;  
• Reviewed  the  development  of  the  RFP  Evaluation  Framework,  which  included  a  review  of  the  
structure  of  the  evaluation  teams,  the  approach  and  application  of  the  evaluation  criteria,  and  
scoring  worksheets  to  confirm  consistency  with  the  RFP  documents;  
 Interim  Fairness  Report  
Eglinton  Crosstown  Light  Rail  Transit  (ECLRT)  –  RFP  Stage    
 
• Attended  the  mandatory  Evaluator  Training  Sessions,  which  supported  the  RFP  evaluation  
process,  provided  guidance  to  the  evaluation  process  participants,  and  established  the  standard  
of  conduct  for  all  evaluation  participants;  
• Attended  and  monitored  the  RFP  evaluation  consensus  meetings  (Design  Excellence,  Technical,  
and  Financial)  to  confirm  that  the  evaluation  criteria  were  applied  diligently  and  consistently  to  
the  proponent  submissions;    
• Reviewed  the  official  records  of  the  evaluation  teams;  and  
• Attended  and  monitored  the  presentation  of  recommendations  from  the  various  evaluation  
teams  to  the  Evaluation  Committee  for  their  acceptance  and  approval.  
 
It  is  notable  that  the  ECLRT  RFP  process  was  exceptional  in  several  aspects:  
 
• Technical  complexity  and  financial  value  
• Organization  of  the  Sponsors’  teams,  including  technical  advisors  
• Prior  Metrolinx  procurements  for  the  LRT  vehicles  and  the  tunneling  
• Design  Excellence  requirements  
• White  Papers  process  
• Extensive  background  technical  documentation    
• Potential  COI  for  several  consulting  firms  and  individuals  resulting  from  the  long  project  history  
• Third  party  involvement  of  TTC,  City  Departments,  Utilities  and  local  community  groups  
• Utility  relocation  processes  and  agreements  
• Optional  Lands  procedures  
• Community  Benefits  consultations  
• Affordability  Threshold  Event  protocols  
• Extensive  submission  requirements  and  related  evaluation  processes  
 
The  three  Technical  Evaluation  Teams  and  the  Financial  Evaluation  team  consensus  recommendations  
were  presented  to  the  Evaluation  Committee  on  8  April  2015.  The  recommendations  were  accepted  and  
approved  to  identify  clearly  the  highest  ranked  RFP  Proponent.  Through  our  direct  participation  and  
review  of  the  relevant  documentation,  SEG  confirms  that  the  identified  Proponent  did  satisfy  the  
requirements  of  the  RFP  evaluation  process  and  was  the  highest  scoring  Proponent  in  this  procurement  
process.  

Attestation  
As  the  Fairness  Monitor  for  the  Eglinton  Crosstown  Light  Rail  Transit  Project  (RFP  No.  13-­‐370P),  issued  
by  Infrastructure  Ontario,  through  our  observation  and  review  we  conclude  that  the  principles  of  
openness,  fairness,  consistency  and  transparency  have  been,  in  our  opinion,  properly  established  and  
maintained  throughout  the  RFP  stage  of  the  procurement  process.      
 
As  Fairness  Monitor  for  the  ECLRT  RFP  procurement,  we  conclude  that:  
 
a) The  Project  RFP  process  was  conducted  in  accordance  with  the  provisions  of  the  RFP,  and  met  
the  fairness  and  transparency  requirements  established  in  the  RFP  and  other  related  policies  of  
Infrastructure  Ontario  and  the  Government  of  Ontario;  

  www.SEGConsultants.ca 2
 Interim  Fairness  Report  
Eglinton  Crosstown  Light  Rail  Transit  (ECLRT)  –  RFP  Stage    
 
b) The  Sponsors’  personnel  and  external  advisors  adhered  to  Infrastructure  Ontario’s  conflict  of  
interest  and  confidentiality  requirements;  and    
c) Both  proponents  were  treated  consistently  in  the  evaluation  process  and  in  accordance  with  
the  Project  RFP  and  the  established  principles  of  fairness,  consistency  and  transparency.  
 
Furthermore,  as  of  this  date  we  have  not  been  made  aware  of  any  issues  that  emerged  during  the  
process  that  would  impair  the  fairness  of  this  procurement  initiative.  
 
 
 
SEG  Management  Consultants  Inc.  
 

             
____________________________         ____________________________    
Lead  Fairness  Monitor             SEG  VP,  Procurement  and  Fairness  
Rob  Lowry               Greg  Dadd  
 
 
cc:   Martin  Ayson,  IO  Manager  –  Procurement  
  Kitty  Chan,  IO  Project  Manager  –  Civil  Infrastructure  (ECLRT)  
  Richard  Lundeen,  SEG  President  

  www.SEGConsultants.ca 3
 Infrastructure Ontario
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Toronto Ontario M5G 2L5
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