Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO: Standing Committee on City Services and Budgets
FROM: General Manager of Engineering Services
SUBJECT: Award of Tender for Dedicated Fire Protection System - False Creek Crossing
 

RECOMMENDATION

A. THAT the City of Vancouver exercise its option to reject all tenders submitted in response to Invitation to Tender No. 2000 - 07 and that the tenders submitted by Smit Land & Marine Inc., Canadian Horizontal Drilling Ltd. and P. Baratta Construction Ltd. all be rejected both as of right and as non-compliant tenders effective immediately,

B. THAT the General Manager of Engineering Services be authorized to formally notify Smit Land & Marine Inc., Canadian Horizontal Drilling Ltd. and P. Baratta Construction Ltd. that their respective tenders have been rejected,

C. THAT subject to Recommendation D., the General Manager of Engineering Services be authorized to enter into discussions with Smit Land & Marine Inc., Canadian Horizontal Drilling Ltd. and P. Baratta Construction Ltd. (the "Post-Tender Participants") on the basis that such discussions are not part of any formal or informal tender process and do not create any legal rights or obligations for either the City or the Post-Tender Participants,

D. THAT the General Manager of Engineering Services be authorized to provide each of the Post-Tender Participants with the particulars of how their respective bids were non-compliant and invite each one to submit an informal expression of interest (if they so choose) outlining how that Post-Tender Participant proposes to rectify each such defect,
E. THAT if a Post-Tender Participant accepts the City's invitation and appears willing to discuss entering into a non-tendered contract for the project, that the Director of Legal Services and General Manager of Engineering Services be authorized to negotiate such a contract provided that the contract contains all of the compliant terms and conditions (including all compliant components of price) set out in that Post-Tender Participant's prior bid documentation, except as modified to rectify the defects identified by the City,

F. THAT if such negotiations are successfully concluded with one of the Post-Tender Participants, the General Manager of Engineering Services and Director of Legal Services be authorized to execute and deliver a legal agreement on behalf of the City with such Post-Tender Participant on terms generally consistent with those set out in Recommendation E. and on such other terms and conditions as are satisfactory to the General Manager of Engineering Services and Director of Legal Services , and

G. THAT if such a contract cannot be signed with one of the Post-Tender Participants, the General Manager of Engineering Services and the Director of Legal Services be authorized to re-tender the project.

CITY MANAGER’S COMMENTS:

The rejection of all tenders is the most appropriate action for Council as none of the tenders comply. Therefore, the City Manager supports Recommendation A and B.

This project is critical for expanding the Dedicated Fire Protection System. Also, there are restrictions to the duration and time of year, when work in and around False Creek may occur. Therefore, consideration should be given to expediting this work. If Council agree the most appropriate way to proceed, short of a new tender process, is to negotiated a fixed price agreement with a qualified contractor. These negotiations should not be limited to only those of rejected non-compliant bidders. In addition, the budget for the fixed price contract should be approved by Council. Therefore, the City Manager recommends that Council not approve C, D, E, F, G, but instead approve the following recommendations H and I.

H. That Council waive the requirement for public tending of the Dedicated Fire Protection System - False Creek crossing work and that the G.M. of Engineering Services negotiate with fully qualified contractors to perform the project for a fixed price.

I. That the G.M. of Engineering Services and Director of Legal Services be authorized to finalize a legal agreement on behalf of the City for performance of the works and subject to approval by Council.

COUNCIL POLICY

Council approved the Dedicated Fire Protection System for implementation on April 16, 1992.

PURPOSE

The General Manager of Engineering Services and the Director of Legal Services seek Council’s resolution to cancel the False Creek crossing tender, on the basis that none of the bids received are compliant and that in all of the circumstances, the City should exercise its legal right to reject all bids.

BACKGROUND LEADING UP TO TENDER

The False Creek pipeline crossing segment of the Dedicated Fire Protection System (DFPS) is scheduled for installation this winter.

The False Creek crossing needs to be constructed using horizontal directional drilling (HDD) technology which enables a hole to be drilled under the bed of False Creek and then lined with a special metal pipe. Accordingly, a specialized drilling machine with experienced personnel is required. Moreover, the combination of bore-hole size, pipeline length, and seabed composition make this particular HDD project technically challenging.

Under advice from engineering consultants Golder Associates Ltd., the City invited twelve contractors to submit expressions of interest to pre-qualify for the tendering process. Six of the contractors that expressed interest were found to have the requisite HDD equipment and personnel for this project.

INVITATION TO TENDER AND BID RESULTS

The City issued an Invitation to Tender to the six pre-qualified contractors with a closingdate of July 14,2000. As of the closing date, the City had received two bids from pre-qualified contractors and one bid from a contractor which had not been pre-qualified:

PRE-QUALIFIED CONTRACTORS

Name of Company

Bid Amount
Smit Land & Marine Inc. ("SLM")

$2,107,431.00
Canadian Horizontal Drilling Ltd. ("CHD")

$3,241,458.00

NON PRE-QUALIFIED CONTRACTOR

Name of Company

Bid Amount
P. Baratta Construction Ltd. ("P. Baratta")

$1,466,364.60

The Engineering estimate for this project was $2,400,000.

Initially, staff were inclined to return P. Baratta's bid unopened since they had not been pre-qualified. However, shortly after the closing, P. Baratta telephoned City staff to indicate that its HDD subcontractor had been pre-qualified by the City. Accordingly, the decision was made to open the bid from P. Baratta. Upon opening the bid, it was discovered that P. Baratta did not name a pre-qualified subcontractor. Rather, it named Directional Mining & Drilling Ltd. ("DMD") as its HDD subcontractor.

Although DMD is a local Canadian company with the appropriate HDD equipment, it did not at the time of Golder's review have sufficiently experienced personnel. Furthermore, DMD had not at that time completed any projects in material having the density (rock) of the False Creek seabed.

Nonetheless, City staff were now aware of a bid (albeit non pre-qualified and unsolicited) in an amount of approximately $641,000 less than the next highest bid. Accordingly, City staff enquired of DMD as to the current level of their experience and consulted on the matter with Golder.

In response, DMD submitted current resumes of their personnel. Though DMD has not completed any rock projects requiring the reaming procedures necessary for the False Creek crossing, some of their personnel have. Golder then evaluated the resumes and advised City staff that DMD now has personnel sufficiently experienced to complete the False Creek crossing, although the level of experience is below that of the two pre-qualified bidders.

EVALUATION OF BIDS

P. BARATTA (DMD):
Based on the information supplied by DMD and the evaluation conducted by Golder, City staff have concluded that the bid from P. Baratta would provide the best value to the City. However, this would only be the case if the City and P. Baratta were able to agree to certain amendments to the contract documentation which specifically addressed the deficiencies in P. Baratta's bid. The primary deficiencies are as follows: The contract documentation does not expressly obligate P.Baratta's subcontractor DMD to use the personnel whose resumes were submitted to the City after bid closing. Also, P. Baratta's bid documentation does not set out a project schedule in the manner required by the Invitation to Tender. These and other less significant deficiencies would need to be rectified in order for City staff to conclude that P. Baratta's bid provided overall best value to the City.

SMIT LAND AND MARINE INC.

The SLM bid is non-compliant for a number of reasons. SLM failed to provide hourly rates for labour and equipment in the force account section of the document. Instead SLM chose to provide a "global" hourly rate for a rig with personnel along with a cost plus 15% (in other words unspecified) rate for all other subcontracted work. Additionally, SLM reserved the right in its bid to assign all or any part of the contract to "other fully-owned Smit companies".

If these and other less significant deficiencies could be rectified (and the City was not able to conclude a legal agreement with P. Baratta), then City staff is of the opinion that SLM's bid would provide overall best value to the City.

CANADIAN HORIZONTAL DIRECTIONAL DRILLING LTD.

CHD'S bid contained substantial qualifications to the fixed price component of the Invitation to Tender. These qualifications have the effect of converting their bid from a fixed price bid where the contractor absorbs certain risks to a variable price where certain risks are shifted to the City. On this basis alone, the CHD bid is substantially non-compliant.

Even if CHD could rectify this aspect of non-compliance, the amount of their bid is substantially over the City's budget for this work and would not, in City staff's opinion provide optimal value, even if the City was unable to conclude a legal agreement with either P. Baratta or SLM.
DISCUSSION

Since all three bids are non-compliant, the City is unable to award the tender and all bids must be rejected. Typically, in such circumstances, the City would simply re-tender and ask for new bids from the same and/or other contractors. However, in this situation, there are many factors making a re-tender less than optimal:

The City has a narrow window of time in which to conduct the work (November through April). Accordingly, re-tendering could result in a delay of one year. Re-tendering would necessitate an up-dated pre-qualification process and likely open up the re-tendering to a new set of bidders. This could be a concern for the current bidders who presumably have committed their equipment and personnel to this project and could be at a competitive disadvantage in a subsequent re-tendering. Re-tendering also introduces the risk that contractor availability and market prices change for better or worse. At least with the current bidders, their availability and prices are known.

Accordingly, staff are recommending that rather than proceeding straight to re-tendering, that each of the three current bidders at least be given the opportunity to submit an informal "expression of interest" confirming their interest in voluntarily contracting with the City (ie. outside of a tender process) and outlining how that bidder would propose to correct the identified defects in their bid, but without modifying the compliant components. By proceeding in this fashion, the City would be seen as making the best of an unfortunate situation. While none of the bids are compliant, at least each bidder is given an opportunity to correct the defects without re-negotiating price (or any other compliant aspect of their original bid). Thus, the City cannot be viewed as "bid-shopping" or treating the bidders in a discriminatory fashion.

Realistically, it is unlikely that CHD will respond to such an invitation. However, it is likely that P. Baratta and SLM will be responsive to such an approach. Finally, such an approach will not impact on the timing of re-tendering should that eventually prove to be necessary.

CONCLUSION

The City should reject the existing bids and offer existing bidders the opportunity to correct the defects in their bids and attempt to contract with the City outside of the tender process should they wish to do so. By doing so, the existing bidders are treated as fairly as possible in the circumstances and the City maximizes the possibility of completing its False Creek crossing project on schedule and within budget.

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