Ottawa council approves $4.7B LRT extension despite calls for delay, more transparency

Gladstone
A rendering of Gladstone Station in LRT's second phase.
Editor's Note

The reference in this story to total budget spending was corrected to $3.6 billion.

Ottawa city council has approved two multibillion-dollar bids to develop the second phase of its light-rail transit network following a vigorous debate on the tight timeline to go ahead with the massive project.

City councillors voted 19-3 on Wednesday in favour of signing the contracts to build the second stage of Ottawa’s LRT, a $4.66-billion project that will see a consortium led by Nebraska-based Kiewit and France’s Vinci extend the forthcoming Confederation Line further east and west as well as SNC-Lavalin subsidiary TransitNEXT extend the existing Trillium Line to Riverside South.

Councillors Diane Deans, Shawn Menard and Rick Chiarelli voted against the motion.

City staff will now draft the final contract document, with the north-south line deal expected to close before the end of March and the east-west line agreement a few weeks later.

Transparency concerns

Concerns from councillors surrounding Montreal-based SNC-Lavalin’s long-term viability in the face of ongoing scandals were met by Chris Swail, the city’s director of O-Train planning, who explained that the agreement is structured to protect the city from any proponents’ potential insolvency.

Swail said SNC-Lavalin’s financial resources for the LRT build are already set. In addition, the company will invest the first $160-million worth of work upfront in the project, which will be paid back by the city only after substantial completion of the project, with 15 per cent of that payback coming during maintenance periods.

Swail also confirmed that if the controversial contractor is found guilty of the fraud and corruption charges it’s currently facing in relation to its work in Libya, the resultant 10-year ban on federal contract bids will not affect the federal government’s funding contributions to LRT.

“Financially, there is very little risk to the city,” he said.

Gloucester-South Nepean Coun. Carol Anne Meehan cited various public-private partnerships that also saw SNC-Lavalin as the lowest and ultimately successful bidder, with various problems arising thereafter.

In the case of a Montreal superhospital, former SNC executives were charged with bribing hospital officials in connection with the $1.3-billion project, while Quebec prosecutors have recently laid out additional possible bribery charges associated with a deal to refurbish the Jacques Cartier Bridge in the same city.

Swail said his team was advised of these and other associated risks but said the city ultimately decided SNC-Lavalin was still the best option to execute on this portion of the project. SNC-Lavalin is also a member of the Rideau Transit Group consortium currently building the first phase of Ottawa’s LRT.

Gloucester-Southgate Coun. Diane Deans attempted to ask city staff about whether the preferred proponents met the technical standards set by the city, a threshold set at scoring 70 per cent on the city’s laundry list of requirements. Swail and the city’s legal team declined to answer numerous variations of the question, citing confidentiality for both successful and unsuccessful bidders, frustrating Deans and other councillors.

On the other side of the debate, councillors such as Barrhaven’s Jan Harder pushed their fellow members of council to say “yes” on LRT today, lest plans for a citywide train system reaching outlying wards never come to fruition.

Councillors ask for more time

Substantial debate during Wednesday’s meeting concerned a motion from Somerset Coun. Catherine McKenney, who proposed delaying council’s vote on the contract until March 27. Many councillors expressed frustration that they had only seen details on the bids to build the second phase of LRT – now more than $1 billion more expensive and scheduled to be completed two years later than originally expected – when the preferred proponents were revealed at a Feb. 22 meeting.

“It’s very important we consider the motion in its entirety,” she said in her opening statements, asserting that 12 days was not long enough to properly consult with constituents on the largest procurement deal the city has ever considered.

A handful of other councillors backed her motion, turning the tight approval timeline into a question of democracy.

"These are major, major decisions for a municipality this size. And we’re all deciding in here that 12 days is long enough to make this type of decision? It’s not."

“These are major, major decisions for a municipality this size. And we’re all deciding in here that 12 days is long enough to make this type of decision? It’s not,” said Capital Coun. Shawn Menard.

“We need to defer this to the 27th to have a much better sense of what we’re getting ourselves into here and the risks we’re about to take on.”

Coun. Chiarelli spoke in favour of the delay to ensure an adequate level of oversight even if the final product is delayed or more expensive. He cited a decade-old city auditor general’s report from the original Trillium Line O-Train plan, which cautioned councillors at the time not to get stuck in a do-or-die situation like this one.

Kitchissippi Coun. Jeff Leiper said that while he believed the proposed second stage of LRT would benefit his ward, he wanted more time to ensure he had “buy-in” from his constituents.

Consequences of delay

McKenney’s motion faced pushback from Mayor Jim Watson, numerous councillors, Swail and Geoffrey Gilbert, a Norton Rose Fulbright lawyer retained by the city.

Gilbert told council that delaying the vote by even a few weeks would make securing the March 29 commercial close date for the Trillium Line contract “impossible.”

“The entire project, as described in this report, will be in jeopardy,” Gilbert said, adding a potential delay would throw the city into “chaos” – a word choice McKenney later criticized for being inflammatory.

Swail said that failing to move forward with the deal in front of council Wednesday would result in up to two years of delay and millions of dollars more in costs when and if stage two eventually moves forward.

If the city misses the March 29 deadline for the Trillium Line contract, it would bypass a “bid validity date.” As a result, the proponents would revise their bids based on new schedules and costs – as well as on the now-public information on the bids which had been submitted under a confidential competitive process.

Losing the leverage of a private procurement process in price and schedule negotiations would be like bringing “a rubber knife to a gunfight,” Gilbert said.

The tight timeline on the stage two contracts also involve a series of agreements that need to be in place before the commercial close of either of the two LRT contracts.

One of the major hurdles is securing transfer agreements for a cumulative $2.3 billion in funding from the federal and provincial governments. After leading a delegation to Queen’s Park last month, Watson told councillors that he had received verbal confirmation that the Ontario government will honour a commitment to pay for its portion of the project.

In addition to reducing the time needed to strike loan agreements with various underwriters, delaying the contract approval would affect operations for the preferred proponents. Swail said that as part of its negotiations with the proponents, the city had allowed for some early work such as tree-clearing and planning to take place after council had approved the contract but before the commercial close. Without that allowance in place, he said, prices would again surely rise with further potential delays.

“This is the time to be visionary, to be bold, and to move forward with this project.”

After more than an hour of debate, Watson concluded by labelling McKenney’s proposed delay a “faux motion,” claiming it was more for show than a sincere attempt to postpone voting on the massive project. The motion to delay lost by a vote of 16-6.

The mayor wrapped up Wednesday’s council meeting by arguing that he and most other councillors around the table had campaigned on extending LRT in the 2018 municipal election, and that further public consultation would put the city back in the same position it’s in today – only on a much later schedule with a likely higher price tag. Watson concluded that he had faith in city staff’s work in the procurement process to date.

“This is the time to be visionary, to be bold, and to move forward with this project,” he said.

Following the lengthy LRT debate, city council took about an hour to unanimously approve Ottawa's $3.6-billion operating budget for 2019, which includes a property tax hike of three per cent.