City of Toronto Piloting New Acceleration/Delay Cost Contracts

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Published on: 08/07/2015

On June 17, the City of Toronto (CoT) Public Works Committee approved recommendations made by City Staff to pilot new procurement models for construction projects occupying the right-of-way on certain city streets. The intent of these recommended models are to accelerate the completion of construction by adding a financial incentive for early completion and an additional penalty for late delivery.

Two models have been approved for pilot study on an unspecified number of projects to be initially tendered in Fall 2015. The cost premium for these projects will be funded through the existing approved capital budget for 2015, which may result in the deferral of other planned capital projects to 2016 as a result.

According to the City Staff Report (attached to this Bulletin for reference), a number of other jurisdictions have used acceleration and delay cost payment strategies to manage projects that are highly time-sensitive. The report outlines the two specific approaches to be piloted by the CoT:

1. Acceleration/delay cost payment terms and conditions in the contract; and/or,

2. Incorporating the potential acceleration into the procurement process (cost-plus-time bidding).

Acceleration/Delay Cost Payment terms and Conditions in the Contract

For this approach, a specific dollar amount is established by City staff and noted in the tender documents (likely to be calculated using Road User Costs, as per pages 4-5 of the attached report) to reward or penalize a contractor for each day the project is delivered early or late from a City established completion date. A cap on the incentive/penalty is being considered at 5% of the total contract value.

Cost-Plus-Time Bidding

Under this model, the contract completion date is not stipulated in the bid document, but rather a flat-rate dollar value determined by the City is included for each working day (Daily Rate). Contract award would then be determined by the dollar value provided by a contractor for all of the contract items (A) and the number of days estimated to complete the work (B) .

To determine low-bidder in this scenario, the City’s Chief Purchasing Officer would review all bids and simply multiply the Daily Rate (DR) by the number of working days proposed in a bid and then add the dollar value proposed by the contractor for all of the other contract items.

A + (B x DR) = total bid value.

This approach would include liquidated damage provisions related to the total number of days proposed by a contractor in their bid and may also contain acceleration/delay cost provisions related to milestone dates related to the release of a lane occupancy by a contractor.

It is the belief of City staff that this incentive/penalty system will attract “…the calibre of bidders who have the capacity to generate better schedule-considered bids and are able to manage and execute projects per plan and schedule targets while deterring contractors who are less certain on their ability to deliver projects on time.â€Â￾

Although the implication on contract pricing is not precisely known, the Report indicates that cost premiums are likely to vary between 20% and 40% higher than a traditionally tendered project, as a number of special provisions will also be afforded to the contractor in order to complete the work on time (e.g. extended operating hours, weekend work, premium labour and material costs, including requirement for shift premiums and off-hours use of asphalt plants or material storage sites, etc).

If you have any questions about the City of Toronto’s piloting of these new procurement approaches, please contact Patrick McManus (905-629-7766 ext. 222 or patrick.mcmanus@oswca.org).


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