Name of the Project: Highway 407 improvement

Executive summary

In 2013, following 3 years of program definition, research and planning, the province of Ontario’s ministry of transportation and infrastructure launched the project to improve the existing highway 407. This highway is the busiest route and convenient to access different parts of Toronto. The proposal of highway 407 was launched in 1959 and opened to the public in June 7 1997. 407 its one of the busiest highway, the total trips in 2010 was 114.691 Million. 407 ETR is the world’s first all-electronic toll road of its kind, and from the day it was opened up to the present day it continues to fulfill its mission of relieving traffic on local highways and roads.

The goal of the project “Highway 407 improvement” includes reducing congestion and travel time; improve safety; expanding networks and transportation choice for high occupancy vehicles. Given the cost of the project and other provincial priorities, a key objective was to be self-financing, paid for through ERT system. The present value cost is estimated more than $5 billion, which is calculated over the period of 35 years.

Key features of the project include extending the high occupancy vehicles lanes and commercial vehicle priority access. The project will also provide the reintroduction of the public transit to a corridor that has been too crowded to support reliable service for the past few years.

The request of proposal was submitted on June 6, 2013 and according to our estimate it will take 250 days to get approved, so by May 30, 2014 RFP will be approved. The following day we will start selection of preferred contractors and by our estimate it will take another 58 days to complete that procedure and we will finish this task on August 19, 2014. After that on the following day we start to negotiation and prepare the contract with contractor and by our forecast it will take 116 days. So, by January 28, 2015 we should be able to finalize the contract. On the following day we will select and agree the design which according to our forecast will take 13 days. So, by February 16, 2015 all the paper work we will done and our contractor Toronto development group’s design-builder will be to start the project the very next day.

The construction will start on February 17, 2015 and from our forecast it should finish by December 3, 2019 in total of 1251 days.

Purpose of this Project

In our project research, the purpose of this report is to demonstrate the need for the highway 407 improvements. It will be including the rationale, objectives and the processes required to complete the project. Our project explains how different procurement delivery models were examined and how project benefits and innovations are expected to be achieved in current market conditions. A summary of the key aspects of the final agreement is also provided. All of the agencies that are involved in this project are publicly responsible for regular budgeting, auditing and reporting processes. In all of its procurement processes, the Province is committed to a high standard of protecting all documents.

Selection Process

In this project, there was a two stage competitive selection process, attaining of a Request for Qualifications stage (RFQ) and a Request for Proposals (RFP) stage was used to choose a preferred contractor. Therefore, we approached 6 teams for RFQ, out of 6 teams only 3 responded and those teams were invited to participate in RFP. All this teams selected had local, national, and international experience in design, construction, operation, and maintenance, and financing of major transportation projects.

After the evaluation process, we based it on a design, build, finance, and operating procedure. As a result, we contacted Toronto development group as the preferred company to complete this project. A fair reviewer was then engaged to monitor the competitive selection process and came into conclusions that it was conducted impartially and fairly.

Due to the challenges, unexpected economic conditions, financial market stability during the final negotiations, the province and connect Toronto development group were unable to reach a mutual satisfactory agreement and negotiations were concluded. In relation with provisions regarding the RFP, the province then exercised its option to enter into a fixed-price, design-build agreement with Toronto development group’s design-builder for the design and construction of the improved highway 407. The
Province was able to integrate many of the advantages that had been recognized through designing, building, financing and operating procurement process. Design-Build Agreement

GTA drivers know they can expect a safe, fast and reliable commute when they choose Highway 407. 407 ETR has budgeted over $70 million in construction projects to keep the highway congestion free. * Under the design-build agreement, our project consist the following elements to improve the highway 407
Adding lanes between Highway 404 and Markham Road * Constructing extra lanes for high occupancy vehicles and commercial vehicle
Ramp improvements at QEW, including the QEW/Fairview Street interchange. * Widening the bridges between Highway 403 and 401 will allow the company to build additional lanes in each direction next year. This will increase traffic capacity by 50% in 2016 on this busy section of the highway.

1. Project Background, Rationale and Objectives

The Problem: Current Congestion
Significant population and economic growth joint with altering regional travel patterns and increasing trade have placed considerable strain on Toronto’s transportation system. Congestion on regional roads and highways is increasing with growing impacts to residents, communities, the environment and the economy.
Over the next 25 years, Greater Toronto’s population is expected to continue over the coming decades with the GTA becoming home to nearly 9.4 million people by 2041.

Without action, congestion would get worse, quality of life would suffer and economic opportunities would be inevitable. Investment in transportation is required to improve the region’s livability and its competitiveness as a trading center and a place to do business. Isolated employment growth, changing social trends and increasing trade have caused Metro Toronto’s growth to change differently than expected by prior regional planning documents such as the Livable Region Strategic Plan. As a result, the region’s transportation network has been showing increasing strain from significant changes in travel patterns, rising traffic volumes and congestion on major roads and bridges.

The GTA’s population is growing by one million people each decade, and in the next 30 years is expected to house one million more jobs, mostly in buildings that have not yet been built. But there is no coherent strategy for where and how new office space will be located, and already there is about 100 million square feet of office space that’s not connected to the region’s network of higher order transit, snarled highways and overcrowded trains are becoming more common.

In 1965 the area had about 22 million square feet of office space; today it has more than 200 million. Jobs and residents go hand-in-hand. As of September there were more than 150 condo towers under construction in the city, more than in the five largest U.S. cities combined.

This loss of mobility compromises the region’s ability to take advantage of significant economic development opportunities, negatively impacts the region’s competitiveness and reduces safety. Regional and inter-regional traffic would continue to spill onto local streets, adding to congested conditions already resulting in collision rates at least double that of free-flowing conditions, and congestion-related idling that contributes significantly to the region’s greenhouse gas emissions.

Responding to the Problem
Coordinated transportation infrastructure and service improvements are necessary throughout the region to address current and future transportation needs and to realize potential economic development opportunities from increasing trade.
In 2013, following three years of program definition, research and planning, the Ministry of Transportation and Infrastructure launched a project which was a very important component of Toronto’s Strategy to reduce congestion.
Other highways for example, Highway 400 or 427 are facing significant commuter and goods movement problems. Therefore, citizens tend to use Highway 407 more than ever to travel between routes.

In response to this problem, as a group we came into conclusions that an improvement on Highway 407 is a necessity to reduce traffic and commute times.

Objectives: Highway 407 Corridor Pre-Design Concept
Studies were conducted using widely recognized tools and planning models along with the goals and analytical parameters established for the project to develop a pre-design concept for the Highway 407 corridor. This concept represented a conceptual point of reference for the physical scope of the Project. Various components of the Highway 407 corridor were studied, with each study indicating the need to provide significant improvements to accommodate forecasted traffic levels. These studies also strongly recommended addressing safety issues along the highway which included not enough combine lengths, wide off-ramp lines that back up onto the highway and undesirable lane changing at on- and off-ramps.

Project Goals
As a result of these studies, the following goals were established for the Highway 407 Improvement Project: * Reduce travel times for trips along the corridor and increase travel time predictability; * Reduce congestion at entry and exit points to Highway 407; * Reduce travel times for trips across the corridor and improve connections within and between communities; * Improve access to and exit from the corridor for goods movement; * Facilitate the introduction of transit service along the corridor and the improvement of transit service across the corridor

The pre-design concept for the Highway 407 Improvement Project included the following features:
• Added capacity to the Highway 407 corridor;
• Extending the westbound and eastbound lanes on Highway 407;
• Transit priority measures, including the introduction of bus service through transits and extended lanes

2. Project Benefits
User Benefits
Improving capacity and transit will provide significant road and bridge user benefits, primarily through:
• Travel time savings (avoiding delays);
• Reducing vehicle operating costs; and
• Improving safety.

Safety Benefits
The Project will also provide significant safety improvements along this major transportation corridor, including:
• Reducing congestion on Highway 407, particularly during peak periods, through widening the highway; extending lanes; providing transit and commercial vehicle priority access measures
• Providing safer, more efficient highway on- and off-ramps, improving connections and improving cross-highway movement; and
• Improving access for all modes of transportation, including public transit and commercial vehicles

Economic Benefits
The Project will also provide long-term economic benefits by:
• Improving the competitiveness of Canadian businesses moving goods to market through and within the region;
• Reducing transportation costs of goods and services for consumers; and
• Increasing the productivity of workers by reducing the travel times of service providers in the region and the number and extent of delays.
Additional Benefits
Additional benefits of the Project relate to anticipated long-term socio-community improvements, including: * Improving intra-municipal access by reducing highway queuing that currently spills onto municipal streets; * Providing improved cross-highway connectivity within municipalities that span both sides of Highway 407 * Maintaining local streets for local use by improving the efficiency of regional corridors; and improving air quality by reducing congestion-related idling vehicle emissions and providing reliable alternatives to the single occupant vehicle.
In addition, the design and construction partner, in response to the competitive selection process, proposed a number of value-added improvements beyond the Ministry of Transportation and Infrastructure’s requirements. These improvements will result in better safety, improved traffic flow and reduced operations and maintenance costs over time.

3. Project Delivery Options
The Ontario Ministry of Finance has mandated through its Capital Asset Management Framework (CAMF) that the following principles guide all public sector capital procurement:
• Fairness, openness and transparency;
• Allocation and management of risk;
• Value for money and protecting the public interest; and
• Competition
Project Procurement Objectives
In support of the Province’s Capital Asset Management Framework, procurement was carefully considered through the development of procurement objectives based on the Project goals. These procurement objectives were then used to help in identifying and assessing a range of procurement options for delivering the Project. The procurement objectives included:
• Achieving value for taxpayers’ dollars;
• Meeting the Province’s financial goals and constraints;
• Developing an attractive and marketable transaction;
• Achieving a fair and transparent procurement process;
• Ensuring public and stakeholder input throughout the delivery of the program;
• Achieving timely delivery and efficient Project sequencing;
• Ensuring effective asset performance throughout the Project term;
• Minimizing traffic impacts during construction; and
• Fulfilling all environmental obligations.

Design Bid Build (DBB)
This is a traditional project delivery model where the Province develops a detailed design for the construction requirements of the project. Once the design and specifications are complete, a tender call is issued. Toronto development group’s design-builder will take all the responsibility for performing the construction base work and design the project. Under DBB the Toronto development group’s design-builder will receive payment based on monthly completion. After the completion of project Toronto development group’s design-builder will hand the project to the province of Ontario.
In this model, separate parties are responsible for design, construction and maintenance at different times in the project’s life cycle and therefore opportunities for innovation in these areas are potentially not optimized
Design Build (DB)
In this project delivery model the Province enters into a DB agreement with a lead contractor who has the responsibility of both preparing the detailed design of the project and undertaking the construction. Combining the design and build aspects of construction focuses responsibility for the construction risks on a single entity. The lead contractor is paid based on certain construction milestones being achieved. However, the Province retains the responsibility and risk associated with the performance of the asset during the operations phase. The management of the interface between major project elements is the responsibility of the Province. When the DB agreement is complete, the asset is handed over to the Province who would then contract with an operations and maintenance contractor to perform those functions for the project

Design Build Finance Operate (DBFO)
In a DBFO agreement, the private partner accepts responsibility for arranging design, project financing and for carrying the costs of construction, operations and maintenance during the term of the agreement. The contractor typically receives compensation through a performance-based payment mechanism which may involve payments for road availability, safety, congestion management and other independent measures. The payment mechanism allows the application of penalties for non-performance during both the construction and operations phases. The penalties vary in severity depending on the type of non-performance.
In the case of the Highway 407 Improvement Project, the risk associated with the revenue stream from the collection of a toll led to the consideration of a variation of the DBFO arrangement. Like other DBFO arrangements, the private partner would be required to design, build, finance, operate, maintain and rehabilitate the corridor over the life of the agreement. However, once the Project had been substantially completed, instead of receiving compensation through a performance-based payment mechanism, the private partner would receive compensation through levying government regulated tolls on road users and would therefore assume the risk associated with this revenue stream. Thus, the private partner would bear the full cost of the Project regardless of whether or not the forecasted traffic volumes materialized. This approach would still include the ability to impose penalties for non-performance.

4. Competitive Selection Process

Once the preferred procurement model is determined, a competitive selection process for the Project will be designed that would be transparent, fair, encourage competition, and allow the selection of an industry partner that would best support the Province’s objectives and achieve value for taxpayers.

The RFP encouraged the proponents to innovate and provide their own design solutions as long as the performance standards set for the Project could be met or exceeded.

The RFP was based on an interactive approach that included extensive technical and commercial in-confidence workshops and topic meetings. These sessions were intended to address and work through any issues that will be faced during the course of this project.
Evaluation of the RFP will be undertaken by an evaluation team which will include leading experts in key areas of: -
• Highway safety;
• Construction traffic management;
• Highway design and construction;
• Finance;
• Environmental management; and
• Engineering.

Below table shows the completion of competitive selection process

Task Stage | Time taken | Outcome | Request for qualification | May 23, 2013 to June 15, 2013 | The project was marketed locally, provincially and nationally. Submissions from six respondents were evaluated and a shortlist of three teams was announced June 15, 2013 | Request for proposalSelection of preferred contractor | June 17, 2013 to May 30, 2014May 31, 2014 to August 19, 2014 | The three shortlisted teams submit proposals. And their proposal will be reviewed. After reviewing contact connect Toronto development group and let them know the team which is selected to do the project. | Agreement in principle | August 20, 2014 to January 28, 2015 | The parties agree to work to finalize terms of the agreement. | Design-build agreement | January 29, 2015 to February 16, 2015 | The Province make contract with the team which is going to design and build the Project. |

5. Final Design Build Agreement
Innovations/Benefits Gained from the DBFO Process
Significant innovative approaches to the final DB agreement and associated benefits were achieved as a result of undertaking a DBFO competitive selection process. These include:
• Competition and innovation: The competitive nature of the bidding process encouraged the proponent teams to develop innovative solutions in all aspects of the Project from design, construction and through to operations.
• Schedule and cost certainty: The risks of cost and schedule overruns are transferred to the DB contractor, thereby providing a financial incentive to complete the Project on time and on budget.
• Integration: One of the benefits of the DBFO delivery model is the integration of design, construction, long-term maintenance and rehabilitation of the Project into one agreement, with a single point of accountability and responsibility for those functions transferred to the private partner.
Risk Allocation Summary
Throughout the competitive selection process, the Province allocated risks according to which party would be best able to effectively manage those risks. For example, the DB partner is responsible for risks associated with design and construction, utilities, traffic management, environmental management and quality assurance. The Province is responsible for risks related to property acquisition and some off-corridor environmental work. There are also risks that are shared between the two parties, including events such as earthquakes and floods.
Due to increased economic and financial market instability after procurement commenced, the Province made the decision to cease negotiations and proceed with the DB agreement. As a result of proceeding with a DB agreement rather than a DBFO, some risks that were originally transferred to the private partner were retained by the Province. The Province also retained responsibility for operations, maintenance and rehabilitation for the Project.
However, the risk transfer associated with the DB agreement for the Project is an enhancement to the historic approach to DB agreements because it transfers risks in a manner consistent with typical DBFO agreements. For example, the majority of the construction schedule and construction cost risk remained the responsibility of the DB partner.
The DB agreement has been structured to pay the DB partner through construction milestones based on progress of the work, and the Province has capped its annual expenditure exposure by having maximum annual payment amounts.
7. Ongoing Design Build Agreement Monitoring
Under the DB agreement, this project is required to register for, and maintain the standards of, the ISO9001:2000 program, a program that focuses on maintaining established quality management standards. The DB agreement also includes checks and public interest safeguards to ensure project delivery, performance and high quality standards. Close monitoring spans the design and construction phases of the Project and includes, but is not limited to, the elements described below.
Self-Monitoring

Monthly quality management reports are required to undertake internal and external audits, and host bi-annual quality management committee meetings throughout the term of the agreement.
The following will be provided with open access:
• Bi-annual Quality Management Committee Meetings,
• Regular Quality Task Force Meetings,
• Work plans, and
• Project Quality Manager’s Monthly Quality Report.
Monitoring by Toronto development group’s design-builder Corp
During the construction phase the elements of this function will include:
• Process monitoring and quality surveillance;
• Independent structural engineering review of the improved lanes, design and construction;
• Independent structural engineering review of the on-shore structures; and
• Review of the monthly progress reports

Final Project Structure

While maintaining government oversight, the Transportation Investment Corporation (TI Corp) will manage all components of project delivery, including design, construction, financing and operations. TI Corp will act as the authority for the Project. The final DB agreement is a contractual arrangement. TI Corp is also responsible for the provision and consideration of additional improvements throughout the Project’s corridor to be completed when warranted by traffic volumes

The organization chart below depicts the overall project structure

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