Meeting Date: April 18, 2007

Subject: Procurement Authorization Amendment - Option To Purchase Fifty 40-Foot Low Floor Diesel- Electric Hybrid Orion Vii Buses

Recommendation

It is recommended that the Commission authorize staff to extend the current contract with DaimlerChrysler Commercial Buses North America Ltd. (DCC), formerly known as Orion Bus Industries Limited, for the purchase of fifty 40-foot low floor diesel-electric hybrid Orion VII buses for delivery in mid 2008, in the amount of $38,488,362.36 including all taxes, with the option to be exercised no later than May 15, 2007. The pricing includes the provision of bike racks, stop announcement system wiring[d1] and seat configuration changes.

Funding

Sufficient funds for the purchase of 50 40-foot low floor diesel-electric hybrid buses in 2008 were included in the Capital Project 4.11 – Purchase of Buses under the project Future Purchase of Replacement 40 ft LF Diesel/Electric Hybrid Buses or Equivalent, for 2008, as set out on Pages 1007 to 1009 in the category of State of Good Repair/Safety in the TTC 2007-2011 Capital Program, approved by the City of Toronto Council on March 7, 2007.

Project financing approval was granted by the City for these bus purchases, as outlined under the Commission’s bus fleet plan included in the 2007-2011 Capital Program.

Background

In early 2005, a contract for the supply of 330 buses, made up of 150 diesel-electric hybrid and 180 clean diesel buses, was awarded to DCC.  In addition to the base order of 330 buses, the contract also included an option of procuring up to 220 more low floor hybrid buses for delivery in 2007. At its meeting of July 19, 2006, the Commission authorized the procurement of the additional 220 hybrid buses from DCC as well as authorizing staff to immediately proceed with negotiations for the option of purchasing an additional 140 buses to ensure delivery in 2008. At its meeting of August 30, 2006, the Commission authorized the procurement of the additional 140 hybrid buses from DCC for delivery in early 2008. These procurements (360 hybrids) were approved by City of Toronto Council on September 25, 26, 27, and 28, 2006.

Also, as a result of the negotiations, DCC offered to maintain the preferred pricing terms as established for the aforementioned option orders of 360 hybrid buses, for an additional option order of 50 hybrid buses for delivery by mid-2008. This option must be exercised no later than May 15, 2007, in order to maintain the favourable pricing terms and allow a continuous production flow for all 190 buses scheduled for delivery in 2008.

Contract details are as follows:

Contract C32PY04839

Original Contact Amount / $208,086,892.35
Previously Approved Amendments / 278,889,881.04
Amount of this Amendment / 38,488,362.36

Revised Contract Amount / $525,465,135.75 

Discussion

In addition to the purchase of 320 buses for delivery in 2007 (comprised of 100 Ridership Growth buses and 220 replacement buses), and the 140 buses for delivery in 2008, there is a need for buses to support warranty activities for the new bus fleet and for streetcar replacement during the track rehabilitation program.  This requirement is discussed in the Bus Fleet Plan in the TTC 2007-2011 Capital Program.

As noted earlier, the procurement of these 50 low floor diesel-electric hybrid buses being recommended at this time will result in the continuation of the preferred pricing terms as established for the previous option orders of 360 buses.  Those previous terms involved a 1% increase over the original 2005/2006 base order and includes any additional costs associated with the more stringent engine exhaust regulations in effect as of 2007. In addition, similar to the previous agreement, DCC are offering to share with the TTC 50% of the savings resulting from each $0.01 change in the Canadian/US exchange rate above $0.85 CDN with the rates to be determined at time of delivery, with no cost exposure to the TTC if rates should fall below $0.85 CDN. This option must be exercised no later than May 15, 2007, in order to maintain the continuation of the offered pricing terms.

This recommended procurement also includes additional costs for the provision of features such as bike racks, seat padding and a revised rear deck seating configuration, as added to the earlier order of 360 buses through recent contract amendments. This order will also include additional costs for the provision of wiring for the Stop Announcement features to be installed by TTC after delivery.

Increasing the number of Orion VII’s in TTC’s bus fleet will lead to commonality of parts, maintenance practices and vehicle configuration, bringing improved efficiencies to the bus operation.

Justification

The Commission has purchased in excess of 760 new Orion VII buses since delivery began in January, 2003.  During the early life of new vehicles, while they are covered by warranty agreements, it is not unusual for some to be withdrawn from service from time to time for warranty repairs and adjustments, as well as for retrofits that may be applied within the terms of the contract to optimize performance.

On these occasions, and when special bus services are required to support the streetcar rehabilitation program, if a reasonable spares contingency is not available, revenue service requirements cannot be met.  The need to purchase a total of 190 buses in 2008 to allow for the planned retirement of the aging buses in the fleet, and to accommodate the bus contingency previously discussed, was identified and approved as part of the 2007 to 2011 Capital Budget submission.

The purchase of diesel-electric hybrid buses is recommended over the purchase of clean diesel buses due to the reduction in engine exhaust emissions and the forecast fuel savings of up to 30%, compared to clean diesel buses, depending upon the route assignments.

The negotiated price of these diesel-electric hybrid Orion VII buses will be a maximum of 1% higher than those purchased from DCC in 2005 and 2006 through a competitive bid.  The pricing is very reasonable and it is recommended that this option with DCC be exercised to take advantage of the favourable price and the related benefits of a common model in the TTC fleet.

April 18, 2007

5-92-91