Proposed Contract Award - Arena and Major Facility Advertising

Program - Parks and Recreation Division

The Economic Development Committee recommends the adoption of the following recommendations of the report (September 1, 1998) from the Commissioner of Economic Development, Culture and Tourism appended to his further report dated October 2, 1998:

It is recommended that:

(1)a five year contract for the exclusive indoor advertising rights for arenas and major facilities within the Parks and Recreation Division be awarded to DM Media;

(2)this contract reflect the terms and conditions contained within the Request For Proposals and this report;

(3)the Commissioner of Economic Development, Culture and Tourism, the City Solicitor, and the Director of Purchasing, be directed to negotiate, prepare and execute the appropriate contract(s);

(4)the portion of annual revenues in excess of the $1,000,000.00 revenue budget requirement, be placed in a balance sheet account for basic improvement use by the participating facilities; and

(5)the appropriate City officials take the necessary action to give effect thereto.

The Committee reports, for the information of Council, having received for information the letter (September 17, 1998) from MediaCo.

The Economic Development Committee submits the following report (October 2, 1998) from the Commissioner of Economic Development, Culture and Tourism:

Purpose:

The purpose of this report is to respond to Media Co.'s letter of September 17, 1998 (Appendix II), addressed to the Chair and Committee. In this letter, Media Co. cited reasons why the company felt it should have been granted an interview in its bid for the above award. This report explains why an interview was not granted and recommends that the recommendations contained in the award report of September 1, 1998 be now approved.

Source of Funds:

Not applicable.

Recommendations:

It is recommended that:

(1)this report, addressing Media Co.'s letter of September 17, 1998, be received as information; and

(2)the recommendations contained in the Department's award report of September 1, 1998 (Appendix I) be approved.

Background:

At Committee's Meeting of Friday, September 18, 1998, the Department submitted an award report dated September 1, 1998 with regard to an Arena and Major Facility Advertising Program. At that same time Media Co., an unsuccessful proponent submitted a letter dated September 17, 1998 (Appendix II) in which the company cited reasons why it felt it should have been granted an interview in its bid for this award.

As the Department received this letter during the course of Committee's meeting, a decision was made to defer the Department's report until Committee's next meeting of October 19, 1998.

Comments/Discussion/Justification:

The following is the Department's response to Media Co.'s letter of September 17, 1998, referencing the pages and paragraphs of the company's letter.

Bid Submission Values - Page One - All Paragraphs:

Media Co. suggests that it was the third highest bidder and as such, should have been invited for an interview. This is not correct. All the proponents that were invited for an interview were made up of companies with higher bids than Media Co. and the two present incumbents; namely Future Sign Multimedia Displays and Board View Advertising. As an act of courtesy, the Evaluation Team had decided before the process began to grant the two incumbents this interview.

Appendix I lists the three final candidates of which DM Media submitted the highest bid. If Media Co.'s bid submission had been listed, the company would have ranked fifth and dollar wise, well below the top proponents.

Only Company to Conduct Site Visits - Page Two - Paragraph Three:

Media Co. suggests that it was the only proponent to conduct site visits and gather information. This is not correct. We can advise that a number of proponents went out to visit our facilities and that one proponent actually went out and did a video tape survey of some of our facilities, the latter being presented with their bid submission.

Guarantees - Page Two - Paragraphs Four and Five:

Media Co. suggests that the R.F.P. was changed to include a 20 percent revenue variance guarantee. This is not correct. In the R.F.P. under Obligations/Conditions, 4.1 reads as follows:

"Rights

The City reserves the right to reject any proposal including those proposals offering the highest remuneration.

The City reserves the right to enter into negotiation with preferred Proponents in the event that proposals do not entirely address the requirements and desires of the City. As such, mutually agreeable terms and conditions may be negotiated and included as a modification to proposals."

This guarantee was negotiated with the recommended proponent with a view to ensuring the proponents' commitment to deliver their stated remuneration to the City.

In its letter, Media Co. states, "If we had been made aware that there was a 20 percent cushion, we could have put in a higher bid".

Background on Recommended Proponent - Page Three - Paragraph Two:

Media Co. suggests that neither of the top two proponents have any history in the business. This is not correct. The recommended proponent, DM Media and its two principals, have over twenty-five years experience selling and designing advertising. As individuals, they have personally sold and managed advertising contracts associated with bill boards, bus shelters, mall posters, airports, GO Stations, Go Trains, buses and subways, all in excess of $60,000,000.00.

The second "runner-up", Future Sign Multimedia Displays, currently manages arena bill board, poster and banner advertising in the former municipality of North York and has had a number of years experience in designing, selling, producing and installing arena board advertising in multiplex arenas such as Westwood, Chesswood and Doublerink Arenas.

Arena Advertising Experience - Page Four, Paragraphs Two, Three, Four and Five:

Media Co. suggests that it is the only company in the industry to handle this contract (arena ads) with the exception of Board View Advertising (another unsuccessful proponent). This is not correct, as previously referenced. However, and more importantly, this was not an arena/rink board based R.F.P. The Request For Proposals, under 1.1 Introduction and 1.3 New Advertising Venues, clearly states that the Department wishes to establish a comprehensive indoor advertising program encompassing all venues within all its facilities. Of the one hundred and fifty-eight facility opportunities listed in the R.F.P., Media Co.'s bid submission addressed 25 percent.

Interview Not Granted - Page Five - Paragraphs Two and Three:

Media Co. did not receive an interview for the following reasons:

Their financial bid was not in the top three as suggested and, dollar-wise well below the main contenders.

Their bid for each of the five years in the proposed contract was a constant $590,000.00. Unlike most proponents, who projected increased sales and revenues to the City over the five years, their financial projections indicated a standstill, no growth position.

Their average guarantees City-wide, although not a requirement, were less than what the City currently receives from a modest rink/bill board program in North York, Etobicoke and East York.

Their submission was very arena facility oriented. It is the Department's desire to move away from a traditional, localized arena rink board advertising program and enter into a new comprehensive, future focused facility advertising program. Such a program would seamlessly address the revenue requirements of the City, while addressing all advertising venue opportunities in all types of facilities.

Conclusions:

With the receipt of Media Co's letter on the day that Committee last met, the Department felt it best to defer the submission of its report in order to prepare this response. This delay, however, resulted in a missed opportunity to earn projected revenues in excess of $100,000.00 as October and November are key advertising sales months.

The Department wishes to assure the Chair and the Committee that the selection process was conducted by a team of qualified representatives from all the former municipalities, and that the team was unanimous in their decision and in turn, the award report which we respectfully re-submit today.

Contact Name:

David C. Brown

Partnerships and Sponsorships Officer

Parks and Recreation

Telephone: 395-6196Fax: 395-0105

(Appendix I, report dated September 1, 1998, addressed to

the Economic Development Committee, from the

Commissioner of Economic Development, Culture and Tourism)

Purpose:

The purpose of this report is to request Council's approval of a five year contract award to DM Media for the exclusive indoor advertising rights for arenas and major facilities within the Parks and Recreation Division. In return the City will receive projected new advertising revenues averaging $1,115,000.00 per annum over the five year period of the contract (Appendix I). This award request is the result of a public Request for Proposals.

Source of Funds:

There are no City funds required with respect to this matter. The award of this contract would result in new advertising revenues as indicated above.

Recommendations:

It is recommended that:

(1)a five year contract for the exclusive indoor advertising rights for arenas and major facilities within the Parks and Recreation Division be awarded to DM Media;

(2)this contract reflect the terms and conditions contained within the Request For Proposals and this report;

(3)the Commissioner of Economic Development, Culture and Tourism, the City Solicitor; and the Director of Purchasing, be directed to negotiate, prepare and execute the appropriate contract(s);

(4)the portion of annual revenues in excess of the $1,000,000.00 revenue budget requirement, be placed in a balance sheet account for basic improvement use by the participating facilities; and

(5)the appropriate City officials take the necessary action to give effect thereto.

Background/History:

The Parks and Recreation Division's revenue enhancement budget calls for a 1998 increase of $250,000.00 in facility advertising with an annual impact of $1,000,000.00. In order to meet this budget challenge, new facility advertising programs must be explored and ideally implemented in 1998.

At present, the former Regions of Etobicoke, East York and North York, have arena board advertising contracts that expire on November 30, 1998, September 30, 1998 and April 30, 1998 respectively. The other former Regions, by and large, have yet to enter this and other indoor facility advertising programs.

With a view to addressing contract expirations, capitalizing on economies of scale and meeting the above budget objective, the Division believes that a City-wide Request For Proposals and subsequent contract award for all indoor advertising rights for arenas and major facilities, would be both appropriate and timely.

On May 19, 20, and 21, 1998, a Request For Proposals advertisement appeared in the Globe and Mail and the Toronto Star, and on Friday, May 22, in the Marketing Magazine. In addition, registered letters were sent out to nine major groups who in the past had shown interest in similar initiatives. The Request For Proposals closed on Monday, June 8^th at 4:30 p.m. and at that time, seventy-three Request For Proposals had been picked up over the previous three weeks. The latter does not include Request For Proposals that were sent out to a number of cities across Canada upon their request for information. In turn, fourteen bid submissions were received, three late bid submissions that could not be entertained, and two letters of interest.

A Project Committee, made up of representatives from each of the former Regions and who had formulated the Request For Proposals, reviewed all bid submissions and determined that seven merited interviews. These seven companies and their principals were in turn interviewed. The interviews focused on remuneration to the City and the bidders' ability to deliver a quality product backed by quality service that would meet the expectations and requirements of the City, bidder, and ultimately the consumer. Three of the seven companies were invited back for a second interview which explored even further the companies' ability to deliver remuneration, product and service.

Comments/Discussion/Justification:

Like most Request For Proposals, this R.F.P. was designed to provide a business opportunity whereby proponents could demonstrate background, expertise, product knowledge, along with their ability to provide satisfactory remuneration to the City. As the Request for Proposals reflected both a business arrangement with the City and a service provision that would reflect on the City's image, a great deal of emphasis was placed during the assessment/interview process on the bidders' ability to meet the terms and conditions of the Request For Proposals, both short and long term.

Taking all of the above into consideration, the Project Committee unanimously believes that DM Media best demonstrates this ability to perform and to provide the City with projected new indoor advertising revenues averaging $1,115,000.00 per annum over the five year period of the contract. These projected revenues (Appendix I) would be backed with a contractual understanding that should these revenues fall short of projections by twenty percent or more after the first year, the City would have the right to either cancel or re-negotiate the contract.

The execution of the contract(s) in addition to the terms and conditions contained within this report and the Request For Proposals would be contingent on a) the approval of the City Solicitor and the Director of Purchasing and b) an obligation on the part of the successful proponent to accommodate any partnership/sponsorship initiatives which might come from such a program in the future.

DM Media is an amalgamation of two sole proprietors that would be brought together and dedicated solely to this undertaking. The principals, Stephen Dohoo and James McCaffrey, with John Tomlinson as a consultant, have had many years experience in advertising sales and media consulting, most recently as consultants to GO Transit, developing GO Station advertising and managing all on train advertising. A number of references were checked and all proved satisfactory.

Finally, as both a participation incentive and reward for the individual facilities concerned, it is recommended that on an annual basis, the portion of City wide revenues in excess of the $1,000,000.00 budget requirement be placed in a balance sheet account for basic improvement use by the facilities. Although this amount is projected to be $575,000.00 over the five year period of the contract (Appendix I), this projection is considered to be conservative.

Conclusions:

The Division believes that appropriate indoor facility advertising is a key element in revenue generation which assists in the financing of programs and services, while providing a community service. The Division further believes that the award of this contract firmly addresses the latter. It is acknowledged, however, that this is only the first step and that in the future, a more comprehensive advertising strategy will be established to address and coordinate all advertising venues, including parks, playgrounds, public vehicles, newsletters, and various publications.

Contact Name:

Gary W. Stoner

Deputy Commissioner

Parks and RecreationTelephone: 395-6190Fax: 395-0105

E-mail: gwstoner@north-york.on.ca

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Appendix I

City of Toronto

Parks and Recreation Division

Arena and Major Facility Advertising Program

Requests for Proposals

Projected Annual Revenues to the City

(Three Final Candidates)

City of Toronto

Economic Development, Culture and Tourism Department

Parks and Recreation Division

Proposed Contract Award

Arena and Major Facility Advertising Program

Executive Summary

This proposed contract award:

-Flows from a comprehensive, public Request For Proposals.

-Was initiated as a result of a) arena board advertising contracts expiring in the former Regions of Etobicoke, East York and North York, b) a desire to capitalize on city wide economies of scale, and c) the need to meet the Division's revenue enhancement budget call for a 1998 increase of $250,000.00 in facility advertising with an annual impact of $1,000,000.00.

-Covers all arenas and major facilities within the Division with the exception of some facilities run by Boards of Management.

-Reflects a five year contract which would provide the successful proponent with the exclusive rights to develop, sell, install and maintain several forms of advertisements (arena boards, centre ice, picture posters, etc.) in arenas and major facilities subject to a) advertising guidelines laid out in the Request For Proposals and b) approval of all advertising by the Division before installation.

-Requires the execution of the contract(s) in addition to the terms and conditions contained within this report and the Request For Proposals, to be contingent on a) the approval of the City Solicitor and the Director of Purchasing and b) an obligation on the part of the successful proponent to accommodate any partnership/sponsorship initiatives which might come from such a program in the future.

-Projects, conservatively, the following revenues to the City; Year 1 - $900,000.00; Year 2 - $1,025,000.00; Year 3 - $1,100,000.00; Year 4 - $1,200,000.00; Year 5 - $1,350,000.00).

-Recommends that the portion of annual revenues in excess of the $1,000,000.00 revenue budget requirement be placed in a balance sheet account for basic improvement use by the participating facilities.

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The Economic Development Committee reports, for the information of Council, also having had before it during consideration of the foregoing matter a communication (September 17, 1998) from Mr. Andrew Hethrington, Vice President, MediaCo, requesting that the recommendation of the Economic Development Committee at its meeting on September 18, 1998, be referred back to staff for further consideration for a variety of reasons including what seems to be, a significant change in the terms of the RFP, which is on file in the office of the City Clerk.