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March
7, 2000
To:Works
committee
From:City Solicitor
Subject:TRIM Disposal
RFP Process - Submission by REF-Fuel Canada Ltd.
Purpose:
The purpose of this report
is to report to the Works Committee, as requested by Council at
its meeting of February 1, 2, and 3, 2000, with an explanation of
the process that has been followed to date respecting the TIRM Disposal
Request for Proposals process in respect of the matter of the Ref-Fuel
Canada Ltd. proposal submission.
Financial Implications
and Impact Statement:
There are no financial implications
by this report.
Recommendations:
It is recommended that this
report be received for information.
Background:
Council, at its meeting
of February 1, 2, and 3, 2000, had before it Clause Number 6 of
Report Number 1 of the Works Committee whereby the Works Committee
recommended that the proposal submission by Ref-Fuel Canada Ltd.
("Ref-Fuel") be excluded from any further consideration in the Toronto
Integrated Solid Waste Resource Management ("TIRM") Disposal Request
for Proposals process ("RFP"). Council adopted the recommendation.
At the same meeting, Council had before it Clause Number 1 of Report
Number 2 of the Works Committee whereby the Works Committee recommended
that Rail Cycle North ("RCN") be requested to remove the exceptions
relating to Toronto's rights to contract separately for the transportation
component of its proposal and to include a preferred customer clause
by the next Works Committee meeting, failing the removal of which
the Rail Cycle North proposal be considered informal and disqualified
from further evaluation in the TIRM process. Council, at its meeting,
received the recommendation of the Works Committee based on the
recommendation of the Commissioner of Works and Emergency Services
and of the City Solicitor given receipt of correspondence from RCN
that it had deleted its exceptions and that its base bid was firm
and binding.
Council in considering the Ref-Fuel matter, requested the City Solicitor
to provide a detailed explanation as to the process that has been
followed to this point in time respecting the matter.
Comments:
It is assumed that the report
request is for a reconciliation of the recommendations made in respect
of Ref-Fuel and RCN.
1. The RFP Requirements and Ref-Fuel's Omission
As set out in the public report that was before Council on the matter
of Ref-Fuel, Ref-Fuel had failed to provide an agreement to provide
a letter a credit as required by the terms of the TIRM RFP. Section
2 of Part B of the RFP sets out the specific conditions, declarations,
requirements, securities and agreements that were to be provided
by a respondent and included as part of its Technical Proposal (Envelope
One). In particular, the RFP provides for certain operations performance
securities that were to be included as part of Envelope One. Section
2.6 of the RFP states, in part, as follows:
"Toronto requires evidence that the successful Respondent will provide
a Performance Bond and an Irrevocable Letter of Credit securing
the obligations of the Contractor to ensure the proper management
of the Contractor's solid waste management facilities."
The section then goes on to indicate the requirement that the Letter
of Credit must be in the amount of thirty percent (30%) of the estimated
annual value of the contract and then states as follows:
"The Respondent shall submit an agreement from a Canadian Chartered
Bank listed in Schedule "A" or "B" to the Bank Act (Canada) to provide
an irrevocable letter of credit. Form A-6 provides a sample of an
agreement." Ref-Fuel provided a letter, dated December 14, 1999,
from the Chase Bank of Texas, signed by a senior vice president
of corporate banking. The letter was neither from a Schedule "A"
or "B" bank nor was it an agreement to provide a letter of credit.
The letter states, in part, as follows: "American Ref-Fuel has been
a customer of Chase Texas for several years and Chase Bank of Texas
will be pleased to give due consideration to a request for a letter
of credit from American Ref-Fuel once a credit request is received.
Credit approval for such a request would need to be obtained. This
letter is not a commitment to issue the referenced letter of credit."
The effect of the omission by Ref-Fuel in not providing a security
agreement is determined by an examination of the RFP document. As
further set out in the public report, the City has a discretion
to waive irregularities as set out in the RFP and as acknowledged
in the Declaration of Proposal Submission signed by each respondent.
Staff's recommendation on whether the discretion should be exercised
or not is based on such matters as the intent of the RFP and the
effect of the irregularity in relation to issues of policy, fairness
and the potential effect on the process. The intent of the RFP is
determined for the most part by the language of the RFP itself.
As set out in the public report, it was staff's position that, in
the context of this RFP, a mandatory requirement had not been met
and there should be no waiver of the requirement. As well as the
fact that the language of the RFP was clear that the agreement had
to be provided in Envelope 1, consideration was given to the facts
that:
(a) the provision of security is a common mandatory requirement
in all of the City's tenders and Requests for Proposals to be determined
at the time of closing, the omission of which results in disqualification;
and
(b) the provision of security as a mandatory requirement was a source
of some discussion not only in the TIRM Disposal RFP but in the
Diversion RFP
Overall, the staff recommendation was made on the basis that it
would be inappropriate to waive a clear mandatory requirement and
thereby favour Ref-Fuel.
2. The RFP Requirements and RCN's Exceptions
Again, as set out in the public report that was before Council,
following the opening and evaluation of Envelope 1, the TIRM Project
Team proceeded to examine the Envelope 2 submissions which contained
the price proposals. The contents of Envelope 1 and 2 form the base
bid from each respondent.
The following statement was contained on the first page of Envelope
2 of the RCN proposal submission:
"BECAUSE OF THE UNIQUE NATURE OF OUR PROPOSAL, WHICH REQUIRES THE
INTEGRATION OF THE WASTE TRANSPORTATION AND DISPOSAL FUNCTIONS,
THE PRICES SET OUT IN THIS ENVELOPE 2 ARE CONDITIONAL ON, AND SUBJECT
TO, THE EXCEPTIONS SET OUT IN ENVELOPE 3."
At issue before Council was the treatment to be accorded to the
exceptions taken to the RCN prices. RCN had argued that it believed
its Price Proposal to be compliant with the terms of the RFP. RCN
argued that the price in its Envelope 2 was a firm binding price
subject only to certain exceptions. At issue were two exceptions.
The two exceptions conflicted with Council's stated position on
the inclusion within the RFP of 1) a preferred customer clause,
and 2) the right of Toronto to contract out separately in respect
of the transportation component of any proposal.
3. The Differences between the Ref-Fuel Omission and the RCN Exceptions
The RCN exceptions are different from the Ref-Fuel omission. The
differences are (a) in kind, (b) in extent and (c) in impact.
(a) Kind
Ref-Fuel failed to meet a mandatory commercial requirement (a criteria)
as opposed to a qualification as to price, which qualification relates
to the reservation of Toronto's contract rights which may or may
not be exercised by Toronto.
(b) Extent
Ref-Fuel did not provide any letter of agreement or commitment in
Envelope 1 but a letter which emphasized it was not a commitment
and that no credit approval had even been sought. In contrast, RCN
did submit prices albeit with qualifications. Separate prices for
disposal and transportation were provided in Envelope 2 in technical
conformity with the requirements for Envelope 2 inclusion in the
RFP.
(c) Impact
The nature of the Ref-Fuel irregularity had greater impact in terms
of the precedence of waiver for the City's processes where commercial
securities are required.
Given these differences, the staff recommendations were different.
Contact Us:
James Anderson
Director, Municipal Law
Phone: 416-392-8059
Fax: 416-397-5624
E-mail: janders1@toronto.ca
H.W.O. Doyle, City Solicitor
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