Meeting Date: January 12, 2005

Subject: Procurement Authorization: Supply Of Static Converter Units (Scu) For H-6 Subway Cars

Recommendation

It is recommended that the Commission authorize the award of a contract, on a Sole Source basis to Intelligent Power Systems Ltd. (I-Power), for the supply of 128 Static Converter Units (SCUs) for the H-6 subway cars in the amount of $6,065,816.30.  In addition to this amount, the TTC will be directly responsible for paying the GST and PST in the amount of $909,872.45, as I-Power is not licensed to collect these taxes, for a total authorized amount of $6,975,688.75, noting that the TTC is entitled to a full rebate of GST.

Funding

Sufficient funds to accommodate this expenditure are included in Project 4.16 Subway Car Overhaul under H6 Subway Cars – 15 Year Overhaul, as set out on pages 1059 to 1062, category State of Good Repair/Safety of the 2005-2009 TTC Capital Program, which was approved by the Commission on November 17, 2004.

Background

H-6 subway cars use Motor-Alternator (MA) equipment to generate the power needed to operate various onboard car subsystems.   Significant modifications and exacting tuning by the Original Equipment Manufacturer was required to bring this equipment up to TTC’s H-6 subway car procurement requirements.  Over time, the MAs have become unreliable, impacting passenger service, causing line delays and affecting the availability of H6 cars for revenue operation.
SCUs generate power through solid state electronics rather than the Motor Alternators rotating equipment.  SCUs are currently used on T1 subway cars and have demonstrated exceptional reliability.  In addition, a prototype of an H-6 SCU has reliably operated in revenue service for more than a year.  Based on this proven performance, and in order to improve the overall reliability of H-6 cars, SCUs were identified as a replacement for the MA equipment.  This work will be done as part of the scope of the H-6 cars, 15-Year Overhaul Program.

Discussion

Specifications and drawings were prepared and a Request For Proposals, P31PJ04850, was posted on TTC’s Website as of September 9, 2004. Four (4) companies submitted proposals. Evaluations completed by staff concluded that the four (4) proposals were considered unacceptable.

I-Power submitted the lowest priced proposal in the amount of $6,585,139.20 including taxes as I-Power stated that they will be applying to obtain the appropriate Federal and Provincial tax licenses. However, their Agreement to Provide an Irrevocable Letter of Credit (Document 00412A) states that the Royal Bank of Canada agrees to provide an Irrevocable Letter of Credit if I-Power is awarded the contract for 25% of the Contract Price, that is $1,564,880.00. This amount is mathematically incorrect, as 25% of $6,585,139.20 is $1,646,284.80. In addition, Hourly Rates for Extra Work (Document 00322) submitted as a submission requirement required that the hourly rate submitted shall include all expenses, equipment and tools, overhead charges and applicable taxes. I-Power’s submission contains an hourly rate with a note indicating “+ expenses”. Staff reviewed the proposal submission from I-Power and their proposal was considered commercially unacceptable.  I-Power included a listing of costs for Non Recurring Costs and Training with a total amount of $315,178.20 in their proposal which was unclear as to whether these items were additional to the proposal price.  Subsequently, after cancellation of the proposal, I-Power has clarified that these costs were not included in their proposal price resulting in a total price of $6,900,317.40.

Oerlikon Transtec Inc. (Oerlikon) submitted the second lowest priced proposal. Oerlikon stated that they are not licensed to collect the ORST, which was calculated to be $491,520.00 resulting in a total adjusted proposal price of $7,065,600.00. Oerlikon submitted a copy of the Agreement to Bond (Document 00412), not the original. Upon review, all the required information was included in the copy. Also, Oerlikon’s Irrevocable Letter of Credit submitted as its Contract Security contained the word ‘standby” before the words “letter of credit” in two places in their document. The form of the Letter of Credit was not on the TTC’s standard form, but does contain the same language as set out on the TTC’s form except for the word “standby” which has been reviewed and found to be acceptable and commercially compliant.

However, Oerlikon’s technical submission was reviewed and deemed to be technically non-compliant as the equipment offered did not meet the requirement to have been in operating service for at least one year and the stated Continuous Rated Power of the Low Voltage Power Supply did not meet the specified requirement and was therefore not technically acceptable.

Transtechnik Corp. USA (Transtechnik) submitted the third lowest priced proposal in the amount of $7,142,624.00 (adjusted for Taxes).  Transtechnik stated that they are not licensed to collect the GST and ORST and included an exchange rate adjustment of $1.00 Cdn. = .816 USD. Transtechnik’s submission contained an executed Agreement to Provide an Irrevocable Letter of Credit (Document 00412A) in the amount of 50% of the Contract Price if awarded the contract. The problem with this submission was that Addendum 2 amended Document 00412A so that the Agreement to Provide an Irrevocable Letter of Credit was only to be 25% of the Contract Price. Transtechnik has stated on the form of Proposal that it acknowledged that Addendum 2 (as well as the other Addenda) formed part of its submission.

However, Clause 16 - Bonding Requirements of the Instructions to Proponents states that a bidder may submit an executed Agreement to Provide an Irrevocable Letter of Credit on Document 00412A instead of the Agreement to Bond, but that the letter of credit is to be “for 25%” of the Contract price.  Staff considers that the bid contains an error on its face.  Therefore, Transtechnik’s proposal was commercially unacceptable.

Skoda Electric (Skoda) submitted the fourth lowest priced proposal in the amount of $8,037,120.00 (adjusted for Taxes).  Skoda stated that they are not licensed to collect the GST and ORST. Skoda submitted a Proposal Security Irrevocable Letter of Credit and an Agreement to Provide an Irrevocable Letter of Credit on forms different from the TTC’s forms which is unacceptable.  Skoda’s proposal was commercially unacceptable.

As all of the proposals received were unacceptable the proposal request was cancelled on November 18, 2004.  Approval was received from the Chief General Manger on November 30, 2004 to negotiate with I-Power on a Sole Source basis. A new Request for Proposal, P31PJ04918, was issued to I-Power on December 1, 2004 which included an additional requirement for test cell resulting in an increase in cost, which is still less than the other proposals. The total proposal price submitted was $6,065,816.30, excluding taxes, and their proposal is considered commercially and technically acceptable by staff.

Justification

The existing MA equipment is unreliable affecting overall H-6 reliability, resulting in subway line delays and impacting the availability of H-6 cars for service.  The SCU’s are required to improve H-6 reliability and support the H-6, 15-Year Overhaul Program.

December 17, 2004

6-222

Attachments: Appendix A – Proposal Summary

Appendix ‘A’

Proposal Summary

Procurement Authorization:

Supply Of Static Converter Units (SCU)

For H-6 Subway Cars

Proposal P31PJ04918

1. Intelligent Power Systems Ltd. / $6,065,816.30 (not including taxes)
 
Preliminary Estimate / $9,348,000 (not including taxes)