Project Report: Achieving Value for Money Charles Jago ...

Project Report:Achieving Value for Money

Charles Jago Northern Sport Centre

March 2007

Table of Contents

Purpose of this Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

1. Project Background, Rationale and Objectives . . . . . . . . . . . . . . . . . . . . . . . .3

2. Competitive Selection Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

3. Final Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

4. Achieving Value for Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

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Purpose of this Document

Partnerships BC works with its clients to undertakean analysis of the value for money expected overthe life of the project. Value for money is a broadterm that captures both quantitative factors, such ascosts, and qualitative factors, such as servicequality and public interest.

Value for money is one of six key principles guidingpublic sector capital asset management in BritishColumbia. The others are:

• sound fiscal and risk management;• strong accountability in a flexible and

streamlined process;• emphasis on service delivery;• serving the public interest; and• competition and transparency.

Since 2002, these principles have guided the B.C.public sector’s approach to acquiring and managingassets such as roads and health care facilities.Under the Capital Asset Management Framework,ministries and other public bodies are encouragedto consider all available options for meeting theirservice objectives. They analyze the options and,after considering the qualitative and quantitativeadvantages and disadvantages of each, choose theone that overall best meets service delivery needsand makes the best use of taxpayers’ dollars.

In some cases, the best option may be traditionalprocurement – where assets are purchased entirelywith taxpayer supported debt and operatedexclusively by the public sector. In other cases,agencies may find innovative ways to meet theirservice needs without acquiring capital assets. In all cases, agencies are publicly accountablethrough regular budgeting, auditing and reporting processes.

In all of its procurement processes, the Province iscommitted to a high standard of public disclosure toensure accountability. This report describes therationale, objectives and processes that led to theuse of an early partnering process for the CharlesJago Northern Sport Centre project, giving thepublic a clear sense of how and why the decisionwas reached to proceed with that option. It explainshow value for money was achieved in the context ofthis unique project.

For more on the Province’s Capital AssetManagement Framework, please go tohttp://www.fin.gov.bc.ca/tbs/camf.htm

For more on public private partnerships in B.C.,please go to www.partnershipsbc.ca

1 Project Report: Achieving Value for Money – Charles Jago Northern Sport Centre

Executive Summary

Competitive Selection Process

There are a number of procurement models toconsider when evaluating which model will have thepotential to deliver best value for money. Value formoney is defined as meeting or exceeding projectobjectives for the best cost. One of the mostimportant determinants of value for money is theability to transfer project risks, such as constructionschedule and budget, to the party best able tomanage those risks.

Three possible procurement options include:

• Traditional delivery – this option involves separateprocurements for the design phase and the buildphase in a linear process, often called Design-Bid-Build (DBB).

• Design-Build (DB) – this option involvesdeveloping one procurement process for both thedesign and build portion of the project.

• Design-Build-Finance-Operate (DBFO) – thisoption involves one overall procurement processfor the design, building, operation and financingof the project.

Initially, the procurement process selected for thisproject was the DBFO model. A market soundingprocess was undertaken to ask market participantstheir views and assess responsiveness towards aflexible approach to consider different options forthe project. As the procurement process unfolded,

Project Background

In an effort to realize the full potential of NorthernB.C. arising from the 2010 Olympic and ParalympicWinter Games, community leaders from the City ofPrince George (the City), the University of NorthernBritish Columbia (UNBC), the Spirit of BC PrinceGeorge Community Committee and PacificSportcame together to develop a plan to create aregional centre of excellence in sport. The resultingconcept, the Charles Jago Northern Sport Centre(the Centre), is a facility that will bring athletes,coaches and communities together to foster adistinctive culture of excellence by integrating sportand education. The Centre is designed to be aNordic Centre of Excellence and provide elitetraining opportunities in northern B.C. for winter andsummer sports.

The Centre will be located at the entrance to theUNBC campus, and includes a gym, indoor track,and multi-use indoor field. The Centre will be afacility that complements the existing amenities inPrince George such as the Northern MedicalProgram, high-performance sport and coaching,and educational opportunities available at UNBC.The Centre will also have the capacity to supporthigh-performance athletes and coaches, particularlyin Nordic skiing. The guaranteed maximum pricefor the facility is $30.75 million. The B.C.government is contributing up to $20.5 million inprovincial funding for the Centre.

UNBC and the City created acorporation, Northern Sport CentreLimited (NSCL), to oversee thedevelopment of the new Centre.This partnership reflects both thecommitment to and the importanceof the project for the City, UNBC andthe Province. Partnerships BC wasretained by NSCL to providebusiness and procurement advisory services for the project.

Artist rendering of the gymnasium

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it was determined that a DB model was moreappropriate for this particular project.

The DB partnership agreement was achievedthrough an early partnering process that enabledthe project and proponent teams to workcollaboratively to determine the final scope anddesign of the project, programming options,variations and cost implications, output basedspecifications and the performance requirements.This process provided for maximum flexibility andinnovation, while maintaining strong competitivetension and transparency throughout.

There are a number of features unique to this projectthat supports the DB model versus the DBFO model.For example, the Centre will operate as an elite,Nordic sports training centre and it would have beendifficult to find experienced operators due to theunique nature of the facility. In addition, the marketsounding process suggested that although theDBFO model was favoured, the potential for additionalrevenue sources from programming opportunities atthe Centre was considered a risk and therefore lessattractive from an operator’s perspective.

Final Agreement

The final DB partnership agreement between UNBCand Giffels Design Build Inc. is an agreement for thedesign and construction of the Centre at a guaranteedmaximum price of $29 million (capital cost). Thefacility is expected to open in September 2007.

Giffels Design Build Inc. is leading a consortium ofprivate companies that have partnered with UNBCand the City on the project. The Northern SportCentre Consortium (NSCC) is comprised of thefollowing companies: Giffels Design Build Inc.,NORR Ltd., Chernoff Thompson Architects andWestern Industrial Contractors of Prince George.

Benefits to Taxpayers

The DB partnership agreement between NSCL andNSCC achieves a number of benefits for taxpayers,including:

• A guaranteed maximum price of $30.75 million fordesign and construction of the facility, procurementand project management costs.

• Through design innovation and the earlypartnering process, an increase in scope fromthe original concept of the facility at no extracapital cost.

• A long-term community commitment to theoperation of the Centre.


1. Project Background, Rationale and Objectives

Charles Jago Northern Sport Centre: Background

Community leaders and sport user groups from theCity of Prince George (the City), Northern B.C., andthe University of Northern British Columbia (UNBC)developed a plan on how Prince George and theNorth could realize their full potential arising fromthe 2010 Olympic and Paralympic Winter Games inBritish Columbia. The resulting concept, theCharles Jago Northern Sport Centre (the Centre), isa facility that will bring together athletes, coaches,and communities to foster a distinctive culture ofexcellence by integrating sport and education.

The key objectives of the Centre are to:

• Establish a regional centre that will attract andassist in retaining students and athletes in theNorth.

• Provide a significant economic stimulus for theCity and Northern B.C. through future sporthosting opportunities.

It is expected that the Centre, through its locationon the UNBC campus and planned programming,will strengthen Prince George’s role as a post-secondary education centre and provideopportunities for citizens of the North to pursuesport and education in their home region. TheCentre is expected to contribute to the growth anddevelopment of Prince George and the surroundingregion by supporting sport tourism and providing alasting legacy to the 2010 Olympic and ParalympicWinter Games.

The initial phase of the Centre will encompassapproximately 12,500 square metres of indoorspace that includes:

• A three-court gymnasium with seating for 2,000.• Two indoor fields.• An elevated 280-metre indoor track.• An expanded fitness centre.• Two squash courts.• Ten offices for coaches.• A seminar room for coaching clinics.

• Physiotherapy and strength training facilities.• Connection to the trail network on Cranbrook Hill.• Additional exterior space for a sports field and

parking.

UNBC and the City created a corporation, NorthernSport Centre Limited (NSCL), to oversee thedevelopment of the new Centre.

Project Objectives

The vision of the project is a facility that improves theregional and community (including UNBC) sport andrecreation delivery system. It is expected that theproject will:

• Provide a sport and recreational facility for the Cityand UNBC that provides equivalent athletic andrecreational opportunities to those offered in othercommunities.

• Develop into a regional centre of sportsexcellence that will attract and assist in retainingstudents and athletes in the North.

• Promote the integration of education, health, sportand wellness for the North.

• Enhance existing competitive and recreationalsport facilities in the City.

In fulfilling this vision, the Centre will meet thefollowing objectives:

• Address regional and university needs forcompetitive sport, recreational and wellnessprograms through the provision of a broad rangeof opportunities, programs, and services.

• Provide a focal point for the growth anddevelopment of local and regional sportscommunities, including athletes, parents,coaches, and officials.

• Support the ongoing development of Nordicsports through the development of a NordicSports Centre of Excellence.

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2. Competitive Selection Process

The procurement process for the Charles JagoNorthern Sport Centre evolved from Design-Build-Finance-Operate to a Design-Buildpartnership agreement based on the uniquefeatures and requirements of the facility.

Competitive Selection ProcessObjectives

The project team was guided by the followingobjectives throughout the competitive selectionprocess:

• Design and construct the project effectively withinthe affordability cap identified by the feasibility study.

• Provide UNBC and the City with price certaintyduring the design and construction phase of the project.

• Optimize the risk allocation between the parties inorder to provide value for money.

• Ensure access to innovation and flexibility.• Optimize functional programming.• Deliver customer service. • Enable flexibility for expansion. • Ensure a fair, open and transparent procurement

process.

Initial Approach

A two-stage procurement process was initiallychosen to select a private sector partner to design,build, finance, and operate the new facility. Thisprocess includes a Request for Qualifications (RFQ),to allow all interested respondent teams to submittheir qualifications and experience for evaluation,and a Request for Proposal (RFP), in which theproponents submit detailed technical and financialproposals. Following an evaluation of the proposalsand the selection of a single preferred proponent,final negotiations commence to reach a finalagreement.

Market Sounding Process

A market sounding process was undertaken to testthe market and assess responsiveness towards aflexible approach to consider different options forthe project. After receiving approval from NSCL,Partnerships BC conducted a market sounding on theCentre business structure and procurement model.

The market sounding process was conducted in afair and transparent manner. This included thepublic availability of materials, local advertisingwithin Prince George, as well as direct communicationwith known market participants in this type of project.

Market Sounding Responses

The following responses were identified regardingwhich approach would be best suited to this project:

• The market sounding indicated a preference for aDBFO approach, but concerns were raised aboutthe allocation of some key risks.

• The operating risks related to generating revenueand programming to the private sector werefundamental to the success of the project.

• Concern was expressed by some companies thatit could be difficult to find experienced operatorsdue to the unique nature of the proposed facility.

• All companies had concerns related to theschedule, particularly the ability to get communityconsensus on the design.

• Concerns were raised regarding the current stateof the B.C. construction market which wasexperiencing rapidly increasing cost pressurescreating a great deal of uncertainty.


The following specific issues were identified relatedto the unique nature of this project:

• The revenue risk was significant and it was notclear what the additional programmingopportunities and sources of revenue might be.

• The scope of the project would have been difficultto define during the procurement process,particularly with regards to programming andrevenue responsibilities, and the technicalspecifications. This would pose difficulties indefining performance specifications in an RFPformat.

• There was a significant need for input fromstakeholders during the project scoping anddevelopment of proposals for the project. Again,this would pose challenges for the RFP approach.

• The City and UNBC were willing to accept two-thirds of the programming risk and wished totransfer one-third to the private sector operator.The response from the market indicated thatalthough it was feasible to transfer that risk, itwould be a challenge.

The market sounding process confirmed that theDBFO model was the favoured approach and theprocurement process should proceed with a RFQ.This would allow flexibility for the market to respondwith its qualifications to implement a DBFO model.However, it was also recommended that an earlypartnering or strategic partnering procurementmodel should be considered as an alternative to theRFP stage, depending on the assessment of theresponses to the RFQ. Both strategic and earlypartnering are competitive processes designed tosolicit high quality partners who can provideinnovative solutions for achieving desired objectives,rather than collecting proposals to provide aspecified solution or outcome. This approach isparticularly useful where the public sector is seekinginnovative solutions from the private sector and theprocess better enables the opportunity to leverageprivate sector expertise earlier in the process.

RFQ Process and Evaluation

A Fairness Auditor and Conflict of InterestAdjudicator were engaged to ensure a fair, openand transparent procurement process.

On July 13, 2005 the project team hosted aninformation meeting at UNBC for the prospectiverespondents. Respondents were advised that twooptions would be considered to replace thestandard RFP phase of the project. These optionswere: proceed to negotiate with two potentialpartners (strategic partnering); proceed to negotiatewith one partner (early partnering).

On August 5, 2005, four submissions were receivedin response to the RFQ. A number of internal staffand external expert advisors were assembled for thepurpose of evaluating the submissions. An executivecommittee, comprised of senior officials from theCity, UNBC and Pacific Sport, was responsible forevaluating and scoring the various proposals.

A Fairness Auditor, Joan M. Young, and Conflict ofInterest Adjudicator, Leslie Peterson, Q.C., wereengaged to ensure a fair, open and transparentprocess. The Fairness Auditor provided anindependent opinion as to the fairness of theprocedures that were followed and as to whether therequirements of the process as defined in the RFQwere met. In her report, the Fairness Auditorreported the following:

“The overall procurement process associatedwith the RFQ for the Northern Sport CentreProject has been conducted in a fair mannerand in accordance with the proceduresestablished in the Request for Qualificationsstage.”

After a complete and thorough evaluation of allrespondents, including presentations from the twoleading respondents, it became clear that a singlerespondent – the Northern Sport Centre Consortium(NSCC) – was significantly superior to the otherthree respondents, particularly with respect to: localknowledge, experience of the team, understandingof the project challenges, and the overall quality ofthe submission.

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Consequently, the executive committeerecommended to the NSCL Board of Directors thatNSCC be chosen as the preferred proponent, and toproceed with an early partnering approach.

Rationale for Choosing EarlyPartnering

NSCL made the decision to replace the standardRFP phase of the project with early partneringbased on the following considerations:

• Responses from market sounding indicated thatwithout clearly defined programming requirementsit would be difficult to run an RFP process.

• Early partnering would allow an interactiveprocess where owners, designers, builders andoperators define programming needs within abudgetary cap.

• NSCL consulted with proponents and receivedunanimous support to proceed with early partnering.

• The decision to proceed with early partnering wassupported by the Fairness Auditor.

Results of Early Partnering

The early partnering process allowed the NSCLproject team to enter into negotiations with theproponent. NSCL and the proponent were then ableto work together to determine the final scope anddesign of the project, programming options,variations and cost implications, output basedspecifications and the performance requirements.In addition, they were also able to negotiate aproject agreement satisfactory to both parties.

Throughout this process it became clear that thisparticular project would more appropriately bedelivered through a DB partnership agreement.Following discussions with the operations team fromthe proponent, it was agreed that the operationsshould be undertaken by NSCL, due to the uniquenature of the facility.

Procurement Timetable

Procurement Milestone Date

Issue Request for Qualification (RFQ) June 29, 2005

Information Meeting and Site Visit July 13, 2005

Closing Date for Submissions August 5, 2005 (revised date)

Notice of Short-Listed Proponents September 2005

Signing of Agreement April 2006

Facility Operational Summer 2007

Contract Finalization

Following the selection of NSCC as the preferredproponent in September 2005, the project teamundertook intensive negotiations to finalize contractdetails and finalized a contract in April 2006.

Competitive Selection Costs

The total procurement costs incurred by NSCL fromthe date of issuance of the RFQ until financial closeare approximately $850,000. This representsapproximately three per cent of the totalconstruction cost for the Centre.


3. Final Agreement

The DB partnership agreement between theUniversity of Northern BC and Giffels DesignBuild Inc. is a legal agreement for the constructionof the Charles Jago Northern Sport Centre at aguaranteed maximum price of $29,000,000.

UNBC and Giffels Design Build Inc. have agreedthat the design-builder will design, construct andcommission the project for the owner in accordancewith the terms and conditions of the agreement.Giffels Design Build Inc. will perform and provide alldesign, labour, services and other acts, and provideall supplies, materials, construction equipment andmachinery required for performance of the work.

UNBC will pay a guaranteed maximum price of $29million to Giffels Design Build Inc., as the completeand total payment for satisfactory performance ofthe work.

Giffels Design Build Inc. is leading a consortium ofprivate companies that have partnered with UNBCand the City on the project. The NSCC iscomprised of the following companies:

• Giffels Design Build Inc. is the largest turnkeyprovider of sporting facilities in Canada.

• NORR Ltd. is a well-established architectural andengineering firm that has designed orreconfigured more than 25 sporting facilitiesacross Canada.

• Chernoff Thompson Architects is a B.C.-basedarchitecture firm with an office in Prince George.It has extensive experience with UNBC, includingserving as the architect for the TeachingLaboratory and the Bentley Centre.

• Western Industrial Contractors of Prince Georgeis one of the largest general contractors in BritishColumbia and is based in Prince George.

UNBC, on behalf of NSCL, will monitor the contractduring the construction phase.

Financing

The financing for the project is provided by theProvince of B.C., UNBC and the City.

On April 14, 2005, the B.C. Ministry of Small Businessand Economic Development announced that theProvince would provide a grant of up to $20.5 millionto UNBC for the Centre. Both UNBC and the Citycommitted to contribute $5.125 million each to thedesign and construction of the Centre. Both UNBCand the City will be jointly responsible for the costsassociated with operating and maintaining the Centre.

Risk Allocation Summary

Project risks were negotiated and allocated tothe party best able to cost-effectively managethose risks.

Giffels Design Build Inc. assumes the majority of therisks relating to construction cost overruns in thisproject, protecting B.C. taxpayers from thesepotential costs. The early partnering processproved effective in transferring risk to the privatepartner in this agreement. Under the contract,Giffels Design Build Inc. is primarily responsible forthe risks associated with the following:

• Construction costs, including any cost overruns,and labour.

• Geotechnical conditions and site clearing.• Commissioning.• Development and design.• Quality assurance and quality control.

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The table below shows which risks rest with which party. Shared risks are indicated by check marks underboth parties.

Risk UNBC Giffels

Site and Land Risks

Site Availability at UNBC Campus ✓

Acquisition of Site ✓

Cleanup of existing environmental contamination of Site ✓

Site Geotechnical Conditions ✓

Demolition, site clearing, and diversion / relocation / extension of Utilities ✓

Development Design

Planning and Development of Site ✓

Design of Charles Jago Northern Sport Centre ✓

Design Error ✓

Changed Conditions ✓

Patent Infringement ✓

Development Construction

Building Permits ✓

Construction of Facilities ✓

Commissioning of Facilities ✓

Occupancy Permissions ✓

Quality Management ✓

Construction Cost Overruns ✓

Insurance ✓

Bonding by Developer ✓

Financing During Construction, as needed ✓

Quality Monitoring and Audit ✓ ✓

Risk UNBC Giffels

Administrative or Miscellaneous

Feasibility of Project, physical and financial ✓

Developer insolvency ✓

UNBC-initiated Change Orders ✓

Labour ✓

Delays by UNBC ✓

Force Majeure ✓ ✓

Development and Implementation of Public Communication Strategy ✓ ✓

Site / Construction

Weather ✓

Fire ✓

Vandalism ✓

Damage to Works ✓

Damage / Injury to Third Party ✓

Defective Works / Materials ✓

Quality Assurance / Quality Control ✓

Workers’ Safety Insurance Board ✓

Fair Wage Compliance ✓

Site Monitoring and Inspections ✓ ✓


4. Achieving Value for Money

The procurement process for the Centre can bestbe described as an evolution from the DBFO modelto the DB model based on the unique features andrequirements of the facility. The early partneringprocess provided for maximum flexibility andinnovation, while maintaining a strong competitivetension and transparency throughout. The ability forexperts on both the proponent and project teams tointeract and create synergies allowed for the optimalsolution to emerge while staying within the statedcapital budget.

The final DB partnership agreement providestaxpayers with the following benefits:

• Protected from cost overruns: the finalagreement achieves an allocation of project risksthat is expected to protect taxpayers from costoverruns or schedule delays. Within the contextof a provincial construction market characterizedby increasing cost pressures, the Centre will beconstructed for a guaranteed maximum price asstipulated at the outset of the process.

• Expanded facility: design innovation andsignificant interactions between the project andproponent teams through the early partneringprocess resulted in an increase in scope from theoriginal concept of the facility at no extra capitalcost. Moreover, the facility will be constructedwith a commitment to high performance sportspecifications and standards.

• Long term relationships: this project broughttogether two public agencies, UNBC and the City,and strengthened their relationship through theformation of the NSCL to protect the interests ofthe citizens of Prince George and area over thelong term.

The Centre will benefit the whole community ofPrince George and area by creating newopportunities for local athletes as well as attractingtop-tier athletes and students from around the world.

Computer generated rendering ofthe sport medicine facility.

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