2006 Audit Recommendations  -  Status Tracking 
  Document 4
  Audit:  Public Private Partnerships (P3) Processes  (Lead:  Nancy Schepers)      
  Audit Recommendation Management Response  Budget Implications 2008 or Beyond Related Council Motions Status Update / Comments  
             
    Audit Management Response Action Required Based on DCM Implementation Plan   Management Timelines    (Q1- Q4) ($$ if known)   (Status, risks, issues regarding implementation, etc)
1 That Management develop materials for Council that will address the current gaps in information in order to more clearly define and differentiate P3s from traditional procurement Management agrees with this recommendation.

With the assistance of staff from the Canadian Council for Public-Private Partnerships, staff will prepare as part of a P3 Policy for Council’s adoption in Q2 2007 an information package on the continuum of P3 procurement options, as compared to the traditional municipal procurement approach. This information package will provide best practice examples of the pros and cons of the various options, and how these options maybe applicable at the City.		   Q3 2007     COMPLETED
Is included in P3 Policy and Procedures report being considered by Council in October/November 2007.
2 That Management refresh the overall strategic plan (or road map) for the continued use of P3s including an indication of where the City intends to operate in terms of the maturity models/continuums described above. Management agrees with this recommendation.

New knowledge has been gained in developing the various P3’s projects that have been completed to date. Practical lessons have been learned from the operational experiences of these projects, and the City now has better insight into the value and consequences of risk sharing with the private sector. By the end Q2 in 2007, staff will bring forward a report to Council refreshing the road map for the continued use of P3’s identifying where the City intends on operating in terms of the procurement options and risk distribution with the private sector. This report will be in the form of a P3 Policy, which together with a procedural manual is currently under development. 		  Q3 2007     COMPLETED
Process to assist staff and Council to identify and prioritize potential future P3 projects included in P3 Policy and Procedures report being considered by Council in October/November 2007.
3 That Management develop a monitoring and reporting mechanism that would enable it to provide Council with feedback on the status of previously approved P3 initiatives. Management will enhance its monitoring function of P3 projects by providing to Council a yearly report explaining the financial and operating status of each P3 project. Operational and programming performance will be benchmarked against what was requested and received by the proponent through the City’s procurement and proposal.   Q4 2007     COMPLETED
This function is included in P3 Policy and Procedures report being considered by Council in October/November 2007.. Client Departments responsible for monitoring various P3 projects will provide a report card at the end of Q4.
4 That Management clarify with Council the required components for P3 business cases and develop a template to ensure business cases adequately address all desired elements. Management agrees with this recommendation.

The components for P3 business cases and a corresponding template will be included as part of the P3 policy and procedural manual identified in the management response to Recommendation 2.		   Q3 2007     COMPLETED
Is included in P3 Policy and Procedures report being considered by Council in October/November 2007.
5 That Management include provisions in future P3 legal agreements to address potential gaps in operating practices between the City and the private partner in areas such as training, bilingualism, public safety and community access. The recommendation is noted, and staff will ensure that future P3 legal agreements consider these issues, however, it is not Management’s intention to automatically include these provisions.
The City of Ottawa entered into the two P3s (Ottawa Paramedic Headquarters and Bell Sensplex) with the understanding that the advantage of the P3 was the respondent's ability to extract 'value-for-money' or 'best value'.  The definition of best value is described in reports to Committee and City Council.  Inclusive within the description of best value is consideration for a degree of flexibility in the process.  P3's are successful when the end product is the benchmark and not necessarily the minutiae of process.  The Ottawa Paramedic Service headquarters was constructed on-time and on-budget; the facility was operational as determined by the contracts and providing the service as expected by the Ottawa Paramedic Service.

   Q3 2007     COMPLETED
On-going. Each P3 is unique. Using a risk matrix, staff will continue to balance/ measure what the Private Partner is to deliver and ensuring value for money can still be realized. Is included in P3 Policy and Procedures report being considered by Council in October/November 2007.
5   The benefit of a P3 includes the potential gaps in operating practices between the City and the private partner in areas such as training, bilingualism, public safety and community access.  What is required is
an understanding of the gaps and the impact on service (or standards) if any.  The 'gaps' may be the business case advantage that makes a project 'best value'. The more we push the private partner to “address potential gaps in operating practices between the City and the Private Partner” the Value for Money, (vfm) may decrease.

This recommendation may be a disincentive to prospective respondents in an RFQ/RFP process wherein the level of prescription is prohibitive to a business' ability to earn profit.  Our experience shows that through negotiations the more we close this gap the less risk the private partner is willing to take on without increasing cost.  In addition to the potential increase in private partner costs this will also cause an increase to the City’s operating costs, as it will increase monitoring activities to ensure compliance. 		         
The 'type' of P3, as noted in Exhibit 3.0, is not one-size-fits-all, rather it ought to be more permissive and specific to the product or service to be delivered.  Further, the P3 model selected will impact the level of prescription (program requirements) for each individual project as defined in the contractual agreements.
6 That Management develop a formal process to capture lessons learned through the construction and ongoing operations of completed P3s and reflect these lessons in future legal agreements Management agrees with this recommendation.

In the future, a post-mortem assessment will be made within four months of construction completion of a P3 project and yearly reviews as per management response to Recommendation 3 will be used to build upon lessons learned.
Management has already begun to incorporate “lessons learned” into new P3 agreements. The Auditor General asserted that the Bell Sensplex agreement did not contain a clear legal definition of “Prime Time Ice”. The legal definition for “Prime Time Ice” from the Bell Sensplex partnership is defined in Section 3.03 of the “Ice Time Purchase Agreement” is as follows:
3.03 Prime Time Ice:  The 2400 hours of ice time purchased by the City in the facility shall be:
(a) during the prime ice rental season, described as September/October to April May , and shall extend over a thirty-five (35) consecutive week period (the “Peak Ice Rental Season”); and
(b) from Mondays to Fridays, 6:00 p.m. to 9:30 p.m., and 7:00 a.m. to 5:30 p.m. on Saturdays and Sundays (“Prime Ice Time”)
   Q3 2007      
6   This definition was improved upon in the Kinburn Partnership to remove the vagueness from the length of season and to ensure that there was a fair balance between weekday ice and weekend ice.  The Kinburn Partnership defines Prime Time ice in the Management Services Agreement page 32 Article 10.03 as follows:
10.03 Prime Ice Time:  The 800 hours of Prime Ice Time purchased by the City in the Arena shall be:
a. during the prime ice rental season, described as September 1 to April 15, and shall extend over a thirty-three (33) consecutive full-week period ("Peak Ice Rental Season");
b. from Mondays to Fridays, 5:00 p.m. to 9:00 p.m., and 7:00 a.m. to 5:00 p.m. on Saturdays and Sundays ("Prime Ice Time"); and
c.  a minimum of two (2) hours  of the 800 hours must be allocated to the City during normal weekday evenings, Monday to Friday during the Peak Ice Rental Season between the hours of 6:00 p.m. and 9:00 p.m., which two (2) hours per night may be scheduled at different or staggered two (2) consecutive hour intervals between 6:00 p.m. and 9:00 p.m., Monday to Friday, to permit
flexibility in scheduling programming activities
at the Arena.		         COMPLETED
Is included in P3 Policy and Procedures report being considered by Council in October/November 2007.
7 That Management enhance processes and clarify accountabilities related to the proactive identification and monitoring of deviations from financial plans and inform Council of these deviations when appropriate. The P3 policy and procedure manual will clearly identify accountabilities related to deviations from financial plans and other elements of the agreement, and Council will be informed accordingly.
Staff will develop a greater reporting system in our legal agreements and in our escalation process, which will take into account the severity, the frequency and the impact on the City.
Such a reporting system and any necessary templates can then be incorporated into the actual agreement between the City and the private partner. They should also be set out in any future Request For Proposals “RFPs” so that potential private partners are notified accordingly at the outset of the process. Moreover, this will assist staff in having these provisions reflected in the actual text of the legal agreement(s) between City and the private partner without prolonged negotiations. 		  Q3     COMPLETED
Is included in P3 Policy and Procedures report being considered by Council in October/November 2007.
8 That Management develop a framework for equitably and consistently addressing adjustments to proposed construction costs (either due to budget constraints or other circumstances such as unforeseen building code issues) and inform Council of these adjustments when appropriate. Management agrees with this recommendation.

As per current practice, staff will continue to provide the best information possible to Council at the approval stage.  Should unforeseen requirements be identified that potentially impact the Council approved project budget, staff will establish through negotiations a change order process in future P3 agreements that will attempt to mitigate these costs through a value engineering exercise, minor scope reductions or other actions. Failing this, all variances or necessary project scope adjustments beyond the City Manager’s delegated spending authority will be brought to Council for approval. 		  Q3 2007     COMPLETED
Is included in P3 Policy and Procedures report being considered by Council in October/November 2007.
9 That Management develop a process to periodically assess and monitor overall compliance with agreements including:
a. Defining possible indicators of future issues and action plans;
b. Defining roles and responsibilities in the event of defaults or breaches under one or more agreements; and
c. Informing Council of these of defaults or breaches when appropriate.		 Please see the management response under Recommendation Number 7   Q3 2007     COMPLETED
Is included in P3 Policy and Procedures report being considered by Council in October/November 2007.
10 That Management enhance the clarity of overall accountability for P3 initiatives through the various phases of the facility’s lifecycle, including the specific roles and authorities of the P3 Office, RPAM, and Client Departments. Management agrees with this recommendation.

In the proposed P3 Policy and Procedural Manual, all roles and accountabilities throughout the operational phase of the P3 initiatives will be clarified.  Current P3 projects will be incorporated into RPAM’s system for life cycle monitoring. 		  Q3 2007     COMPLETED
Is included in P3 Policy and Procedures report being considered by Council in October/November 2007.
11 That Management develop a means to capture the financial and related costs associated with ensuring continued management of P3s and that these costs be considered in budget/resource decisions for those participants most impacted by an increasing number of P3 projects. Management agrees with this recommendation.

During the pre and post construction phases of P3 initiatives, all required staff time will be captured and considered through the budget process to ensure suitable resource decisions can be made for P3 projects.  This is particularly important for some Centres of Expertise like RPAM and Supply Management who play a significant role in the P3 procurement and negotiations process. 		  Q3 2007     COMPLETED
Is included in P3 Policy and Procedures report being considered by Council in October/November 2007.