Report to/Rapport au :

Transit Commission

Commission du transport en commun

11 January 2012 / le 11 janvier 2012

Submitted by/Soumis par : Nancy Schepers, Deputy City Manager/Directrice municipale adjointe, Infrastructure Services and Community Sustainability/Services d 'infrastructure et Viabilité des collectivités

Contact Person/Personne ressource : Vincent Patterson, Manager, Marketing and Strategic Development

Transit Services/Service de transports en commun

(613) 842-3636 x 3672, vincent.patterson@ottawa.ca

City Wide/à l'échelle de la Ville

Ref N°: ACS2012-ICS-TRA-0002

SUBJECT:	Q3 TRANSIT SERVICES PERFORMANCE REPORT

OBJET :	RAPPORT SUR LE RENDEMENT DES SERVICES DE TRANSPORT EN COMMUN - 3E TRIMESTRE

REPORT RECOMMENDATION

That the Transit Commission receive this report for information.

RECOMMANDATION DU RAPPORT

Que la Commission du transport en commun prenne connaissance de ce rapport.

BACKGROUND

On January 20, 2011, the Terms of Reference for the Transit Commission were approved. As a result, the Commission was deemed solely responsible for making decisions on all operational matters related to Transit Services, and providing recommendations to Council regarding budgets, fares, and strategic plans. It is also responsible for providing overall guidance and direction to the Transit Services Department on all issues relating to the operation of public transit, including the O-Train and the Para Transpo service delivery model.

As outlined in the Terms of Reference under Responsibilities of Transit Commission under Delegation of Authority of the Transit Commission, the Transit Commission is responsible for receiving:

· The Transit Services Department Annual Report and quarterly performance reports; and

· Reports from staff regarding the exercise of delegated authority (By-law 2009-231 as amended) on items within the Commission’s mandate.

DISCUSSION

Summary

Operationally, strong ridership growth continued through the third quarter and exceeded the growth in the employed labour force. As anticipated, the route optimization changes introduced in early September did not have a net negative effect on ridership levels.

Service delivery remained at high levels throughout the third quarter, measured by planned hours operated, fleet availability and on-time performance. Increased employee engagement and new processes in both fleet maintenance and operations have led to much improved service availability during the third quarter as compared to the same period in 2010.

Q3 year-to-date results reflect favourably compared to the net budget requirement. The year-to-date operating results correspond to a decreased requirement for Transit Services (including Para).

1. FINANCIAL UPDATE

The year-to-date budget figures are prepared on a “calendarized” basis. Actual expenditures and revenues are compared against budget for the corresponding time frame. Staff prepared the forecasts of operating expenses and revenues for the full year, taking into account results achieved year-to-date.

Table 1 summarizes the operating results for the period ending September 31, 2011, and the 2011 annual forecast. Transit Services has presented the operating results based on department and key expenditures rather than according to branch-by-branch cost categories. This approach enables a better understanding of the effect of expenditure and revenue drivers on the results regardless of the organizational structure of the department.

Overall, Q3 year-to-date results reflect a favourable variance of $1.4M (0.9%) as compared to a net budget requirement of $166.9M. The year-to-date operating results correspond to a decreased requirement of $1.2M for Conventional Transit Services and $256K for Para Transpo.

Transit Services forecasts that overall annual results will result in $2.1M, or 1%, higher net requirement as compared to budget. While conventional operations revenues, buoyed by increased ridership, will exceed budget by 1.1%, higher expenditures largely related to variances for fuel costs ($6.2M) and bus operators’ compensation ($5.4M) will result in an overall shortfall in 2011.

Table 1
Transit - Operating Budget	Q3 YTD Actuals 2011	Q3 YTD Budget 2011	Variance	% Change	Year End Forecast 2011	Year End Budget 2011	Variance	% Change
	('000's)
Expenditures
Operators	94,190	91,563	(2,627)	(2.9%)	124,276	118,926	(5,350)	(4.5%)
Maintenance	49,126	51,145	2,019	3.9%	64,990	66,810	1,820	2.7%
Fuel	28,848	24,653	(4,195)	(17.0%)	38,412	32,252	(6,160)	(19.1%)
O-Train Operations	2,787	3,117	330	10.6%	3,571	4,211	640	15.2%
Facility Operations	17,075	18,874	1,799	9.5%	22,592	26,147	3,555	13.6%
Operation & Cust Support	15,827	16,073	246	1.5%	20,454	20,854	400	1.9%
Mgmt & Admin	23,287	24,012	725	3.0%	30,685	31,460	775	2.5%
Contribution to Capital	43,332	43,332	-	-	53,249	53,249	-	-
Debt Charges	22,990	22,990	-	-	31,940	31,940	-	-
Pension Adjustment	6,075	6,075	-	-	8,100	8,100	-	-
Total Expenditures	303,537	301,834	(1,703)	(0.6%)	398,269	393,949	(4,320)	(1.1%)

Revenues
Revenue from Operation	(125,637)	(122,767)	2,870	2.3%	(169,138)	(166,908)	2,230	1.3%
One-Time Funding	(4,313)	(4,313)	-	-	(8,625)	(8,625)	-	-
Provincial contribution	(18,581)	(18,581)	-	-	(18,793)	(18,793)	-	-
Federal Contribution	(9,781)	(9,781)	-	-	(9,781)	(9,781)	-	-
Total Revenues	(158,312)	(155,442)	2,870	1.8%	(206,337)	(204,107)	2,230	1.1%

Net Requirement Conventional	145,225	146,392	1,167	0.8%	191,932	189,842	(2,090)	(1.1%)

Net Requirement Para Transpo	20,248	20,504	256	1.2%	27,310	27,310	-	-

Total Net Requirement	165,473	166,896	1,423	0.9%	219,242	217,152	(2,090)	(1.0%)

Financial Results Overview – YTD Q3; 2011 Forecast Results

The following is an explanation of the major variances between the YTD Q3 2011 actual and budget, and 2011 annual forecast and budget.

Fuel Costs

Fuel costs are higher by $4.2M, or 17.0%, than budget year-to-date. While the majority of budgeted volume is hedged in accordance with policy, a portion was subject to increased market prices ($600K) with increased fuel volumes accounting for the balance of the variance. A number of factors are related to the increased volumes, including: outdoor storage of buses upon opening of the new Industrial Garage, which shifts costs from facilities (building heating) to heating buses by fuel; lower fuel efficiency of the hybrid bus fleet; the introduction of high capacity buses with additional air conditioning; an overall higher proportion of high capacity vehicles over the previous year, which run at a lower overall fuel efficiency rate.

The newest buses are delivering on efficiency targets but the operational changes cited above are dominating the fuel variance.

Fuel costs will continue to exceed budget by $2.0M for the remainder of 2011 resulting from an additional ($480K) price impact and increased volume of 17.0% over what had been budgeted.

Annual results will be $6.2M or 19.1% over budget largely as a result of higher consumption subject to higher market rates. It should also be noted that this 2011 fuel budget includes efficiency and route optimization reductions of $4.5M.

Operators Compensation

Operators’ YTD Q3 compensation is higher by $2.6M (2.9%) compared to budget due to a shortage of drivers in the early part of 2011 followed by higher than expected costs due to lower than anticipated attrition rates.

Annual forecasted results are expected to continue to rise to $5.4M above budget additional due to lower than expected attrition in Q4.

Facility Operations

The facility operational expense was $1.8M under budget YTD Q3 due to lower compensation costs ($797K) related to the Q1 hiring freeze and vacant operating expensed positions, as well as, lower facility operating costs for supplies, hydro, repairs, maintenance, etc. of $1.0M.

Annual forecasted results are expected to be $3.6M below budget as a further $1.8M of savings due to lower compensation regarding vacancies with the balance due to lower facility repair costs and hydro expenses.

Maintenance Costs

While maintenance hours have increased over budget, Transit Services has seen a corresponding offset of other maintenance related expenditures, which have resulted in $2.0M of savings

Staff anticipates that the annual forecasted maintenance costs savings to be $1.8M.

Operation and Customer Support

The Operations and Customer Support Q3 YTD variance of $246K is the result of the following:

1. Increased insurance claim expenditures ($455k); and

2. Lower training costs due to timing of expenditure $150K, and other miscellaneous items $551K

Year-end expenditures in this area are forecasted to be below budget by $400K (1.9%).

Management and Administration

The Management and Administration YTD Q3 variance of $725K is mainly the result of the lower compensation costs due to Q1 hiring freeze, and subsequent vacancies. Annual forecasted results are expected to be $775K below budget again largely due to staff vacancies.

Revenue

Q3 YTD operational revenue exceeded budget by $2.8M, or 2.3%. This included a U-Pass student participation adjustment of $741K. Ridership continues to exceed budgeted levels, however, this is at a lower average fare rate as adult customers economize through the use of lower fare products and as university students increasingly use their U-Pass. Ridership numbers exceeded budget by 4.9%, however, the average fare rate was 2.4% lower than planned ($1.62/trip budget compared to $1.66/trip actual).

Ridership is expected to remain above budgeted levels for the balance of the year resulting in annual forecasted fare revenue of $2.2M or 1.3% above budget.

Capital Budget

Table 2 below is a summary of the capital program by category, which identifies the original capital authority amount approved, and amount spent in 2011, the project-to date amount spent and the overall percentage of capital spent. Specific details by projects are included in Document 1 appended to this report.

Table 2 - Summary of YTD Q3 Projects
	Description	Total Authority	2011 YTD Expenditures	Total Expenditures & Commitments		Percent Complete
GROWTH	Growth	259,687,000	232,950,000	243,355,000		93.71%
RENEWAL	Bus Replacement / Equipment	460,432,000	344,292,000	404,108,000		87.77%
	Facilities	47,014,000	10,904,000	16,142,000		34.33%
	IT Related	77,371,000	34,570,000	60,941,000		78.76%
	Other	8,930,000	3,238,000	5,326,000		59.64%
	O-Train	75,683,000	17,986,000	43,377,000		57.31%
	Transitway	21,407,000	6,775,000	10,101,000		47.19%
	Non revenue vehicles	4,946,000	1,808,000	2,407,000		48.67%
		695,783,000	419,573,000	542,402,000		77.96%
STRATEGIC INITIATIVES
	Strategic Initiatives	8,967,000	2,586,000	4,099,000		45.71%

Infrastructure Projects		80,730,000	54,646,000	66,897,000		82.87%

TMP Capital Projects etc.		4,740,000	787,000	1,078,000		22.74%
TOTAL		1,049,907,000	710,542,00	857,831,000	81.71%

2. OPERATIONAL PERFORMANCE

1 - Ridership

Strong growth in ridership continued through the third quarter. In September, it even exceeded the growth in employed labour force, an indicator closely tied to people's need to go places. This suggests that factors such as increasing gas prices and higher service levels in certain areas would have led to a net increase in transit market penetration. As anticipated, the route optimization changes introduced in early September did not have a net negative effect on ridership. Similar ridership growth is anticipated for October, which should lead to record-breaking year-end ridership level. Conventional transit includes regular transit (bus and O-Train), commuter transit and school transit, but not paratransit services.

2 - On-time Performance

On-time performance during the morning peak period, when people are the most sensitive to arriving at their destination on time, has inched upwards, just shy of 70 percent overall, in spite of major pressure on performance brought by the route optimization changes in September, to which both bus operators and customers have had to adjust. The afternoon peak period saw a small decline in operators being 'on time' compared to the previous two quarters, given the challenges of adjusting to the September service changes. Yet, significant improvements are noticeable year-to-year both for running on time (increased) and for not running early (decreased), during both morning and afternoon peaks. The route optimization adjustment period now over, on-time performance is expected to keep improving during the fourth quarter, especially given the nature of changes made in support of service reliability.

3 - Service Delivery

Service delivery remained at high levels throughout the third quarter, with July and August each achieving 99.7 percent of planned hours operated. September saw a slight decrease, mostly due to adjustments made in the context of the route optimizaiton changes, but remained above 99.5 percent. Increased employee engagement and new processes in both fleet maintenance and operations have led to much improved service availability during the third quarter as compared to the same period in 2010.

4 - Ride Comfort

The ride comfort score is established from anonymous observations made by mystery shoppers, whom OC Transpo uses to measure customer service quality and experience. The overall score decreased slightly to 92.7 during the third quarter of 2011. Of the three measures making up the ride comfort score, driving smoothly remained at 95 percent and not being aggressive to other motorists and to pedestrians was at 99 percent. Only the score for waiting for reduced-mobility customers to sit decreased, to 84 percent.

5 - Mechanical Failure Rate

7 - Operating Cost

The sharp drop in the mechanical failure rate from the first to the second quarter of 2011 was maintained during the third quarter. Compared to the same quarter in 2010, the mechanical failure rate has decreased by almost 27%. Also, the impact of mechanical failures on revenue service was much less severe than in the same quarter of 2010, with only 27% of mechanical failures causing service to be fully cancelled. New fleet maintenance processes and operations practices focus on increased service reliability.

6 - Operating Cost

The direct operating cost per vehicle-kilometre was the lowest in a year. Were it not for pension payments now allocated through the year, the direct operating cost per vehicle-kilometre would actually have been the same as during the third quarter of last year -- when pension payments were one-time transactions. The fuel cost per vehicle-kilometre increased by 8 percent over the same period in 2010, largely due to the 10 percent increase in fuel price. OC Transpo is embarking upon a multi-faceted fuel strategy in an effort to further improve fuel efficiency.

7 - Park and Ride Utilization

The actual number of park-and-ride users in the third quarter increased by more than 9 percent compared to the same period in 2010. The utilization rate dropped slightly however, because of the fact that park-and-ride capacity increased at a greater rate (over 10 percent). Most notably, capacity was increased at Fallowfield Station (640 more spaces than a year ago) and Leitrim Station opened this year (with almost 300 new spaces).

3. DELEGATED AUTHORITY

The Purchasing By-law requires the Supply Branch to report to Council on a quarterly basis. However, the Transit Commission Terms of Reference direct staff to report to Transit Commission on Transit Services’ delegated authority. Therefore, the delegated authority information contained in this report and in Document 2 relates only to Transit Services. Each quarterly report:

1. Contains information on contracts exceeding $10,000 awarded under delegated authority to Transit Services.

2. Identifies all contracts categorized as:

(a) Consulting Services

(b) Professional Services

(d) Amendments (A)

3. Identifies the reason for outsourcing in accordance with the definitions discussed below.

Document 2

The contracts approved for the period of July 1, 2011, to September 30, 2011, are listed in Document 2 of this report.

Where appropriate, staff used the following definitions as outlined in the Purchasing By-law to identify the contract category, the outsourcing reason and the non-competitive exception.

Professional Services

Professional Services means services requiring the skills of professionals for a defined service requirement or for a specific project related deliverable including but not limited to the areas of engineering, architecture, design, planning, information technology, financial auditing and fairness commissioners.

Consulting Services

Consulting Services means assistance to management, including but not limited to the areas of strategic analysis, organizational design, change management, policy development, feasibility studies and other services intended to assist decision making within the organization.

Reasons for Outsourcing the Work

The reason Consulting and Professional Service contracts are let is identified as follows:

(a) Workload related or lack of internal resources by a “W”;

(b) Need for specialized expertise by an “E”;

(d) Regulatory requirement by an “R”;

(e) Proprietary service or unique market position by a “P”; and

(f) Business model required outsourcing by an “O”.

Amendment

An amendment is an increase in the scope of an approved contract, which is unanticipated. Those amendments that are both greater than $50,000 and 50% of the original contract will be identified in the quarterly report.

Follow-on Contract

A follow-on contract differs from an amendment in that the original contract or bid solicitation document recognizes the fact that it is likely that the initial defined contract scope may be expanded to include a number of related phases that are either included in the tender document, or are customary in relation to the work assignment. Rates charged for the follow-on contract are reviewed by the Supply Branch, and must be based on those rates proposed by the service provider in the original competitive “bid”.

An extension to a contract is not categorized as an amendment or a follow-on contract. An extension is a contract term allowing the City to continue purchasing the good or service for an extended period of time where the option to extend the contract was outlined in the bid document, or is deemed to be in the best interest of the City.

Non-Competitive Purchases

22(1) The requirement for competitive bid solicitation for goods, services and construction may be waived under joint authority of the appropriate Director/General Manager and the Supply Branch and replaced with negotiations under the following circumstances:

(a) Where competition is precluded due to the application of any Act or legislation or because of the existence of patent rights, copyrights, technical secrets or controls of raw material,

(b) Where due to abnormal market conditions, the goods, services or construction required are in short supply,

(d) Where there is an absence of competition for technical or other reasons and the goods, services or construction can only be supplied by a particular supplier and no alternative exists,

(e) Where the nature of the requirement is such that it would not be in the public interest to solicit competitive bids as in the case of security or confidentiality matters,

(f) Where in the event of a "Special Circumstance" as defined by this By-law, a requirement exists,

(g) Where the possibility of a follow-on contract was identified in the original bid solicitation,

(h) Where the total estimated project cost for professional services does not exceed $50,000, or

(i) Where the requirement is for a utility for which there exists a monopoly.

Document 2 identifies all non-competitive purchases as well as references the appropriate subsection 22(1).

Supply Branch certifies that all the contracts awarded under Delegation of Authority for the period of July 1, 2011, to September 30, 2011, are in compliance with the Purchasing By-law.

RURAL IMPLICATIONS

N/A

CONSULTATION

N/A

COMMENTS BY THE WARD COUNCILLOR(S)

N/A

LEGAL IMPLICATIONS

There are no legal impediments to receiving this report.

RISK MANAGEMENT IMPLICATIONS

There are no risk management implications to implementing the recommendation in this report.

CITY STRATEGIC PLAN

There are no implications to the City’s Strategic Plan to implementing the recommendation in this report.

TECHNICAL IMPLICATIONS

There are no technical implications to implementing the recommendation in this report.

FINANCIAL IMPLICATIONS

Financial implications are addressed in the report.

Prior to a contract approval, Supply Branch staff confirms that the appropriate funds are available in the budget, based on receipt of a funded requisition in SAP. The availability of funds is a condition of approval under the Purchasing By-Law.

ACCESSIBILITY IMPLICATIONS

There are no accessibility implications to implementing the recommendation in this report.

SUPPORTING DOCUMENTATION

Document 1 OC Transpo Capital Projects

Document 2 List of Transit Services’ contracts with a value of $10K or more, awarded under delegated authority for the period July 1, 2011 to September 30, 2011.

DISPOSITION

Transit Services will begin preparation of Q4 Performance Report.