Report to/Rapport au :

Transit Commission /

Commission du transport en commun

13 April 2011 / le 13 avril 2011

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 / Gestionnaire, Marketing et développement stratégique

Transit Services/Service de transports en commun

(613) 580-2424 x3672, vincent.patterson@ottawa.ca

REPORT RECOMMENDATIONS

That the Transit Commission:

1.         Receive the double-decker business case (Document 1)

2.         Delegate authority to the General Manager of OC Transpo to negotiate, with Supply Management and City Clerk and Solicitor departments, an agreement with Alexander Dennis Limited to procure double-decker buses and support services, and to maximize value-added opportunities within the $81.8 million budgetary envelope approved as part of Budget 2011.

RECOMMANDATIONS DU RAPPORT

Que la Commission du transport en commun:

1.         Prenne connaissance de l’analyse de rentabilisation pour les autobus à deux étages (document 1);

2.         Délègue au directeur général d’OC Transpo le pouvoir de négocier, avec la Direction de l’approvisionnement et la Direction du greffier municipal et chef du contentieux, une entente avec la société Alexander Dennis Limited en vue de l’acquisition d’autobus à deux étages et de services de soutien connexes, et de maximiser le potentiel de valeur ajoutée, à l’intérieur de l’enveloppe budgétaire de 81,8 millions de $ approuvée dans le cadre du budget 2011.

BACKGROUND

The 2011 OC Transpo Business Plan approved by the Transit Commission and City Council in March/April 2011 outlined a proposal to replace the oldest, lowest-capacity buses in the fleet (first-generation low-floor models) with 75 double-decker buses by 2012.  In Budget 2011, City Council authorized the allocation of $81.8 million to this project, conditional on the Transit Commission’s approval of a detailed business case analysis of the double-decker bus acquisition.

This report presents the results of that analysis.  It incorporates information – including customer and operator feedback – gathered through a three-year pilot project involving three Enviro500 double-decker buses in regular service.  While double-decker buses have been used for years in large cities around the world, including London, Hong Kong and Singapore, this report focuses on best practices and lessons gleaned through consultation with North American transit agencies that have operated Enviro500 buses, such as BC Transit, Go Transit and Community Transit in the Seattle area.

The analysis compares four different fleet replacement scenarios involving the acquisition of various quantities, different models of buses, and various delivery schedule options.  Not replacing the first-generation low-floor buses currently in the fleet is not a realistic alternative, as they are approaching the end of their useful life.

Based on this comparative analysis, staff have concluded that the Enviro500 is the right double-decker bus to meet OC Transpo’s long-term strategic objectives and savings while meeting our short-term operational needs.  The principal advantage of double-decker buses is that they carry more customers and offer more seating than any other bus type.  This increased capacity can be accomplished at about the same capital cost as a 60-foot articulated bus and in the same road space as a standard 40-foot bus.

The double-decker buses are particularly well-suited for use on OC Transpo express routes where seating availability is critical to attracting and satisfying customers, and on future feeder routes that will accompany the opening of the light rail line through the downtown core.  By reducing the number of buses needed to serve customer demands, the use of double-decker buses will substantially reduce operating costs and long-term capital costs.

Pilot Project History

In summer 2006, OC Transpo operated an Alexander Dennis Enviro500 double-decker bus to get a preliminary indication of customer reaction and operator feedback.  The results were very encouraging, and in August 2006 Council approved funding for further trial.  The trial included operations through the winter of 2006-2007 to gather cold weather testing information and an assessment of maintenance and storage facility requirements.  The results of the winter trial were satisfactory.

In June 2007, Council approved the purchase of three Alexander Dennis Enviro500 double-decker buses as part of the OC Transpo Fleet Acquisition Strategy (ACS2007-PTE-TRA-0009).  This purchase enabled the completion of an additional pilot project in 2009 and 2010.  As identified in the 2007 OC Transpo Fleet Acquisition Strategy, positive results during this pilot phase could lead to the potential acquisition of double-decker buses in greater numbers beginning in 2011 (40 in 2011, 37 in 2012 and perhaps more in the future), subject to future budget approvals.

This pilot project has been highly successful, confirming the suitability of double-deckers for their intended applications and providing specific requirements that will inform the configuration and operation of buses to be acquired.

OC Transpo’s own experience with the Enviro500 have been supplemented by consultation with BC Transit, GO Transit and Community Transit, which have been operating the same vehicle in Victoria, Kelowna, the Greater Toronto Area and the Seattle area for a number of years.  OC Transpo staff have also conducted detailed market research on customer and operator experience with the Enviro500.  This report integrates this information and analysis into a comprehensive business case that supports the recommended double-decker acquisition.

DISCUSSION

Business Case

This section summarizes the detailed business case analysis to support the acquisition of 75 new double-decker buses.  66 double-decker buses have been used as the base for the business case analysis because that figure represents an equal capacity of the 158 low-floor buses that are scheduled to be retired between 2012 and 2014.

Additional capacity (equivalent to that of nine double-decker buses) will be required to serve transit demand as ridership grows over the next few years. 

Complete details of the business case analysis are contained in Document 1.

Replacing the 158 first-generation low-floor buses in the current fleet, namely all 138 Orion VI buses and all 20 Novabus buses presents an opportunity to further reduce the diversity of bus models at OC Transpo, from 14 in 2008 down to four in 2012, and relieve pressure on maintenance capacity, efficiency, and the associated operating costs.  As indicated in the Review of Bus Fleet Maintenance and Standards Report (ACS2009-ICS-TRA-001) approved by Council in February 2009, OC Transpo has been working towards reducing the number of bus models within the fleet and reducing the overall age of the fleet.  These steps significantly reduce maintenance costs and streamline operations.

The business case examined four alternative scenarios:

•      Business as Usual – Gradual replacement with standard buses.  This involves removing the 158 Orion VI and Novabus buses from service on their planned retirement dates (20 in 2012, and approximately 70 in each of 2013 and 2014), and replacing them with 148 new standard buses over three years (the lesser number of replacement buses arises from their greater seating capacity).  This scenario serves as the baseline against which the benefits of Options 1, 2 and 3 are measured.

•      Option 1 – Accelerated replacement with standard buses.  This involves retiring all Orion VI and Novabus buses in 2012, and replacing them with 148 standard buses.

•      Option 2 – Accelerated replacement with articulated buses.  This involves retiring all Orion VI and Novabus buses in 2012, and replacing them with 84 articulated buses.

•      Option 3 – Accelerated replacement with double-decker buses.  This involves retiring all Orion VI and Novabus buses in 2012, and replacing them with 66 Enviro500 double-decker buses.

The business case analysis considered several major parameters to ensure comprehensive identification and consideration of all significant impacts of double-decker acquisition.  Each of the following parameters is discussed in greater detail in Document 1:

•      Service design - OC Transpo faces a defined set of operational needs related to its express route services, as well as the construction and operation phases of the light rail project. Factors considered include bus length and total and seated passenger capacities.

•      Procurement - Factors considered include purchase costs, quality assurance during production, setup of the PRESTO fare system, and residual value of retired buses.

•      Operations - Factors considered include operator salaries, operator training, fuel consumption, vehicle licensing and advertising revenue.

•      Smartbus - Factors considered include integration of recently implemented IT projects such as automated next stop announcement and future IT initiatives such as PRESTO and Next Bus (GPS enhancements).  

•      Fleet maintenance - Factors considered include tire replacement, running repairs, major repairs (engine, transmission, structural) and spare parts.

•      Facilities - While double-deckers would fit in the new Industrial Garage and could be serviced there, factors considered include specific garage modifications and additional maintenance of both Transitway and public roads.

•      Infrastructure clearance - Factors considered include options for technological prevention and warning systems or infrastructure modifications at three locations on Ottawa roads where there is currently insufficient clearance to overhead structures.

•      Customer and operator experience - Factors considered include accessibility features and customer and operator input on a range of double-decker feature/service issues (boarding and exiting, circulation and passenger monitoring, security, speed, comfort, enjoyment) raised in focus groups of frequent users, on-board interviews and an online survey.

•      Environmental sustainability - Factors considered include greenhouse gas emissions and support to cycling as an active mode.

Financial Analysis

A net present value (NPV) analysis was also completed for each of the three options. An NPV analysis is a standard tool which allows organizations to assess which is the better project among two or more competing projects.  In this case, the cash outflows that would be incurred over the life of the options was forecasted and discounted based on the city’s borrowing rate.

The financial analysis calculated an estimated savings of $10 million per annum of operating costs, which were included in the OC Transpo 2011 Business Plan.  With debt financing required to 2015, the net savings from the acquisition will be $2.5 million in 2012 (implementation in September), $6 million per annum from 2013 – 2015, and $10 million per annum from 2016 to 2027.  

These savings can be attributed to a reduction in maintenance costs, bus part acquisition, fuel consumption and service hours.  Further financial analysis can be found in the Finance Implications section of this report and in Document 1.   

The business case confirms that Option 3 – Accelerated Replacement with Double-Decker Buses is the best strategy moving forward and aligns with the long-term directions set by Council for transit, including improved service, as well as the creation of efficiencies and a foundation for long-term sustainability.  These long-term directions can be found in the 10-Year Tactical Plan, 2011 Business Plan, and fleet acquisition strategy reports.

Option 3 provides a significant step towards sustainability by reducing the number of bus models in the fleet, improving greenhouse gas emissions, reducing fuel consumption, and increasing bus availability and reliability.

Most importantly, Option 3 provides the highest level of customer service for riders of OC Transpo.

The table below summarizes the results of the financial analysis that is detailed in Document 1.

Procurement Approach

The acquisition of Alexander Dennis double-decker buses aligns with the approved 2007 OC Transpo Fleet Acquisition Strategy.

As was the case at the start of the pilot project, OC Transpo has confirmed that Alexander Dennis is still the only vendor of market-ready double-decker buses for regular urban transit service in North America.  Further, they are the only buses that can be purchased on an accelerated basis; other vendors of double-decker transit buses in the global market face a lengthy process of redesign (e.g. for left-hand drive), testing and certification to meet regulations before delivering a version suitable for Canadian use.  Even then, another pilot project would be warranted before OC Transpo could consider procurement. 

The intent of the double-decker pilot project was to test and evaluate the Alexander Dennis Enviro500 bus, rather than double-decker buses in general.  From the beginning of the pilot project process, and conditional on its success, OC Transpo intended to purchase more of these buses – 40 for delivery in 2011, 37 in 2012 and perhaps more in the future.

The accumulated experience with Enviro500 buses during the pilot project by maintenance staff, bus operators and OC Transpo customers will allow staff to negotiate an optimal bus specification and configuration that balances operational needs, customer desires and financial value. This experience is supplemented by consultations with Canadian transit systems that have multiple years of experience with the Enviro500 bus and who give it equally favourable reviews.

Staff are recommending that a negotiated procurement process be followed to ensure that the double-decker buses are placed into service as quickly as possible.  The financial benefit of replacing first-generation low-floor buses with double-deckers is about $800,000 per month in reduced operating costs alone ($9.6 million annually), and also 22 per cent higher than that of a similar-capacity fleet of articulated buses, making rapid procurement a valuable goal.

A negotiated process would also allow staff to leverage the inclusion of extra value in the purchase, including enhanced products and services consistent with the improved transit maintenance and supply chain business model (e.g. extended warranties, program review, onsite representation, parts inventories) as well as the retrofit or replacement of the three pilot buses so that all double-deckers in service have an identical configuration.

The City gained valuable experience negotiating the addition of value-added items into its existing contract with New Flyer as part of its acquisition of 306 New Flyer buses in 2010, including a maintenance program review, an onsite representative and kitted and consigned parts technology. Staff recommend a similar approach for the acquisition of double-decker buses from Alexander Dennis Limited.

Before purchasing, staff will work with Alexander Dennis to identify the features required to make this fleet of buses optimal to our market (including bike racks, etc) based on feedback received from our operators, maintenance staff and customers.

RURAL IMPLICATIONS

There are no rural implications.

CONSULTATION

N/A

COMMENTS BY THE WARD COUNCILLOR(S)

N/A

LEGAL/RISK MANAGEMENT IMPLICATIONS

In accordance with Article 21(1)(c) and (d) of the Purchasing By-law 2000-50, as amended, the requirement for competitive bid solicitations can be waived:

c)         where only one source of supply would be acceptable and cost effective; and

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.

CITY STRATEGIC PLAN

The Double-Decker Business Case directly and indirectly supports the following objectives of the Strategic Plan.

A1.      Improve the City’s transportation network to afford ease of mobility, keep pace with growth, reduce congestion and work towards modal split targets.

I4.        Become a financially sustainable city

TECHNICAL IMPLICATIONS

N/A

FINANCIAL IMPLICATIONS

The financial analysis conducted as part of the business case (Document 1) substantiates the choice of the double-decker buses as the most favourable fleet replacement option.  The financial analysis also confirms the estimated savings of $10 million/annum of operating costs which were included in the OC Transpo 2011 Business Plan (Table 3 – Double-Decker bus acquisition net savings) submitted in February, 2011, to the Transit Commission and Council.  With debt financing required to 2015, the net savings from the acquisition will be $2.5 million in 2012, $6 million per annum from 2013 – 2015, and $10 million per annum from 2016 to 2027.  

As part of the 2011 Budget, capital authority of $81.8 million was approved by Council for the purchase of double-decker buses and related infrastructure requirements subject to a positive detailed business case. Capital cost estimates per the business case financial analysis are in line with the capital budget authority.

SUPPORTING DOCUMENTATION

Document 1 - Double-Decker Business Case

DISPOSITION

With the delegated authority for the $81.8 million budgetary envelope approved as part of Budget 2011, staff will proceed to purchase 66 replacement and 9 growth high-capacity double-decker buses, and implement the capital and operating changes required to manage and maintain this double-decker fleet, including modifications to facilities, addressing infrastructure clearance and internal bus configuration.