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City inks $16M deal for eight-year snow-clearing contracts

Long-term contracts were recommended in recent audit of winter control services

The city will lock in a trio of eight-year contracts for snowplowing services at a cost of just over $2.1 million per year, with options for two single-year extensions on each of the three contracts.

Meeting Tuesday, the Finance and Administration committee voted unanimously in favour of the three contracts that will provide on-demand snow removal service for up to the next 10 years. The contract now goes to council for final approval.

Pioneer Construction Inc. was awarded one of the contracts at an estimated annual cost of $980,000, while Belanger Construction Inc. was awarded two contracts at an estimated annual cost of $598,000 each.

The city's current operational model for snow clearing is that 42 per cent of the city's roadway snowplowing routes are completed by city personnel, with the remaining 58 per cent cleared by contracted services.

That remaining 58 per cent that is contracted out is broken down into three different areas around the city, hence the three separate contracts. 

The largest of the city's three current snowplowing services contracts is scheduled to expire at the end of this winter season, on March 31. In response to that, city staff prepared a tender that included the procurement of 22 new multi-function trucks that can be used on an "on demand" basis for winter road maintenance within the city.

The current contract was subject to a fixed rate for the first five years, and a consumer price index (CPI) increase in each of the two option years.

Ward 4 Coun. Geoff McCausland raised an eyebrow to the length of the contract, questioning whether it was common in other municipalities to hire snow removal services for such a length of time.

"Eight-year contracts seem somewhat long. Do the contractors benefit from those trucks throughout the year, and what other cities provide similar length contracts?" McCausland asked Randy Halverson, the city's director of linear infrastructure services.

"I don't have any statistical information that would demonstrate other municipalities that use eight-year contracts," said Halverson. "This objective aligns with the recent audit that was completed in mid-2019 associated with our winter control services that suggested that we go out and secure pricing for an eight-year and a five-year term, specifically an eight-year term to line up better with the life expectancy of the plows."

McCausland was also curious as to whether the contracts included anything to address changes and increases to snow removal contractor services that has been a factor in the city consistently blowing its snow removal budget.

"The contracts are really the largest portion of our contract services as it relates to snowplowing services," said Halverson. 

"We've employed, over the years, several pieces of technology to help us with the efficiency of the operation; items like AVL (automatic vehicle location) technology, intelligent routing technology that we've placed on our contractor trucks as well as our own fleet, have given us the opportunity to best utilize those services. We're constantly looking at ways to optimize and best utilize these services."

The contract services portion of the city’s current winter control plan utilizes an on-demand approach and as such the costs can fluctuate significantly based on weather events. 

The budget is formulated based on contract rates and average utilization. The 2020 financial results will vary depending on the weather, however the average 13-per-cent rate increase could lead to a $125,045 deficit for the November and December periods of 2020, when the new contract takes effect. 

This figure is estimated using the 2020 budgeted hours per truck under the current contract. Using the same approach, the updated unit pricing will be incorporated into the 2021 base budget and could result in an approximate $357,000 increase to the 2021 budget for plowing and standby costs.

Over expenditures resulting from winter control activities are typically funded from the Winter Control Roads Reserve Fund. This reserve was depleted as of Dec. 31, 2018 and any over expenditures for 2020 (in winter maintenance) will form part of the year-end position and may be funded from the Tax Rate Stabilization Reserve.

Matt Durnan

About the Author: Matt Durnan

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