Union pans $2.6-billion contract to privatize federal heating, cooling

Private-sector consortium Innovate Energy has been awarded a $2.6-billion, 35-year contract by the government of Canada to modernize and operate heating and cooling facilities in the National Capital Region. But the largest federal public service unions are crying foul, saying public-private partnerships “regularly fail.”

The current system connects more than 80 buildings in Ottawa and Gatineau—including those in the Parliamentary Precinct—to central plants using more than 14 kilometres of underground piping to provide heating by steam and cooling by chilled water, according to the government’s website. Built between 50 and 100 years ago, the system uses outdated technologies and using components at the end of their service life.

Announced June 4, the public-private partnership will involve two phases. The first phase will include the design and construction of the new system at a cost of $1.1-billion, expected to last from 2019 to 2025. The second phase includes the operation and maintenance of the system valued at $1.5-billion, and includes costs around energy and fuel, according to the government’s press release. The government will continue to own the district energy system and Public Service and Procurement Canada (PSPC) employees will form a “stay back” team to monitor the contract. The department said it’s “working with unions to support employees as they transition to new opportunities.”

“The exciting thing about this project—how we heat and cool our buildings in the National Capital Region—is that it’s also a huge opportunity to tie in Lebreton Flats and other buildings,” said Environment and Climate Change Minister Catherine McKenna (Ottawa Centre, Ont.), in an interview at a separate announcement on World Environment Day on June 5. “That makes a real difference because it’s reducing emissions by 60 per cent in terms of how we heat and cool, so it’s great technology.”

Ms. McKenna said one of her top priorities as Member of Parliament for Ottawa-Centre is greening the capital and highlighting the river.

“One of the amazing things as well, is that they are actually taking down the building they are using right now for heating and cooling right beside the Supreme Court, said Ms. McKenna, referring to Cliff Heating and Cooling Plant. “They’re going to put it underground and then they’re creating a park.”

Ms. McKenna said the federal government needs to be taking a leadership role in tackling climate change and can be doing “a lot better” in terms of how it reduces emissions.

“This is very, very practical and is also a huge opportunity for other business and organizations to tie into [the new system],” said Ms. McKenna.

The investment is “just one more way the Government of Canada is greening the capital,” according to the press release, which will also allow the city, the community, and local business to tap into cleaner power.

Environment Minister Catherine McKenna and Liberal MP Will Amos announced plans to update federal heating and cooling systems in the National Capital Region on June 4. The plans include burying the plant behind the Supreme Court of Canada and turning the area into a park. The Hill Times photograph by Andrew Meade

Public service unions opposed to contract 

The announcement followed months of opposition by a number of public service unions, including the Public Service Alliance of Canada (PSAC) and the Government Services Union (GSU).

“We repeatedly asked the government to pause this decision and answer some important questions about the privatization of this critical infrastructure,” according to a written statement from Chris Aylward, national president of PSAC, and Randy Howard, national president of the GSU.

Their opposition to public-private partnerships “overall, and to this project specifically, is based on information, research and global evidence that [public-private partnerships] do not save money, do not provide service, and regularly fail,” they wrote, citing delays in the readiness of Ottawa’s light rail system and escalating costs in the Cobequid Pass toll highway in Nova Scotia, among other national and international examples.

Mr. Aylward and Mr. Howard wrote that Ms. McKenna and Mr. Mackinnon claim that they met with their representatives and addressed their concerns. “They are correct on one of these points—we did meet.”

“Their responses to our concerns however, did not provide fact-based answers to our concerns. They referred to documents—Value for Money studies, a business case and so on—but did not share those documents with us. For months our access to this information has been blocked,” the statement continues.

“Why is the government not prepared to share information that would back up its claim that this particular privatization is a good deal for Canadians, and a safe project for those who work and live in Ottawa,” wrote Mr. Aylward and Mr. Howard.

About 30 union members braced -20 C temperatures earlier this year on Jan. 28 to raise awareness of their Heat is On campaign, launched in early October 2018 “to stop the contracting out of five heating and cooling plant operations in the National Capital Region,” according to a PSAC press release. Members at the event collected more than 275 signatures for their petition to have the privatization stopped. At the time the government was still in the process of choosing between Innovate Energy or Rideau Energy Partners for the public-private contract.

Alex Silas, the alternate regional executive vice-president for PSAC, said at the time that his main concern was for the health and safety of members, of which there’s about 60, who work in both the plants and in the buildings.

The Cliff Heating and Cooling Plant was built in 1916 and was the site of a fatal explosion nearly 10 years ago in October 2009 when a boiler blew open, killing an engineer and injuring others.

Public Works and Government Services Canada (now PSPC) plead guilty to three charges under the Labour Code in the death of the worker in November 2012, and was fined $300,000 by the Ontario Court of Justice in July 2014 for numerous safety violations, according to reports from the Ottawa Citizen.

Private consortium consists of four partners

Innovate Energy, the consortium that won the contract over Rideau Energy Partners, includes ENGIE Services Canada, PCL Constructors Canada, PCL Investments Canada, and Black & McDonald.

The request for quotation (RFQ) process began in August 2017 and ended in December 2017, according to an email from PSPC spokesperson Charles Drouin. Following that process, the request for proposal (RFP) was sent in March 2018 to the pre-qualified candidates, with technical responses due in January 2019 and financial responses due in February of this year.

“Innovate Energy had the best technical proposal and the lowest price and met all of the mandatory design, architectural and engineering criteria,” wrote Drouin.

PSPC consulted extensively with industry experts, private sector advisors, and PPP Canada in determining, and evaluating, the range of project delivery options available to meet the Energy Services Acquisition Program objectives, according to Drouin.

PPP Canada was a Crown corporation created to promote public-private partnerships that was dissolved in in March 2018.

The government and the private partner will sign a project agreement that bundles design, construction, operation and maintenance obligations and clearly states roles and responsibilities.

Under the P3 model, the government “leverages the capacity, innovation, and expertise of the private sector to deliver a modern, efficient, cost-effective, and sustainable long-term energy services system solution,” wrote Drouin. “Moreover, the P3 model ensures that sufficient planning and funds are set aside for regular repair and maintenance, ensuring our assets remain in good condition and the safety of occupants and workers is maintained.”

Conservative MP Rob Nicholson (Niagara Falls, Ont.), his party’s PSPC critic, said in an email to The Hill Times that “Canada’s Conservatives will ensure that taxpayer money is being spent responsibly and effectively,” with respect to the Ottawa heating and cooling plant announcement.

“This includes ensuring the project costing analysis is accurate, all rules and regulations were followed, construction is completed on time and on budget, and that the energy sources are confidently reliable,” Mr. Nicholson said.

“Innovate Energy had been identified as the preferred proponent because of the consortium’s unique expertise, innovative approach and capacity to modernize and operate the district energy system at the best quality-price ration for Canadian taxpayers,” according to the consortium’s press release on June 5.

The four partners comprising Innovate Energy have not worked as a unit in the past, but have worked together in different combinations on various projects, according to Marie-Claude Cabana, director of communications and marketing with ENGIE Services Canada, in an email to The Hill Times. ENGIE and PCL have worked together on at least four projects, including Toronto’s Centre for Addiction and Mental Health. Black & McDonald were design-builders for numerous wind and solar generation projects throughout Ontario in collaboration with ENGIE as well, according to Ms. Cabana.

“During the design and construction phases, ENGIE is involved in design review of the new system that will convert the heating network from steam to low-temperature hot water,” Ms. Cabana wrote. “During this initial phase, ENGIE will operate the existing network, while optimizing its performance and meeting operational targets.”

ENGIE will then operate and maintain the modernized network during the operation and maintenance phase. The start date was officially May 29, with initial designs presented as part of Innovate Energy’s proposal. “These designs will be completed over the next few weeks in order to be ready when construction begins in 2020,” according to Ms. Cabana.

mlapointe@hilltimes.com

The Hill Times