Meeting Date: July 16, 2003

Subject: Procurement Authorization - Option To Purchase 250 40-Foot Low Floor Clean Diesel Buses From Orion Bus Industries - Contract C32y01883, Amendment #3 


It is recommended that the Commission:

1. Authorize staff to exercise the contract option with Orion Bus Industries of Mississauga in an amount not to exceed $136,000,000 for the purchase of 250 40-foot low floor clean diesel Orion VII buses for delivery in 2005, subject to approval by Council of the City of Toronto, and

2. Forward a copy of this report to the Council of the City of Toronto for approval of funds, and project commitment in an amount not-to-exceed $136,000,000 to cover the purchase and in-house costs for the procurement of 250 40-foot low floor clean diesel buses for delivery in 2005, and

3. Note that this procurement is based on the approved bus fleet plan and the 2003-2007 Capital budget program approved by the Council of the City of Toronto on February 26, 2003, and


Sufficient funds for the purchase of 250 40-foot low floor clean diesel buses in 2005 were included in the 2003-2007 Capital Budget as shown in Section 4.11 Purchase of Buses under Project 6816 – Replacement of 40-foot. Diesel Buses or equivalent (pages 705 – 713),under the category of State of Good Repair/Safety approved by the Council of the City of Toronto on February 26, 2003.


In a report submitted to the Commission on August 29, 2001 it was proposed to purchase 509 forty-foot low floor diesel buses to address the need for replacement buses through the period of 2003, 2004 and 2005. After further review an updated report was submitted to the Commission on September 25, 2001 wherein funding approval was sought in the amount of $278 Million to purchase the 509 buses previously discussed.

A request to assign an award to Orion Bus Industries for the purchase of only 220 buses for delivery in 2003 and 2004 and an option for the purchase of 250 buses in 2005 was presented at a meeting of the Commission on November 28, 2001 and subsequently approved by the Council of the City of Toronto on December 5, 2001. This revised plan resulted in 39 fewer buses being proposed for procurement over the three year period.

An option for the purchase of 250 Orion VII’s identical to those contracted for delivery in 2003 and 2004 was included in the agreement with Orion. The pricing was considered to be very competitive for the initial 220 buses and would hold for the purchase of additional buses, except for a contractual agreement with Orion that an adjustment would be made to reflect the Producer Price Index for Series ID 1413 Trucks and Buses prepared by the US Department of Statistics. It was agreed that the adjustment would be calculated for the period between October 1, 2003 and the scheduled delivery dates for each bus. While the effect of the adjustment cannot be accurately estimated at this time, a review of the current trends by staff leads us to believe that the overall blended escalation factor for the period will be approximately 4%.

The estimated total value of the project for the purchase of 250 Orion VII diesel buses, including related in-house costs is not expected to exceed $136 Million due to the GST rebate that will be received after completion of the project. Project costs, in addition to the cost of the buses, includes adjustments for the GST rebate, in-house engineering and administrative costs, in-plant and receiving inspection, preparation for service and travelling expenses to the manufacturing facilities and an allowance for contract changes.


The Capital Budget for the period 2003-2007 approved by the Commission on November 15, 2002 and the Council of the City of Toronto on February 26, 2003 included the current Bus Fleet Plan as part of the support documents. The plan indicated the purchase of 250 low floor clean diesel buses in 2005. During the negotiations with Orion Bus Industries for the supply of 220 buses to be delivered in 2003 and 2004, agreement was reached to include an option in the contract for the purchase of an additional 250 buses for delivery in 2005. The price agreement reached for the purchase of the initial 220 Orion VII’s was deemed to be very reasonable, therefore staff believed it was prudent to include an option for an additional 250 buses at the same price with provision for an adjustment based on a Price Index generated by the U.S. Department of Statistics and used frequently in the transportation industry to reflect fair escalation factors for truck and bus products. Increasing the number of Orion VII’s in our fleet will lead to commonality of parts, maintenance practices and vehicle configuration, bringing improved efficiencies to our bus operation.

The Commission is in desperate need of new buses to replace the older vehicles in our ageing fleet. Our approved fleet plan includes the procurement of 250 buses in 2005 and does not provide for any contingency buses. Upon delivery of these buses in 2005, the buses to be retired will include a group of ninety five 25 year old GMC New Look Buses and one hundred and twenty seven 18 year old Model D901 Flyers.

It is essential that replacement buses are procured at the earliest possible date. Since the option pricing is deemed to be fair and reasonable in the marketplace, and since all 250 buses can be delivered in early 2005, staff recommends that the Commission exercise the option in the contract with Orion so the program can be entered into their production schedule to prevent any delay in delivery.


The Commission’s bus fleet is an average of 14 years old, as compared to 8 to 10 years at most other Ontario transit properties. It is essential that replacement buses be ordered immediately to ensure delivery of new buses as early in 2005 as possible.

The negotiated price of Orion VII buses is very reasonable and it is recommended that the option in the current contract with Orion Bus be exercised to take advantage of the favourable price and the related benefits of a common model in our fleet.

June 30, 2003


Attachments: Bus Fleet Plan 2003-2007 – Pages 705-722 from TTC 2003-2007 Capital Program Commission Presentation – October 23, 2002