City takes next step in breaking 30-year contract with RTG
City asks court to confirm RTG is in default so it can exercise its options, 'including termination'
The city has taken the next official step toward breaking its 30-year maintenance contract with the constructors of the Confederation Line.
In September, the city issued a second notice of default to the Rideau Transit Group (RTG) — the consortium comprising SNC-Lavalin, ACS Infrastructure and Ellis Don — after two trains derailed in as many months. A notice of default is the city's official mechanism for claiming RTG failed to live up to its contract.
After failing to resolve their dispute over the past few months, the city is now asking the court to confirm RTG is in default of the project agreement so that "the city can appropriately exercise its options under the project agreement, up to and including termination," according to the notice of application the city filed in Ontario Superior Court on Wednesday.
The maintenance contract is worth about $1 billion.
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The city's version of events in its dispute with RTG has not been proven in court, nor has RTG responded publicly yet to the court filing. However, if a judge confirms the city's application, Ottawa could be on its way to breaking its contract with Rideau Transit's maintenance arm.
The city's latest move in its on-going dispute with RTG is sure to be a key subject in the in-camera legal briefing for the Confederation Line being held for councillors this Friday morning.
Although the application is an incremental step in the contract battles, the 17-page document paints a dire picture of RTG's performance since the Confederation Line was opened in September 2019.
"The Confederation Line has been plagued with significant problems resulting from RTG's failures to comply with its contractual obligations since the launch of service in the fall of 2019," the court application states.
In fact, the LRT performed so poorly in its early months that the city could have applied to break the contract before the end of 2019, according the document.
Apparently, RTG "had exceeded the failure points threshold" needed for a default under the project agreement within months of opening.
RTG receives about $4 to $5 million a month in maintenance fees from the city, but that payment is subject to deductions related to how well the LRT ran that month. As well, RTG is assigned "failure points" for everything from trains not being available to system failures, like the derailments.
The application argues RTG breached the failure points threshold in three ways under the project agreement:
- By incurring more than 1,300 or more failure points in any three months
- By incurring 1,600 or more failure points in any six months
- By incurring 2,000 or more failure points in 12 months
RTG must have breached these thresholds a number of times. Consider, for example, that for the August derailment alone, RTG accumulated 2,825 failure points — 2,405 points for a "systems" event and another 420 for a lack of available trains during the month.
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The city sent RTG a notice of default in March 2020 after door-and-train reliability issues, switch heater failures, wheel flats and sparking on the overhead catenary system — to say nothing of the incident where an 8-metre swath of cable was somehow pulled down.
"To date, RTG has not fully remedied all the 2020 defaults," according to the document.
However, none of those issues are part of the court application the city filed this week and were included as "context."
Instead, the city is asking the court to consider RTG's failures related only to the August and September derailments.