LRT settlement gives builders millions in back pay, keeps their contract

The City of Ottawa is retroactively paying the consortium that built the Confederation Line millions of dollars for maintaining the LRT network as far back as the start of service in 2019, CBC has learned.

The money is part of a settlement package between the city and Rideau Transit Group (RTG) that puts to rest a number of disputes, including disagreements over maintenance payments.

It could be a turning point in the often-fractious relationship, as it makes good on a key recommendation in the light rail public inquiry report which urged the two parties to repair their partnership. 

However, most of the details of the settlement remain secret. 

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On a number of occasions over the troubled life of the east-west light rail line, city leaders — including former mayor Jim Watson and former transit boss John Manconi — told the public the city was not paying RTG for maintenance due to poor service. 

Now, according to CBC sources familiar with the deal, the city has agreed to pay a portion of the $65 million withheld from RTG's maintenance arm from September 2019 to the end of 2022.

No getting out of $1B maintenance contract

The consortium — comprised of SNC Lavalin, ACS Infrastructure and Ellis Don — has also made concessions in the settlement package, CBC has learned, including promising to hire about a dozen more people by spring to provide more service to the city.

A key part of the deal is that it puts to rest the issue of default, a legal term indicating the group of companies wasn't living up to its contract with the city.

Ottawa served RTG with two separate notices of default: one in March 2020 due to a litany of problems that arose after the Confederation Line's launch and one in the fall of 2021 connected to derailments.

The city escalated the notice over the derailments to court in December 2021, asking a judge to confirm the default — an official step needed in the process for breaking the 30-year maintenance contract.

That's all over now.

In a densely worded legal statement the two sides released 10 days ago, RTG acknowledged it had not lived up to the contract, ending the need to keep arguing the point in court. The statement also said the settlement "resolves" the city's notices of default against RTG.

That means even though RTG finally agreed it breached the contract after years of legal fighting, the city has in turn also agreed to no longer consider RTG in default, thus closing the door on getting out of the $1-billion maintenance contract.

Instead, according to last month's statement, the city has accepted RTG's "rigorous plan to address the issues that led to the derailments" and is committed to the "sustainable resolution of these issues" on the light rail vehicles before the Confederation Line's eastern extension opens in early 2025. 

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However, there is currently no plan for a long-term fix of the Confederation Line. As well, 18 months after a light rail vehicle derailed at Tunney's Pasture station when a wheel broke off the axle, RTG still has not produced a report on the possible root cause. 

According to an email to CBC from OC Transpo head Renée Amilcar, the city and RTG have been working together on a plan for months and that "work is still underway. " 

That plan will be presented to a new light rail sub-committee "when practicable," wrote Amilcar. There is no date scheduled for its first meeting.

Council gave deal the green light 

On Jan. 25, the relatively new city council got a private five-hour update on the legal dispute.

When council members emerged, they unanimously approved a motion directing staff to finalize a settlement with RTG, one that was "not to be reported out publicly" as it concerned litigation and was covered by "solicitor-client and settlement privilege."

Two days later, the city and RTG finalized their deal and released their joint statement.

Asked for comment last Friday, Mayor Mark Sutcliffe's office sent a statement Sunday evening, confirming that a "limited portion" of the $65 million held back in maintenance fees will be paid to RTG.

The statement reiterates that the terms of the deal are confidential and that no members of council "can speak about its components, including the financial terms."

"However, it's important to remember that the mayor and councillors are elected to protect the interests of the City of Ottawa," the statement said. "And after a careful examination of the terms, the settlement was approved unanimously by council."

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There is still ongoing litigation between the city and RTG over costs related to the delays in handing over the Confederation Line, which was 15 months late.

City won't say if maintenance contract changed

CBC asked on Jan. 12 what RTG and its maintenance arm had been paid from the beginning of the LRT handover back in August 2019. 

The city refused to say.

On Jan. 18, an email attributed to Troy Charter, OC Transpo's director of transit service, stated that invoices for maintenance from September 2019 to March 2020 were "under review" and that the city had made service payments for the months spanning April 2020 to August 2022.

The invoices for the rest of 2022 were still being finalized, according to the email.

When CBC specified again that it wanted the actual amounts RTG had already been paid for maintenance to date — not including any that arose from a possible future settlement — the city declined to respond.

City officials have also refused to say if they've changed how they're measuring the Confederation Line's performance as part of the settlement agreement.

RTG receives about $4 to $5 million a month in maintenance fees from the city, subject to deductions related to how well the LRT ran that month. RTG is also assigned "failure points" for everything from trains not being available to system failures such as the derailments. 

It is not clear whether the city has changed any of the metrics it previously used to grade RTG's maintenance performance.