Item - 2025.GG26.35

The General Government Committee recommend that: 

1. City Council authorize the Executive Director, Corporate Real Estate Management, in consultation with the Chief Procurement Officer, to execute any necessary purchase order amendments, once a construction management agreement(s) has been executed after holding an open, competitive procurement process, with a value exceeding $500,000 or more than 10 percent of the original commitment, for which Committee or City Council approval would normally be required under City of Toronto Municipal Code Chapter 71 (Financial Control By-law), and City of Toronto Municipal Code Chapter 195 (Procurement) for the provision of construction and professional services needed and to carry out any necessary pre-development, pre-construction, construction, renovation or conversion of properties for the development of George Street Revitalization, provided that:

a. the purchase order amendment is necessary to meet the timelines of the George Street Revitalization Project;

b. the funds are available for the George Street Revitalization Project and funded through the Council approved Capital Budget and Plan;

c. the terms and conditions of any amending agreements are acceptable to the Executive Director, Corporate Real Estate Management in a form satisfactory to the City Solicitor; and

d. a report summarizing any amendments made under this authority is submitted to the appropriate Committee and / or City Council for information on an annual basis.

2. City Council authorize the Executive Director, Corporate Real Estate Management, in consultation with the Chief Procurement Officer to include Risk and Reward incentive contract provisions in the construction management agreement(s) for the George Street Revitalization Project, provided that the terms and conditions of the construction management agreement(s) enable the implementation of the Construction Manager at Risk delivery model; and that the terms and conditions of the construction management agreement(s) are acceptable to the Executive Director, Corporate Real Estate Management and in a form satisfactory to the City Solicitor.

3. City Council authorize the City Solicitor, in accordance with Section 195-7.1 (P.) of the Toronto Municipal Code Chapter 195, Procurement, to enter into, and execute a non-competitive retainer agreement with Blake, Cassels and Graydon LLP for the provision of legal services to support the drafting, negotiation, and execution of necessary construction management agreement(s) for the George Street Revitalization Project, in the amount of $480,000 net of all applicable taxes and charges ($488,448 net of Harmonized Sales Tax recoveries), on terms and conditions satisfactory to the City Solicitor in consultation with the Executive Director, Corporate Real Estate Management, and in a form satisfactory to the City Solicitor.

The George Street Revitalization Project is a signature initiative of the Downtown East Action Plan, defined by its integration of shelter services, a long-term care home, supportive housing with wrap-around services, and a community hub - providing a continuum of care on a single site.

In April 2025, City Council approved a two-phased City-delivered approach to procurement and implementation for the George Street Revitalization Project, in alignment with the approved budget. Through value engineering, the City is advancing Phase 1 as a City-led development that delivers key program components while preserving three heritage properties, a semi-detached residence (two units), and a schoolhouse.

This report outlines the Construction Manager at Risk delivery model that will be used to ensure Phase 1 of the project is delivered within the approved capital budget and schedule, and seeks the following delegated authorities to enable the Construction Manager at Risk delivery model:

1. execute the Construction Manager at Risk agreement(s) for George Street Revitalization Project implementation, and perform purchase order amendments for the project duration to avoid delays and exposure to market fluctuations;

2. include Construction Manager at Risk Risk and Reward provisions in the construction management agreement(s); and

3. enter into a non-competitive retainer agreement for external legal counsel to support the execution of the construction management agreement(s).

The Construction Manager at Risk model is an industry-recognized approach, especially beneficial for complex, multi-phase developments, that provides greater cost certainty before construction begins and enhances owner oversight. Under this model, the competitively procured construction manager assumes financial responsibility for delivering the project within an agreed guaranteed maximum price, thereby shifting a portion of project risk away from the City.

Part of the success of the model relies on incorporating real-time market pricing, by tendering trade contracts competitively in sequence prior to the commencement of each phase of the project. The authorities sought in this report would eliminate the need for Council and / or Committee authority for each purchase order amendment tied to a trade contract, allowing timely execution of trade contracts and adjustments necessary to finalize the guaranteed maximum price, and mitigating the risk of delays and exposure to market volatility.

Risk and Reward provisions are also a key to the Construction Manager at Risk model and establish performance-based incentives and penalties that align the construction manager's financial interests with the City’s objectives for cost control, schedule adherence, and high-quality outcomes. The model is increasingly adopted in the construction industry as a strategy to manage ongoing market fluctuations and volatility following the COVID-19 pandemic, and authorities are being sought to include these provisions in the contract.

Staff are also seeking authority to enter into a non-competitive retainer agreement with Blakes for the provision of legal services to support the drafting, negotiation, and execution of necessary construction management agreements for the George Street Revitalization Project. On account of the magnitude, complexity, and time sensitivities of the George Street Revitalization Project, external legal counsel is necessary. Given this is the first City-led Construction Manager at Risk delivered project, unique features, not typically found in City contracts, need to be developed to support the City’s objectives and optimize the Construction Manager at Risk model. Blakes also has a long history with the George Street Revitalization Project and can provide precise insights and advice on account of their experience with the complexities and challenges that have, and will continue to, present themselves. It is essential to execute this agreement on an expedited basis to avoid delays and maintain the George Street Revitalization Project schedule.