The Development Agreement

Long-Term Care Home Renewal Branch October 2016

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Learning Objectives

By the end of this session, you will have a solid understanding of: • The description and purpose of a Development

Agreement (DA), and how it is executed. • Outline milestones and deliverables of the

construction project described within the DA. • Significant differences between a General

Contractor (GC) and a Construction Manager (CM). • This presentation is for general convenience – for

full detail and a definitive description of rights and obligations see the DA itself.

Agenda

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Description and Purpose of a DA

DA Preparation and Execution Process

Construction Manager (CM) vs General Contractors (GC)

General Contractor Milestones and Deliverables

Construction Manager Milestones and Deliverables

Questions

Development Agreement: Description and Purpose • The DA is a legal document signed by the operator and the

Ministry of Health and Long-Term Care (the ministry) that states the terms and conditions for redevelopment projects that operators must comply with in order to receive a Construction Funding Subsidy (CFS) per diem under the Construction Funding Subsidy Policy for Long-Term Care Homes, 2015.

• After a LTC home operator is approved into the Enhanced Strategy, a DA must be prepared and fully executed before the project can proceed with an assurance of funding (subject to meeting the conditions in the DA). o The operator must work with their assigned Project Manager

(PM) to provide the detail necessary for the ministry to draft the DA.

• Without an approved DA in place, construction cannot begin.

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DA Execution Process

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Confirmation of Project

Details Preparation of the DA

Operator Review and Signature

Minister Review and Signature

• PM must confirm the project details and schedule, with the operator.

• Operator may need to contact their architect for a project schedule.

• The ministry’s legal team prepares the DA based on standard template

• Operator and the operator’s legal team review and operator signs DA.

• The Minister then reviews and signs the DA (and it is then considered “fully executed”.)

Planning Grant for Non-Profit Homes • The Planning Grant will be provided to eligible non-profit operators

(e.g. charitable, not-for-profit, municipal) to cover $250,000 per project for costs associated with organizing and preparing for the redevelopment project.

• The eligible operator will receive this one time grant after the Development Agreement is fully executed.

• Eligible expenses include professional or consultant services (e.g.

an architect, engineer, project manager) and must be incurred before construction starts and within two years prior to construction start (or back to the execution of the DA if that was earlier).

• A Planning Grant may be provided only where no grant of this type has previously been provided to the Operator in respect of the redevelopment of the home, or in respect of any other LTC home at the same location.

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Construction Manager (CM)? General Contractor (GC)? What’s the Difference?

• Contractually responsible to the Operator for the entire construction work of the project.

• Takes overall responsibility for the project; may perform work itself or hire sub-contactors and supervise the work.

• Public Tender after the Working Drawings have been approved

• Selection of GC must be approved by the Minister

• Plans, coordinates, and controls construction of project.

• The Operator (not the CM) hires/selects subcontractors for a project, with assistance of CM.

• Public Tender required, but selection of CM does not require Minister approval.

• Minister approval of selection of at least first publicly tendered subcontractor is required.

• CM bid may include an option to convert contract into a stipulated sum contract

Development Agreement Milestones and Deliverables General Contractor

Process of proceeding through Construction with a General Contractor

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Site Approval

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New LTCH Site

If a Site has not been identified in the application:

Land Purchase Agreement / or 30+ year Lease

Agreement

Minister Approval of site

for the LTC Redevelopment

Zoning - permit the operation of

a Long-Term Care home

Preliminary Plans Ministry Approval

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Development Agreement Executed

Site Approved (if needed)

Submission of the Preliminary Plans

Operational Plans (if required)

Review by Technical Specialists

PP not approved • Letter from the

ministry Approved PP • Approval Letter on

behalf of the Minister

Working Drawings Ministry Approval

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Requirements Addressed

Preliminary Plans Approved

Operational Plans (if required)

Review by Technical Specialists

WD Not Approved: • Letter from the

ministry Approved WD: • Approval Letter on

behalf of the Minister

Begin Tendering Ministry Approval Procurement for Construction

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Minister Approval to

Begin Tendering

Preliminary Plans

Working Drawings

Operational Plans (if

applicable)

Material to Support Request for Approval to Award

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3 Bids

• 1 Proposed Successful Bid • 2 Alternate Bids

FEC • Final Estimate of Cost

Finance • Letter of Confirmation of Financing for the Project

Ministry Review

• Minister has the right to Reject any Bids • Minister Letter of Approval

Submission to the Ministry

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• a fifty percent (50%) performance bond • a fifty percent (50%) labour and material bond. Proof of Bonding

• Builder’s Risk property insurance • Wrap Up Liability insurance • Environmental/Pollution Liability insurance • Certificate of Good Standing under the Workplace Safety and

Insurance Act (Ontario)

Proof of Insurance

• Submission of All Permits required for Construction Municipal Approvals

• Agreed upon by the Operator and General Contractor - consistent with Project Schedule in DA

• Minister Approval in writing

Construction Schedule

Construction Approval

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- Minister Approval to begin

Construction - Expires after 9

months

PP

WD

Construction Schedule

FEC

Tender Approval

Occupancy Plan Approval, Pre-Occupancy Review, and First Resident Date

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Occupancy Plan

3 Months prior to

anticipated First

Resident Date

Pre-Occupancy

Review

Inspection

Occupancy Approval

Licencing

Confirmation that

applicable conditions of

licensing have been

met*

First Resident

Date

Confirmation of Admission

of First Resident

*DA is not a commitment to issue a licence – Licensing requirements must be met separately.

Final Statement of Disbursements (FSD)

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Due by One Year after First Resident Date

Auditor’s Report

LEED Certification

Development Agreement Milestones and Deliverables Construction Manager

Process of proceeding through Construction with a Construction Manager

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Selection of a Construction Manager

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Selection of Construction Manager • Executed Development Agreement • Public Tender • Ministry Approval is not required

Construction Manager Cannot: • Select Sub-Contractors • Allocate own employees for Construction Work

Stipulated Sum for Construction • Tender/Bid may include an option to convert a CM contract into a stipulated sum contract • Only when 75% (by contract value) of subcontractors have been selected. • Original bid must include markup and overhead on top of the amounts owing subcontractors • Operator to inform the Ministry • Stipulated Sum may not be raised once the Construction Manager has been selected

Early Work Tendering Ministry Approval – in CM Scenario

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Preliminary Plans Approved

Operator must request

Minister to approve or deny

Minister Letter detailing work that can be tendered

Construction Work Must Wait Working Drawings Approval

Minister Approval to begin Construction

Bid Tendering for Sub-Contractors

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Minister must approve the start of tendering for sub-contractors. Contract between Operators and the Sub-Contractor • Greater than $100,000

• Public Tender required • Greater than $25,000 and less than $100,000

• Competitive Process • RFP in writing inviting at least 3 potential sub-contractors

• Subcontractor Stipulated Sum Contracts Greater than $250,000 • Bonding Requirements with a financially sound and reputable bonding company:

• a fifty percent (50%) performance bond and • a fifty percent (50%) labour and material bond

Subcontractor Bids Submitted to Ministry

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Selection of First Sub-Contractor for 1) early work (if applicable) and 2) main work

- Copies of Public Tender documents - List of all bids submitted - Copies of the bid submitted by the proposed selected candidate - Copies of two alternate bids that could be selected - Minister Approval Required

Selection of all other Sub-Contractors

- Copy of Public Tender of RFP Documents - List of all bids submitted - Copy of selected bid - Minister Approval Not Required

Work Cannot be Completed

- Operator can select replacement from previously submitted bids or - Re-Tender

Stipulated Sum - CM

- Only where 75% of the Sub-Contractors (by contract value) have been selected - Bid must have included an option to convert a CM contract into a stipulated sum contract, with specified markup and overhead. - Operator to inform the Ministry

Initial Estimate Cost and Final Estimate of Cost Submission

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IEC • Submitted after Sub-Contractors have been Selected • Required to obtain Approval to Begin Construction

FEC • Submitted 30 days after the last Sub-Contractor has

been selected

FSD • Up to 1 year after First Resident Date

Conclusion

• Purpose of a Development Agreement (DA) • Process for receiving/executing a DA • Milestones and deliverables of the construction

project described within the DA. • Significant differences between a General

Contractor (GC) and a Construction Manager (CM). • See DA for details and definitive requirements.

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The Development Agreement

Thank you for your participation!