Contractor troubles for Ontario public projects

Theglobeandmail.com
September 10, 2018
Arik Ligeti

A dozen public-sector construction projects across Ontario – including hospitals, schools and university buildings – are either months behind schedule or in limbo as one of the province’s largest construction companies struggles to pay its subcontractors and complete jobs.

Since the start of 2018, Bondfield Construction Company Ltd., a family-owned firm based in Vaughan, north of Toronto, has been terminated as the general contractor on three public-sector projects, and several others are mired in delays. Frustrated subcontractors have had to take extraordinary steps to get paid on Bondfield projects -- in some cases striking agreements to receive payment directly from the public-sector institutions or turning to Bondfield’s insurer for compensation.

The result has been a flurry of lawsuits, liens and a growing list of aggrieved public institutions. One of the company’s major hospital projects, doubling the size of the emergency department and adding more inpatient beds at Cambridge Memorial Hospital in Southwestern Ontario, is 22 months behind schedule.

“Let me stress that we are profoundly disappointed and frustrated with the delays,” said Alan Findlay, a spokesman for Infrastructure Ontario, the Crown corporation that oversees all of the province’s major building projects and which awarded Bondfield the $187-million Cambridge Memorial contract. “We are working with each project owner to protect taxpayers from cost overruns caused by the delays. We are determined to make sure the projects get done.”

Two other Bondfield hospital projects awarded by Infrastructure Ontario – downtown Toronto's St. Michael’s Hospital and Hawkesbury and District General Hospital in Eastern Ontario – are also months behind schedule. The centrepiece of the $301-million St. Michael’s redevelopment, a 17-storey patient-care tower, was slated to be completed 10 months ago. On the $125.7-million Hawkesbury project, the revised completion date for a new three-storey wing is set for August, 2019, 13 months behind schedule.

Infrastructure Ontario and Bondfield signs hang on construction hoarding outside Toronto's St. Michael's Hospital in March, 2018.

Bondfield declined to respond to questions about specific projects, but in a statement the company said: “Bondfield is extremely proud of its successful track record on numerous major projects in Ontario. Project delays are often an unfortunate but unavoidable part of large construction projects, and Bondfield’s record in that regard is no different than any major contractor.”

All three hospital contracts were awarded using what Infrastructure Ontario calls its Alternative Financing and Procurement, or AFP, system. The AFP model requires builders to finance projects using private lenders, and construction companies are only paid with public dollars upon completion of the job. The system, the Infrastructure Ontario website says, “protects taxpayers from cost overruns by transferring project risks to the party with the expertise, experience and ability to handle that risk best.”

Several of Bondfield’s traditional, non-AFP public-sector projects -- which don’t involve private-sector financing -- have stalled or failed to get off the ground. In March, the City of Brampton, west of Toronto, terminated Bondfield as the builder of its $33.5-million Gore Meadows Community Centre and Library even though the project was close to completion.

In a March 5 letter informing Bondfield that it was being removed from the project, a Brampton official said little progress had been made in the previous eight months. “Although Bondfield appears to be close to achieving occupancy, that has been the state of affairs for many months,” wrote Randy Rason, Brampton’s director of construction, in the letter, which was reviewed by The Globe and Mail. “This state of affairs has been ongoing since the summer of 2017 and the city no longer has faith that Bondfield will reach occupancy in any reasonable time.”

A new contractor has been hired. The project is expected to be completed later this month, a Brampton spokesperson said.

In March, the City of Brampton terminated Bondfield as the builder of its $33.5-million Gore Meadows Community Centre and Library even though the project was close to completion.

Two other public entities have taken the same step. In August, the City of Toronto rescinded a $79.7-million contract awarded to Bondfield six months earlier to construct the new St. Lawrence Market North building. Also in August, Hamilton Health Sciences terminated its contract with Bondfield to build a $4-million addition at Hamilton General Hospital. Neither would say precisely what brought about the terminations. In a statement, City of Toronto spokeswoman Erin McGuey said Bondfield was “unable to meet the requirements of the City’s tender process.”

Bondfield is also responsible for a portion of the massive renovation of Union Station in downtown Toronto. The City of Toronto initially hired Carillion Canada Inc. in 2010 to refurbish the century-old train station and install a new shopping concourse, but the company completed only the first phase. The city subsequently awarded Bondfield a $178.5-million contract in June, 2015, to complete stages 2 and 3, the Bay Concourse.

The entire project was initially supposed to be done by 2015 at a cost of $640-million, but the timeline has been pushed back to early 2019 and the budget increased to $823.9-million. (Carillion’s British parent collapsed in January and a Toronto investment company has acquired its core businesses in Canada.)

The refurbishment of Canada’s busiest transit hub is “one of the most complicated construction projects in the country, wedged into one of the most congested parts of Toronto,” Ms. McGuey said in explaining the delays. More than 300,000 people pass through Union Station every day.

In interviews, a number of subcontractors to Bondfield described how they have had to take unusual measures to get paid. Some subcontractors have struck agreements, with permission from Bondfield, to be paid directly by the public institution under construction, thus bypassing Bondfield in one of its roles as a general contractor. The University of Guelph, for instance, has directly paid two subcontractors for the work Bondfield is co-ordinating on its delayed addition, a university spokesperson said.

Other subcontractors said they have recently been paid by, or instructed to put in a claim with, Bondfield’s insurer, Zurich Insurance. In an interview, Patrick Gaskin, the chief executive officer of Cambridge Memorial said: “We understand that at least one of the subcontractors has been paid by Zurich.”

With most public-sector construction contracts, builders are required to obtain what is called a performance bond, an insurance policy that obligates the insurer to step in and see a project through to completion in the event of default.

Mr. Findlay, the Infrastructure Ontario spokesman, declined to respond to specific questions about Zurich’s involvement in the delayed projects. But he said whenever projects face difficulties, “we would expect the bonding company to play an active role to address issues with payment of subcontractors and help get the project back on track.”

Zurich Insurance declined to comment on the matter.

A Globe analysis of lawsuits filed in Ontario’s court system shows a marked increase in the number of claims launched against Bondfield in 2017 and 2018. Forty-six per cent of the total lawsuits launched against Bondfield across the province since 1994 were initiated over that time period.

Number of cases involving Bondfield appearing in Ontario’s court filing system
Cases where Bondfield is cited in the case name itself

In Toronto alone, there have been 207 lawsuits in which Bondfield has been named as a defendant since the start of 2017. The company’s two larger competitors in the public infrastructure space, PCL Constructors Canada Inc. and EllisDon, have been named as a defendant 22 times and 40 times, respectively, over the same period.

Many of these claims have been launched by subcontractors, but also in a few instances by the public-sector institutions themselves.

In 2017, St. Michael’s Hospital launched a lawsuit against Bondfield seeking compensation for a 2015 flood that closed several operating rooms and forced the hospital to function for a number of weeks under a code brown – a hazardous spill. In March of this year, a Thunder Bay hospital, St. Joseph’s Care Group, sued Bondfield for breach of contract, alleging that the company was responsible for a series of delays that meant that the second and third phase of its project were both a year behind schedule. The project was completed in August. Statements of defence have not been publicly filed in either case.