Toronto $26M over budget on snow-clearing last year as auditor warns accountability tools missing

CBC.ca
July 17, 2023

The story at a glance:

• City spent $26.4 million more than planned on winter maintenance.
• Controversial contract process triggered complaints to city's fraud and waste hotline, may have increased costs by more than $24 million.
• Auditor estimates city paid $18 million for vehicles that lacked GPS tracking.
• City officials set up a complex and confusing contract process that may have introduced a safety risk for citizens.

 

Toronto's snow-clearing operations were plagued by equipment and personnel shortages as well as a complicated GPS rollout that initially prevented hundreds of vehicles from being tracked, the city's auditor general found in a report headed to city council next week.

Three separate reports, including two from auditor Tara Anderson, raise serious questions about how the city's contracts -- worth nearly $1.5 billion over the next decade -- were largely won by two companies and their joint venture, and how the transportation staff responsible for them are overseeing the work.

Meanwhile, an operating variance report shows the city spent $26.4 million more than anticipated on snow-clearing this winter. And the auditor makes it clear that due to issues with GPS installation and poor accountability practices, there's no way to ensure the city got the work it paid for.

Scarborough Coun. Jamaal Myers said city staff worked hard, but snow clearing did not go well last winter.

"I'm not going to sugarcoat it," he told CBC Toronto.

"This contracting fell well below the standards that I think most people expect and most people deserve. And we have to do better."

City spent $26M more than planned
Last winter was the first in a new system that has two companies and their joint venture handling all of the snow-clearing in Toronto, except for the Willowdale area, the Don Valley Parkway and Gardiner Expressway.

The auditor general looked into the awarding of that contract and found while it "generally unfolded according to the rules," city management created a complex and confusing process that created time pressures that in turn led to a safety risk for Torontonians.

Why does this matter? For one, the city still doesn't have this right, according to the reports. The auditor noted hundreds of machines still lacked GPS sensors at the end of this winter season.

Barbara Gray, General Manager of Transportation Services with the city of Toronto, speaks to members of the media about the city’s snow clearing plan ahead of an expected snowstorm, at a downtown works yard, on Feb. 1, 2022.
In Toronto, private contractors handle the majority of snow-clearing work, including on 5,780 kilometres of roads, 7,400 kilometres of sidewalks and 770 kilometres  of bike lanes and major trails.

The main work of in-house staff is sidewalk plowing -- 1,460 kilometres in total.

This winter didn't pack the same punch as 2022, but city staff say in an operating variance report it was still worse than previous years. As a result, city hall spent $26.4 million more than planned.

Councillors were told when signing the new winter contracts that they could expect to save $41 million per year.

City allowed contractor to substitute vehicles
The first year of working with the new snow-clearing contractor got off to a difficult start.

Despite clear warning signs that the COVID-19 pandemic's rupturing of supply lines would be a problem, the city expressed confidence the contractor could get the vehicles it needed.

But the struggle was real, the auditor found, noting the city also faced issues acquiring machines.

As a result, the city's transportation department's priority last winter was working with contractors to "ensure salting and snow clearing equipment was ready and available."

That included letting the companies use machines that weren't what the original contract called for (a decision made in summer 2022, when CBC Toronto reported the companies would use plows mounted on concrete trucks).

Despite that, the city may have overpaid on what's called the daily rate – basically the number of machines stationed at a depot and ready to go.

The daily rate matters because it's the largest driver of costs, the report notes, making up almost 80 per cent of the contract cost.

On Dec. 1, a "key milestone date" for contacts, "in most contract areas, the information listed on daily rate sheets was not accurate," the auditor's report states.

Based on staff records, it continues: "we estimate that Transportation Services paid almost $18 million for daily rate payments from October 15, 2022, through March 31, 2023, for equipment where some of the express terms of the contract were not fully met."

The auditor said the $18 million may not be an overpayment, but without documentation the city can't be sure.

GPS units not installed in hundreds of vehicles
Further, the city struggled to get GPS equipment running on the machines due to "resource and staffing challenges", which made tracking their work nearly impossible. Some of those issues may have tracked back to the city's GPS vendor, the report notes.

The auditor found city staff decided in December 2022 that "if the equipment was at a depot and operational… but was still missing GPS, it was still eligible for the daily rate."

That happened some 633 times, the auditor said. The total snow-clearing fleet was approximately 1,300 vehicles.

The city could have sought what's known as "liquidated damages" for the lack of GPS-equipped vehicles.
However, the auditor said for the first part of the winter: "management made 'a business decision weighing on the safety of residents of Toronto…' and strongly believed 'that if we'd issued [liquidated damages], of that size, these companies may not have been able to be financially viable.'"

That, staff decided, would have put residents at risk.

Management started penalizing the companies in February, but only for two things: leaving a depot late and not correcting problems within two hours of being notified. At this point, the city is seeking $17.4 million in liquidated damages, however the companies are disputing those potential fines.

Myers said he would have liked to have seen fines issued early to correct poor practices that became entrenched over the course of the winter.

"It would have been better that we apply these [fines] as soon as we started noticing that there were problems," he said. "That would have provided the right incentive to the contractor that they had to immediately start fixing these problems."

Scarborough filed most complaints, problems widespread
Where were conditions worst? Scarborough, according to the auditor.

Those areas filed nearly 40 per cent of all "winter-related service requests" to the city's 311 service, and more than 30 per cent of liquidated damages applied to the contractors stem from those areas.

Myers said when complaints began to come into his office and his staff reached out for answers, they were told they were "growing pains" under the new contract.

"When the problems were across the city, it became harder to ignore," he said.

Barbara Gray, General Manager of Transportation Services with the city of Toronto, speaks to members of the media about the city’s snow clearing plan ahead of an expected snowstorm, at a downtown works yard, on Feb. 1, 2022.

Barbara Gray and Vincent Sferrazza, the top city officials in charge of this work, defended their efforts at an audit committee meeting this month.

Gray said the city had "embarked on a major transformation" of the winter maintenance program. She acknowledged it had not always gone smoothly.

"We believe we're at the beginning stages of continuous improvement of winter service," she said. "I think we've made a very significant leap forward this year, but we all recognize that we have more to do."

Sferrazza said that outside of Montreal, no other Canadian city, provides the same level of snow-clearing services that Toronto does. And that means that Toronto's costs will likely be higher, he added.

Cement trucks with plow blades. That's what will clear some Toronto roads this winter
"The City of Toronto provides the most elaborate, the most sophisticated, and most complicated services for winter maintenance probably in all of Canada," he said.

But councillors on the committee expressed frustration.

Coun. Frances Nunziata, who represents Ward 5, York South-Weston, said when staff in her office reached out about resident complaints, city staff told them the issues had already been fixed. They later heard rom numerous residents that the issues remained.

It got so bad that Nunziata began to send her staff to problem areas to take pictures in an attempt to convince city staff that contractors had not solved the issues.

"There's a lot of confusion there," she said. "I think there has to be a lot more training for staff."

Contract process itself may have driven up costs
When city councillors were given their first look at the contract, they also heard from snow-clearing companies who were poised to lose out on work, including some who had provided the service for decades.

Those companies filed pre- and post-bid disputes, the auditor said. She also received complaints about the contract via the city's internal fraud and waste hotline.

While there were complaints, the auditor found the way the contract was awarded "generally unfolded according to the rules."

However, the auditor has made 16 recommendations connected with the plan.

Toronto city council to move ahead with controversial $1.4B snow-clearing deal
The city should not have used a new process on such a massive contract, she said.

The process chosen was new to most of the companies who do snow-clearing work and made the process more complex and confusing, she added.

"The result was that two companies and their joint venture were awarded approximately $1.29 billion (88 per cent) of the total $1.47 billion dollars in winter maintenance contracts," Anderson said.

2 companies and their joint venture poised to win almost every Toronto snow-clearing contract
In addition, the limited competition that resulted from the process -- which included two negotiated request-for-proposal procedures followed by the awarding of some non-competitive contracts -- may have driven up the overall costs.

"While the circumstances surrounding this process may be atypical, the bid disputes, complaints, issues, and concerns raised during the process point to the need for continuous improvement."