Auditor flags big change with Toronto's $100M per winter snow-clearing plan

Industry source says city staff move may see contractors move with less urgency

Cbc.ca
Dec. 1, 2023
John Rieti

Transportation staff are significantly reducing a key liquidated damages provision for the contractors that handle most of the city's snow clearing, even after a winter marked by sharp criticism from the public and councillors alike.

Staff have agreed to lower one of 10 liquidated damages contractors face -- "Failure to leave a depot within the applicable mobilization period" -- from $200 to $10 per minute per piece of activated equipment, according to a new report released by the city's auditor general.

So, why does this matter for your neighbourhood when the snow starts flying? The biggest problem, an industry source told CBC Toronto, is that creates an environment where contractors will now have less urgency to get their snow-clearing machines out on the roads.

The steeper liquidated damages in the original contract, the source said, indicated the city wanted the snow cleared and "they wanted it fast."

City staff denied that in a statement to CBC Toronto, calling the change a "standard matter of contract management" that will not affect the snow-clearing budget, nor the city's service levels and operations.

But councillors have already been calling staff to more rigorously police the snow-clearing work, which includes some $1.5 billion worth of contracted-out work over the next decade.

New contractors took over last winter

Two companies and their joint venture, now dubbed "Snow T.O.," took responsibility for almost all non-highway snow clearing in Toronto for the first time last year. The city then went $26M over budget and dealt with a barrage of snow-related complaints.

Coun. Jamaal Myers put it bluntly when the season was over: "This contracting fell well below the standards that I think most people expect and most people deserve."

Councillors were assured the contracts came with stringent penalties when voting on them in 2021. Liquidated damages are not penalties, per se, but a way of reimbursing the city for costs it incurs when a contractor fails to meet certain requirements.

In total, just $604,769 worth of damages are being sought for the companies' failure to meet the contract terms so far, transportation staff said. Those penalties stem from February to March, and are not finalized.

City management didn't seek damages earlier that winter, Toronto's auditor general revealed in July. Staff explained that decision by stating, in a report: "if we'd issued [liquidated damages], of that size, these companies may not have been able to be financially viable."

Move takes pressure off contractors: industry source

City staff made the move to lower one specific liquidated damages provision in September, but didn't tell councillors.
Staff deemed that unnecessary because it "did not alter the fundamental service levels and operations, and would not generate revenue for the City," according to the audit committee report where the decision was made public.

But the industry source said it should matter to councillors because the city is likely now in a situation where it's paying more for less. That's because when contractors bid for the work they baked some assumed damages into their price (the source said their own bid went up by a double-digit percentage) assuming an occasional fine due to broken machinery or other issues.

"The city is now paying for a level of service that's far more than what they're getting," the source said.

The contracts "Snow T.O." won are worth at least $647 million over the next seven years, and an extension could bring that total closer to $900 million.

In the audit committee report, staff said an "error" led to the rate being set at $200 per minute, but also confirmed they stood by that rate when contractors questioned it during the bidding process. 

Changes will be debated Friday

At Friday's audit committee meeting, councillors will get their first chance to ask questions about the change.

"I think they are numbers that will face scrutiny from the committee," Chair Stephen Holyday told CBC Toronto.

Holyday noted snow clearing is among the largest contracts the city handles, and one with literally many moving parts. It's also something councillors hear a lot about from the public, he said.

"At the end of the day, taxpayers should feel confident and assured that the money they pay to pay for important services like this are being used both economically and wisely by the city," Holyday said.

"The expectation is that this critical service is going to be performed, that we're going to have a city that operates and that we have roads that are safe."

Coun. Paula Fletcher, who is also a member of the audit committee, said she wants to understand why councillors weren't notified about the change prior to this report.

"It's a change in the contract. I'll be asking to find out how that happened," she said, adding that the shift in liquidated damages is a significant reduction.

"That is a 95 per cent change," she said. "And I don't think that happens that often."

Contractor still recruiting workers

CBC Toronto has also learned that "Snow T.O." is still looking for seasonal workers as winter looms.

The company is recruiting for a range of jobs, including but not limited to: "Class G snow plow drivers," skid steer operators and grader operators.

The jobs were advertised in a flier sent to the International Union of Operating Engineers Local 793 last week. The same industry source who commented earlier noted that it was sent to their employees and those of other snow-clearing companies as well.

There have been well-documented struggles to recruit snow plow drivers in recent years, both in Ontario and across the United States.

The city said there's no cause for concern.

"The City has been informed by all its contractors, including 'Snow T.O.,' that they are ready to perform their contractual duties for winter road operations, including having sufficient staff to operate the salting and plowing equipment," staff said in a statement.
"It is normal for companies to continue to hire throughout the year."

Toronto hasn't seen much snow yet, but it's becoming a more frequent possibility in weather forecasts.