Audit finds gaps in way City of Winnipeg handled police HQ

An external review of about $75 million in cost overruns for Winnipegs new police headquarterslanded at city hall on Tuesday, and it citeda lack of evidence of required consultation with decision-makers, oversight committees and city council.

The report details several"gaps"between how the project was handled and what current city policy is.

The citys Executive Policy Committee review of the report was delayed Tuesday afternoon while councillors poured over the dense document.

"There is evidence to suggest that the citys failure to effectively manage the progress and quality of the design may have caused delays to Caspian [Construction], states the report, referring to the construction company assigned to the build.

The KPMG report examined whether best practises were followed when the city began converting a building on Graham Avenue.

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The report reviews the conversion of a former Canada Post office into the new Winnipeg police headquarters.

In 2009, the project was forecast to cost $135 million. But by fall of 2013, city council learned the costs had mushroomed to $210 million.

Report finds aspects ofproject mismanaged

When council learned of the overruns, they called an audit and quantity review survey.

Both are now complete and councillors on the citys EPC got a chance to ask questions about what the reportscontained on Tuesday afternoon.

The reports summary suggests the project was not completely compliant with the city's existing policies and the construction process was managed poorly.

The statement in the November 2013 Administrative Report that theGMPContract was 'approved by Council' appears inconsistent with what occurred- KPMG

The project has had 81 "change orders"since it began, andthose orders amount to nearly $20 million (or 14 per cent) in changes to the projects original budget projections.

"In our experience, this denotes a significant volume and degree of changeduring the course of design and construction,"states the report. "The effect of not proactively managing and acting upon change requests as they were received is that thepricing, review, approval or rejection of millions of dollars in changes were effectively deferred and notreported upon to Committees of Council for many months."

The project's budget issues were also inconsistently reported and in some cases there was "inadequate project management,"the report says.

The report found contractsweren't reported on a timely basis and city administrators did not keep council up-to-date on the status of the project. There was also an apparent failure to record minutes atoversight committee meetings, the report suggests.

The report found a lack of evidence that required consultations were adhered to between project oversight committees and city council"on the minimum periodic basis as required."

An additional $7 million in interest charges were incurred since the project began.

"Regarding performance against budget, over the four years from November 2009, Council approved additional funding amounting to $67 [million], excluding a further $7 [million] in construction period interest charges," the report states.

Some of those additional costs could've been avoided, according to the report.

Finally, the report pointed to a lack of "appropriate segregation"between management staff and department reps during the design and construction of the building.

Another area for concern: the citys procurement policies werent consistently applied during the project.

Former CAO Sheeglhad 'unlimited' ability to award contracts

Thereport also found former City of Winnipeg CAO Phil Sheegl was given full power to approve and award contracts on the project.

"The statement in the November 2013 Administrative Report that theGMP Contract was 'approved by Council' appears inconsistent with what occurred," states the report.

"From ourdocumentation review, we understand that Council did not formally approve a recommendation to enter into this contractual arrangement in the July 2011 Administrative Report, rather Council approved a request to delegate authority to the CAO to award (unlimited and unspecified) contracts for the Project, and it was only on the final page of the "history section"of the appended Administrative Report that there is any mention of a GMP contractual arrangement."

Sheeglwas contacted butdeclined to comment.

Quantity report shows good value for construction money

Before looking at the audit, city councillors first reviewed a quantity review survey Tuesday morning, which is essentially a review of the project costs.

During that briefing, Coun. Harvey Smithstepped out to tell reporters the quantity survey showed the city got value for what it spent on new police headquarters when compared to other cities.

Despite that valuation and the fact that the report found there was no criminal behaviour, Smith is still not happy the project went over budget.

"It's very difficult, I got bored as they [went] through this,"said Smith. "You know, it's not pinpointing anyone responsible for anything."

Coun. Brian Mayes was frustrated by the overrun as well.

"There's a real lack of the original budget figure of $105 million and it ended up being $180 to do the reconstruction, and thats a serious problem," said Mayes. "We need much better project management; we need some people in there who will keep track of the expenditures, because ...this one was doomed to be over budget from the start."

Coun. Russ Wyatt also spoke with reporters, saying he wasnt happy with what he saw in the report. He said while the report said the city got value for money spent on the police headquarters, thats only a small part of the whole picture.

Wyatt said he still has serious questions about the process and wont be happy until he sees the external audit later on Tuesday.

Turner & Townsend's quantity survey said, "Strictly from a financial viewpoint ... it is our opinion that the project value of $156,374,911.67 for the Winnipeg Police Headquarters and Wyper Road Firing Range is within the acceptable range of cost for a facility of this nature."

The quantity survey used a $156 million price point to evaluate the project, excluding costs for the purchase price of the building, design costs and interest costs.

Last week,councillors looked at a real estate audit, which also included the citys purchase of the former Canada Post location.

Read KPMG's full report here