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

Thestory at a glance:

• City spent$26.4 million more than plannedon 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.Resulting delays created a situation where staff warned councillors there would bea safety risk for citizens if the deal wasn't approved.

Toronto's snow-clearing operations were plagued by equipment and personnel shortages as well asacomplicated GPS rollout that initially prevented hundreds of vehiclesfrom 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 winterwas 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 createdtime 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 lackedGPS sensors atthe end of this winter season.

In Toronto, private contractors handle the majority of snow-clearing work, including on5,780 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 prioritylast 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,there were issues with finding out what the contractors were working with.

"We observed that to varying degrees in most contract areas, the information listed on daily rate sheets was not accurate. The daily rate sheet stated a GPS device was working, but when we reviewed information tracked in the GPS system, the system showed those GPS devices were not reporting any data / signal (i.e., the device was likely not installed or not working). Given the issues with reliability of information on daily rate sheets, we cannot confirm that the daily rates paid were appropriate," the report notes.

Based on staff records, it continues, transportation services spent almost $18 million on daily rate payments for equipment where some of the "express terms of the contract were not fully met."

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

GPSunits 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 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.

"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, theauditor found the way the contract was awarded"generally unfolded according to the rules."

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

The auditor's top recommendation was that for acomplex, large-scale procurements like snow-clearing, city management should test out "significant changes to the procurement processes" on a smaller scale first and review before making major changes.

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.

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."