2 companies and their joint venture poised to win almost every Toronto snow-clearing contract
UPDATE: The infrastructure and environment committee voted late Thursday to send a final decision on the contracts to full city council on Dec. 15 without recommendations on how to proceed.
Two paving companies, and a joint venture they launched this September, are in line to win nine of 11 City of Toronto snow-clearing contracts worth nearly $900 million over the next decade, prompting sharp questions about the fairness of the city process that led to this point.
City staff defended the plan on Thursday morning, but companies that lost out on the work — and many of which had done the job for decades — said the bidding process wasn't fair to them and that the two companies' dominance should raise red flags for councillors.
A & F Di Carlo Construction Inc. won two contracts, while Infrastructure Maintenance Inc. won one. Their joint venture, the numbered company 2868415 Ontario Inc. launched on Sept. 21 according to corporate records, is poised to win the contracts to clear six more areas of the city — work totalling nearly $647 million over the next seven years, which is the guaranteed portion of the deal.
The city has an option to extend all of the contracts for three more years, which would bring the totals to some $893 million. City officials did not set a limit on how much of the work any company could win.
If the deals are approved, that would mean starting in 2022 the three companies will be responsible for plowing and other winter maintenance in nearly all of Toronto, with the only exceptions being the Willowdale area and the Gardiner Expressway and Don Valley Parkway.
Rival companies speak out at committee
Eight rival companies bid on portions of that work but were shut out, city documents show. The leaders of several of them spoke out Thursday.
Dominic Crupi is vice president of D. Crupi & Sons Limited, which was one of the companies that lost out on the contracts. He urged councillors to try to figure out why one group of companies was able to dominate the bidding process.
"It is beyond rare that someone comes along and revolutionizes a business," he said, noting his company has decades of experience doing snow-clearing in the city.
Jim Hurst, of Steed and Evans Ltd., also questioned why the city negotiated two sole-source deals with 2868415 Ontario Inc., but didn't negotiate with his company even though he had gone through the formal bidding process.
The numbered company, Hurst said, "had an unfair advantage."
Most of those companies failed to pass the "technical" evaluation of the negotiated request for proposal process that began in May.
City staff say that process — conducted in two parts and followed by one non-competitive agreement that went to 2868415 Ontario Inc. — will get Toronto the best price possible (the report estimates savings of $40 million per year) and offer other benefits as well.
City staff maintained the process was fair and transparent, but Mike Pacholok, the city's chief purchasing officer, confirmed the city chose not to use a fairness monitor.
Instead, Pacholok said, there were many internal discussions and steps taken to make sure the competition was done fairly.
Vincent Sferrazza, the director of operations and maintenance with the city's transportation services division, told councillors he was confident the companies that won can do the job.
"We are very confident in their capacity operationally and financially," he told councillors.
City staff confirmed the companies could outsource 25 per cent of the work they win, but will be responsible for the crews doing that work.
Proposed deal goes to committee
Councillors had a number of questions about the snow-clearing deal, and for good historical reason.
During 2019's super-snowy winter, Torontonians called 311 thousands of times with complaints about poor snow-clearing and also filed complaints with Mayor John Tory, city councillors and the ombudsman.
As a result, Tory called for a full review of the city's winter operations.
Then, last October, Toronto Auditor General Beverly Romeo-Beehler found city staff failed to use GPS data to ensure contractors — who handle the majority of winter maintenance — were doing their job.
That failure, she said, also led to an estimated overpayment of $7.1 million to those same contractors over a five-year span.
Romeo-Beehler's report also flagged some $24 million in potentially wasted "standby" payments — money paid to contractors to have machinery at the ready — over the same timeframe.
The city staff report on the current contracts said recommendations from the auditor general on snow-clearing have "informed" the procurement process.
The auditor's office declined to comment on the proposed new contracts but noted via email councillors can request to add an audit to her work plan by a two-thirds vote.
Coun. Jennifer McKelvie, who chairs the committee, considered a motion to ask Romeo-Beehler to review the contracting process but said she was told that wouldn't be possible before the Dec. 15 meeting.
With that, McKelvie and the committee voted to send the item to full council without recommendations.
Snow-clearing contracts difficult to design
Brian Kelcey, an urban public policy consultant, told CBC News snow-clearing contracts are notoriously complicated for municipalities.
First, it's difficult to budget for snow because the city doesn't know how many storms will hit throughout the winter, he said. Second, companies need to acquire expensive equipment and keep it ready for whenever the snow starts flying.
Typically, Kelcey said, "you want a healthy mix of winners" so that if there is an issue it's easier to fix.
The other winning companies were Maple Crete Inc., which will cover the Willowdale area, and Emcon Services Inc., which won the contract to clear the Gardiner and Don Valley Parkway.
This winter's maintenance work will be done by the companies currently on the job.
