Councillor wants paving companies 'blacklisted' after AG probe finds apparent bid-rigging

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Auditor General Beverly Romeo-Beehler slammed a "very broken" system of awarding paving contracts as she laid out the facts of her investigation into alleged bid-rigging at city hall Friday.

Romeo-Beehler's findings suggest contractors may have colluded while applying for city work between 2010 and 2015, costing the city millions in the process. City staff, meanwhile, made poor estimates about the scope of work that needed to be done and failed to ensure all of the roadwork it paid for was being done.

"Now it's time to level the playing field," Romeo-Beehler told the audit committee.

Toronto police have been called in to look at the potential bid-rigging.

But Coun. Josh Matlow says the city should be punishing the companies behind the wrongdoing right now.

"They should be blacklisted," he told reporters.

"I believe that if a company has defrauded taxpayers and scammed the city of Toronto we shouldn't be doing business with them ever again."

Romeo-Beehler's report doesn't name companies, however, it cites an example of one company that inflated costs over the five-year span to the tune of $2.5 million. 

The report doesn't suggest any wrongdoing by elected officials, though it features recommendations to make sure city staff don't find themselves in conflict of interest situations. 

It's unclear exactly how much money the city lost over this span, and City Manager Peter Wallace said it's likely the wrongdoing was happening prior to 2010 as well.

Romeo-Beehler says transportation staff, who presented a report on new oversight measures for procuring contracts, are well on the way to fixing the issues. However, all city divisions that hand out contracts should look at their practices, she said.

"The city is changing the dance," she said.

But, she warned, contractors looking to take advantage of the city will likely change their approach, too. 

Probe found city lacked proper controls

Romeo-Beehler said she started her investigation in the spring of 2015 by driving a van around the city to collect all of the paper documentation about the bids. The paperwork was supposed to be kept in court-ready shape, but she told councillors it was instead "a mess."

By November of 2015, with the files digitized, she brought serious concerns to the city manager.

Wallace said he was "monumentally unhappy" to hear about the auditor's findings and immediately began working to root out the issues.

Wallace said his changes were met with defensiveness by staff who didn't feel there was anything wrong with the status quo, especially because fraud detection methods — like weighing materials used — hadn't turned up anything wrong.

However, Romeo-Beehler found companies were charging 15 to 30 per cent more than the work should have cost, and were still winning contracts.

"I have not seen a situation where it's been this devoid of controls," she said.

The situation, Romeo-Beehler said, was like having a contractor rip you off on a project, then going back to them for the next one.

"Would you allow this to happen with your own money?" she asked the audit committee.

Both the auditor and Wallace said better systems are in place now, but the city must remain vigilant.

"We can never declare victory," he said.

'Bright, blazing alarm'

Romeo-Beehler's report says there were "telltale signs of bid-rigging and inflated pricing" in the paving sector — where the city awards some $100 million worth of contracts annually. 

Coun. Stephen Holyday calls the report "a bright, blazing alarm."

And that's a good thing, he told CBC Toronto.

"The mere fact that this report exists means that we're savvy to this and people are looking for these indicators now."

Holyday said he doesn't know if what's happening in the paving sector is happening with other construction contracts.

Mayor John Tory, who issued a statement while on his trade mission in India, said there have already been a number of personnel changes in the affected area and that he trusts city staff to make the necessary changes to prevent this from happening in the future.

Auditor issues series of recommendations

Toronto issues some $1 billion worth of construction contracts every year, and Holyday says it could potentially save "tremendous" amounts of money by stamping out issues like bid-rigging.

The auditor-general's report contains six recommendations to improve the system, including:

- Developing a database of tender and contract information to monitor for potential bid-rigging.

- Training staff about the "red flags" when it comes to bid rigging.

- Shielding the identity of companies who buy bid documents, to keep the bidding process confidential.

- Ensuring staff understand the city's conflict of interest policy as it relates to the procurement process.

- Enhancing the quality control testing when it comes to paving contracts.

- Circulating the report to all city divisions, agencies and corporations that contract out for construction work.

Romeo-Beehler is scheduled to provide an update on the city's progress in June.