Item - 2007.AU2.4

The Audit Committee recommends that:

1.        City Council not authorize the public release of the confidential report in Attachment 1 at this time as this report contains confidential legal advice and information in relation to current litigation, but that the Auditor General be requested to publicly re-submit Attachment 1 to the Audit Committee once the litigation is settled.

2.        The following recommendations in the attached Auditor General's report dated March 23, 2007 entitled "Management of Construction Contracts – Leaside Bridge Structure Rehabilitation Contract" be adopted:

"1.        The Executive Director, Technical Services Division, ensure that where possible all tender quantities contained in construction contract tenders are accurate and are representative of actual quantities required to complete the contract.

2.        The City Manager, in consultation with the City Solicitor, review the content of all standard construction contracts in order to ensure that  contract provisions are clear, consistent and enforceable.

3.        The Executive Director, Technical Services, ensure that staff are aware of their levels of authority in regard to the approval of amendments to City contracts.  Further steps be taken to monitor compliance with this level of authority.

4.        The Executive Director, Technical Services, direct that any renegotiation of contract terms which appear to be ambiguous, unclear or inconsistent only be conducted after consultation with the City’s Legal Services Division.  All such consultations be documented.

5.        The Executive Director, Technical Services Division, ensure that documentation supporting all reductions in tender quantities and tender prices is completed and retained.  Any negotiated reductions in tender amounts be approved by appropriate staff.

6.        The Executive Director, Technical Services Division, evaluate the appropriateness of the current quality control policies and procedures and make the changes necessary to increase the effectiveness of the current process.

7.        The Deputy City Manager and Chief Financial Officer, in consultation with the City Solicitor, review the tender evaluation process particularly as it relates to the impact recoveries from third parties may have on the award of contracts.

8.        The Executive Director, Technical Services Division, review the current practice  relating to the billing and recovery of costs from third parties and ensure procedures are developed for the timely billing and recovery of all related costs.

9.        The Deputy City Manager and Chief Financial Officer consider the implementation of a policy for the recovery of administration fees relating to the management of contracts by the City on behalf of third parties.  Such a policy be included in the Technical Services Capital Works Projects Procurement and Administration Procedures Manual.

10.      The Executive Director, Technical Services Division, review the process for determining and approving all payroll overhead calculations.  In regard to the Leaside Bridge contract, payroll overhead overpayments should be determined and recovered.

11.      The Executive Director, Technical Services Division, ensure that the Division's existing procedural requirements identifying the due dates for all warranty inspections are performed for all projects.  Details of all warranty inspections be clearly documented and approved by senior management.  Deficiencies identified during the warranty inspection process be documented along with the specific steps undertaken to address these deficiencies."