Item - 2007.AU4.1

The Audit Committee recommends that:

1.         The General Manager, Toronto Water, in consultation with the Deputy City Manager and Chief Financial Officer and the City Solicitor:

a.         evaluate City business continuity and disaster management risks in contracting with a single contract provider for all City water and sewer emergency repairs;

b.         evaluate the viability  and impact of alternate procurement solutions such as a roster of contractors, or restricting bidding contractors to a limited number of districts; and

c.         develop appropriate criteria for the standardized use of contractual incentives such as alternative liquidated damages provisions when emergency repairs are delayed and include such criteria in future City water and sewer emergency contracts.

2.         The Deputy City Manager and Chief Financial Officer ensure the tendering process is complied with and a comparative summary of bids is developed and authorized.  Copies of key sections including authorization and pricing sections of competitive bids should be retained by the Purchasing and Materials Management Division.

3.         The General Manager, Toronto Water, in consultation with the City Solicitor, review the content of all standard Toronto Water emergency repair contracts in order to ensure that contract provisions are clear, consistent and enforceable.

4.         The General Manager, Toronto Water, review payments to the contractor based on undocumented assumptions and informal agreements and where appropriate such payments be recovered.

5.         The General Manager, Toronto Water, direct staff that any decisions, and in particular, decisions that involve financial commitments for contract terms which appear to be ambiguous, unclear or inconsistent only be made after consultation with the City’s Legal Services Division and approval by the senior management.  All such consultations and approval be documented.

6.         The General Manager, Toronto Water, review the possibility of including criteria for emergency and non-emergency work in future contracts and obtaining separate rates for emergency and non-emergency work accordingly.

7.         The General Manager, Toronto Water, ensure that where possible, estimated quantities contained in emergency repair contract tenders are reasonably accurate and are representative of actual quantities required to complete the contract.  In addition, The General Manager in consultation with Purchasing and Materials Management, explore other procurement solutions for obtaining emergency repair services independent of fixed quantity estimates.

8.         The General Manager, Toronto Water, take steps to develop policies and procedures for managing emergency repair contracts and ensure staff is appropriately trained.

9.         The General Manager, Toronto Water, review 2006 and 2007 contractor payments for emergency repairs and take steps to determine and recover overpayments made to the contractor identified as part of the review.

10.       The General Manager, Toronto Water, develop policies to ensure that:

a.         Site Inspector’s Daily Work Reports are prepared independently of contractor invoices and provide relevant details including services provided, calculations and measurements supporting payment; and

b.         documentation supporting progress payments is reviewed in detail by supervisory staff.

11.       The General Manager, Toronto Water, ensure that extra work is awarded through authorized change directives and that separate inspector reports are used for recording work pertaining to extra work orders.

12.       The General Manager, Toronto Water, ensure that to the extent possible, all required work be included in the original contract and extra work orders be limited.

13.       The General Manager, Toronto Water, develop a process for the periodic monitoring of contract expenditures and ensure that Purchasing by-law requirements for authorizing over-expenditures are complied with.  Appropriate action is taken in circumstances where non-compliance of the by-law is identified.

14.       The General Manager, Toronto Water, ensure contractor performance issues are consistently documented and monitored.  Significant contractor performance issues that can not be resolved through the regular contract management process should be communicated to Purchasing and Materials Management for consideration in future contract award decisions.

15.       The General Manager, Toronto Water, expedite the review and assessment of existing work management systems, including an assessment of the SAP Plant Maintenance Module.  Following the selection of a work management system, its implementation should be expedited and the cost benefits of its integration with SAP be evaluated.

16.       The General Manager, Toronto Water, develop procedures to ensure staff review repair requests to determine if the required work is covered under warranty.

17.       The General Manager, Toronto Water Division, develop a process for District Contract Services and Operations & Maintenance staff to meet on a regular basis to discuss project status, and document and assess the priority of ongoing projects for re-assignment of pending projects to in-house staff.

The Audit Committee requested the Auditor General to submit a follow-up report to the Audit Committee on this matter within one year, the report to also include clarification of the following staff Recommendation 3 in terms of defining the role of the City Solicitor in the review of Toronto Water contracts:

3.         The General Manager, Toronto Water, in consultation with the City Solicitor, review the content of all standard Toronto Water emergency repair contracts in order to ensure that contract provisions are clear, consistent and enforceable.