Item - 2017.AU8.3
Tracking Status
- City Council adopted this item on April 26, 2017 with amendments.
- This item was considered by the Audit Committee on March 24, 2017 and adopted without amendment. It will be considered by City Council on April 26, 2017.
AU8.3 - Detection of Warning Signs for Potential Bid Rigging Should be Strengthened
- Decision Type:
- ACTION
- Status:
- Amended
- Wards:
- All
City Council Decision
City Council on April 26, 27 and 28, 2017, adopted the following:
1. City Council request the Director, Purchasing and Materials Management, to develop and maintain a database of tender, contract, and sub-contracting information for all construction contracts in order to proactively monitor and detect potential bid rigging.
2. City Council request the Director, Purchasing and Materials Management, to provide training on bid rigging, including preventive controls and red flags, to City purchasing and divisional staff who are involved in tender preparation or contract administration.
3. City Council request the Director, Purchasing and Materials Management, to adopt a practice of keeping the identity of prospective bidders who purchased the bid documents confidential.
4. City Council request the Director, Purchasing and Materials Management, and the General Manager, Transportation Services, to ensure staff members involved in procurement or contract management have up-to-date and clear understanding of the City’s conflict of interest policy and procedure requirements, as it relates to the procurement process, and their application, as well as providing periodic refresher training.
5. City Council request that General Manager, Transportation Services, to review and enhance the current processes for quality control testing and progress payments for road resurfacing contracts to ensure adequate segregation of duty and independence.
6. City Council request the City Manager to forward the report (March 17, 2017) from the Auditor General to other relevant City Divisions and City Agencies and Corporations which acquire contracted construction services on a regular basis for information.
7. City Council direct the City Manager to report to the Audit Committee on what mechanisms are in place under the terms of the Supplier Code of Conduct, if a company is found to have acted fraudulently, unethically or otherwise inappropriately, that would cause them to be placed on a blacklist and lose the privilege of bidding on City contracts.
8. City Council confirm the confidential instructions issued to staff in closed session.
City Council Decision Advice and Other Information
Beverly Romeo-Beehler, Auditor General, gave a presentation to City Council on this Item.
Barbara Gray, General Manager, Transportation Services, and Michael Pacholok, Director, Purchasing and Materials Management, gave a presentation to City Council on Procurement of Construction Services, Management Response.
City Council recessed its public session and met as Committee of the Whole in two closed sessions on April 27, 2017 and one closed session on April 28, 2017, to consider confidential information on this Item as it pertains to the security of property belonging to the City or one of its Agencies or Corporations and personal matters about identifiable individuals, including City or local board employees.
Background Information (Committee)
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102117.pdf
Audit at a Glance - Detection of Warning Signs for Potential Bid Rigging Should be Strengthened
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102118.pdf
Attachment 1 - Detection of Warning Signs for Potential Bid Rigging Should be Strengthened
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102119.pdf
(March 10, 2017) Placeholder Report from the Auditor General - Detection of Warning Signs for Potential Bid Rigging
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102160.pdf
(March 24, 2017) Presentation Material submitted by the Auditor General
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102288.pdf
(March 24, 2017) Presentation Material submitted by the Auditor General - Procurement of Construction Services, Management Response
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102289.pdf
Background Information (City Council)
https://www.toronto.ca/legdocs/mmis/2017/cc/bgrd/backgroundfile-103371.pdf
(April 27, 2017) Presentation to City Council by the Director, Purchasing and Materials Management and the General Manager, Transportation Services
https://www.toronto.ca/legdocs/mmis/2017/cc/bgrd/backgroundfile-103401.pdf
Motions (City Council)
April 27, 2017 at 6:03 p.m. - Speaker Nunziata advised that City Council had not completed its closed session consideration of Item AU8.3 headed "Detection of Warning Signs for Potential Bid Rigging Should be Strengthened". Speaker Nunziata advised that she would ask for a motion to meet in a further closed session when Council returned from the evening recess.
April 27, 2017 at 7:52 p.m. - Speaker Nunziata advised that City Council had not completed its closed session consideration of Item AU8.3 headed "Detection of Warning Signs for Potential Bid Rigging Should be Strengthened".
April 28, 2017 at 12:01 p.m. - Speaker Nunziata advised that City Council had completed its closed session consideration of Item AU8.3 headed "Detection of Warning Signs for Potential Bid Rigging Should be Strengthened". City Council issued confidential instructions to staff in the closed session. Council would now proceed to the public debate on this item.
That City Council confirm the confidential instructions issued to staff in closed session.
That City Council direct the City Manager to report to the Audit Committee on what mechanisms are in place under the terms of the Supplier Code of Conduct, if a company is found to have acted fraudulently, unethically or otherwise inappropriately, that would cause them to be placed on a blacklist and lose the privilege of bidding on City contracts.
Vote (Amend Item (Additional)) Apr-28-2017 12:08 PM
| Result: Carried | Majority Required - AU8.3 - Matlow - motion 2 |
|---|---|
| Total members that voted Yes: 39 | Members that voted Yes are Paul Ainslie, Maria Augimeri, Ana Bailão, Jon Burnside, Christin Carmichael Greb, Shelley Carroll, Josh Colle, Gary Crawford, Joe Cressy, Vincent Crisanti, Janet Davis, Glenn De Baeremaeker, Justin J. Di Ciano, Frank Di Giorgio, Sarah Doucette, John Filion, Paula Fletcher, Michael Ford, Stephen Holyday, Jim Karygiannis, Norman Kelly, Mike Layton, Chin Lee, Giorgio Mammoliti, Josh Matlow, Pam McConnell, Mary-Margaret McMahon, Denzil Minnan-Wong, Frances Nunziata (Chair), Cesar Palacio, James Pasternak, Gord Perks, Anthony Perruzza, Jaye Robinson, Neethan Shan, David Shiner, Michael Thompson, John Tory, Kristyn Wong-Tam |
| Total members that voted No: 0 | Members that voted No are |
| Total members that were Absent: 5 | Members that were absent are John Campbell, Mary Fragedakis, Mark Grimes, Michelle Holland, Joe Mihevc |
Vote (Adopt Item as Amended) Apr-28-2017 12:09 PM
| Result: Carried | Majority Required - AU8.3 - Adopt the item as amended |
|---|---|
| Total members that voted Yes: 39 | Members that voted Yes are Paul Ainslie, Maria Augimeri, Ana Bailão, Jon Burnside, Christin Carmichael Greb, Shelley Carroll, Josh Colle, Gary Crawford, Joe Cressy, Vincent Crisanti, Janet Davis, Glenn De Baeremaeker, Justin J. Di Ciano, Frank Di Giorgio, Sarah Doucette, John Filion, Paula Fletcher, Michael Ford, Stephen Holyday, Jim Karygiannis, Norman Kelly, Mike Layton, Chin Lee, Giorgio Mammoliti, Josh Matlow, Pam McConnell, Mary-Margaret McMahon, Denzil Minnan-Wong, Frances Nunziata (Chair), Cesar Palacio, James Pasternak, Gord Perks, Anthony Perruzza, Jaye Robinson, Neethan Shan, David Shiner, Michael Thompson, John Tory, Kristyn Wong-Tam |
| Total members that voted No: 0 | Members that voted No are |
| Total members that were Absent: 5 | Members that were absent are John Campbell, Mary Fragedakis, Mark Grimes, Michelle Holland, Joe Mihevc |
That in accordance with the provisions of Chapter 27, Council Procedures, City Council end the debate on Item AU8.3 and take the vote immediately.
Vote (End Debate) Apr-28-2017 12:06 PM
| Result: Carried | Two-Thirds Required - AU8.3 - Holyday - End debate |
|---|---|
| Total members that voted Yes: 27 | Members that voted Yes are Ana Bailão, Jon Burnside, Christin Carmichael Greb, Shelley Carroll, Josh Colle, Gary Crawford, Joe Cressy, Vincent Crisanti, Janet Davis, Justin J. Di Ciano, Frank Di Giorgio, Paula Fletcher, Stephen Holyday, Norman Kelly, Mike Layton, Giorgio Mammoliti, Pam McConnell, Mary-Margaret McMahon, Denzil Minnan-Wong, Frances Nunziata (Chair), Cesar Palacio, James Pasternak, Gord Perks, Jaye Robinson, Neethan Shan, David Shiner, Michael Thompson |
| Total members that voted No: 12 | Members that voted No are Paul Ainslie, Maria Augimeri, Glenn De Baeremaeker, Sarah Doucette, John Filion, Michael Ford, Jim Karygiannis, Chin Lee, Josh Matlow, Anthony Perruzza, John Tory, Kristyn Wong-Tam |
| Total members that were Absent: 5 | Members that were absent are John Campbell, Mary Fragedakis, Mark Grimes, Michelle Holland, Joe Mihevc |
AU8.3 - Detection of Warning Signs for Potential Bid Rigging Should be Strengthened
- Decision Type:
- ACTION
- Status:
- Adopted
- Wards:
- All
Committee Recommendations
The Audit Committee recommends that:
1. City Council request the Director, Purchasing and Materials Management Division, to develop and maintain a database of tender, contract, and sub-contracting information for all construction contracts in order to proactively monitor and detect potential bid rigging.
2. City Council request the Director, Purchasing and Materials Management Division, to provide training on bid rigging, including preventive controls and red flags, to City purchasing and divisional staff who are involved in tender preparation or contract administration.
3. City Council request the Director, Purchasing and Materials Management Division, to adopt a practice of keeping the identity of prospective bidders who purchased the bid documents confidential.
4. City Council request the Director, Purchasing and Materials Management Division, and the General Manager, Transportation Services Division, to ensure staff members involved in procurement or contract management have up-to-date and clear understanding of the City’s conflict of interest policy and procedure requirements, as it relates to the procurement process, and their application, as well as providing periodic refresher training.
5. City Council request that General Manager, Transportation Services Division, to review and enhance the current processes for quality control testing and progress payments for road resurfacing contracts to ensure adequate segregation of duty and independence.
6. City Council request the City Manager to forward this audit report to other relevant City divisions and City Agencies and Corporations which acquire contracted construction services on a regular basis for information.
Decision Advice and Other Information
Beverly Romeo-Beehler, Auditor General, gave a presentation to the Audit Committee on this Item.
Barbara Gray, General Manager, Transportation Services, and Michael Pacholok, Director, Purchasing and Materials Management, gave a presentation to the Audit Committee on Procurement of Construction Services, Management Response.
_____________
The Audit Committee recessed its public session and met in closed session to consider confidential information on this Item as it relates to the security of property belonging to the City or one of its Agencies or Corporations, and personal matters about identifiable individuals, including City or local board employees.
Origin
Summary
The City of Toronto awards public contracts worth over $1 billion annually for construction of vital infrastructure including bridges, roads, and water supply. Between 2010 and 2015, the Transportation Services Division spent on average over $100 million annually on road repair and maintenance contracts.
The Auditor General's Office commenced an audit of the City's paving contracts in 2015. The audit results are contained in two separate reports:
- A first report, entitled "Improving the Tendering Process for Paving Contracts", was issued in June 2016. The report brought to light the issue of materially unbalanced bidding in the award of road resurfacing contracts.
- This second report focuses on ensuring value for money through fair and competitive bidding practices.
Central to this audit report is the question whether proper monitoring and management controls are in place to ensure a competitive tendering environment allowing the City to obtain the best value for money.
Our audit identified significant control deficiencies and a lack of a meaningful analysis of bid submissions and bidding patterns. This, combined with findings in our first report highlighting a lack of accurate quantity estimates by staff in issuing road resurfacing tenders, leave the City vulnerable to inflated prices and potential bid rigging by contractors.
There were telltale signs of bid-rigging and inflated pricing and even more concerning was the fact that most district contracts were consistently dominated by a small group of contractors over the past five years.
The City needs to ensure adequate measures are in place to deter and detect potential bid rigging and collusion between bidders.
Background Information
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102117.pdf
Audit at a Glance - Detection of Warning Signs for Potential Bid Rigging Should be Strengthened
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102118.pdf
Attachment 1 - Detection of Warning Signs for Potential Bid Rigging Should be Strengthened
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102119.pdf
(March 10, 2017) Placeholder Report from the Auditor General - Detection of Warning Signs for Potential Bid Rigging
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102160.pdf
(March 24, 2017) Presentation Material submitted by the Auditor General
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102288.pdf
(March 24, 2017) Presentation Material submitted by the Auditor General - Procurement of Construction Services, Management Response
https://www.toronto.ca/legdocs/mmis/2017/au/bgrd/backgroundfile-102289.pdf
Motions
2:19 p.m. - That the Audit Committee recess its public session and meet in closed session to consider confidential information on this Item as it relates to the security of property belonging to the City or one of its Agencies or Corporations, and personal matters about identifiable individuals, including City or local board employees.
The Audit Committee recessed its public session and met in closed session to consider the above matter.
The Audit Committee reconvened in public session at 3:05 p.m. Councillor Holyday took the Chair and advised that the Committee had completed its closed session consideration of confidential information related to this Item. No motions were moved in Closed Session. The Audit Committee would now proceed with the public debate on this Item.