By Stanley Tromp, Vancouver Sun, 27 July, 2006
Ran with fact box "Major
infrastructure program projects",
which has been appended to the end of the story.
Provincial review cites poor
business practices, untendered contracts
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A $900-million program to
build civic projects across B.C. is plagued
by poor business practices, untendered contracts and improper expense claims,
an internal government audit
warns.
The review of the Canada-B.C.
Infrastructure Program found problems with four of the six projects audited last year.
But the provincial Liberal
government has so far opposed its own auditors' advice to require competitive
bids and conflict-of-interest rules for contractors. Internal documents,
obtained through the B.C. Freedom of Information Act, show the province has
insisted that municipalities be entrusted to oversee the $900 million in taxpayer-funded projects.
"This is a huge
story," said Vancouver municipal lawyer Jonathan Baker in an interview. "It's
shocking to oppose having rules on these procedures, on a billion dollars in public money. That's banana
republic politics ... Even with rules, there are plenty of dangers."
The federal and provincial
governments launched the infrastructure program in 2001. Under the program, the two senior governments
and the local government each contribute one-third of the money for
infrastructure projects.
The program as of June had funded 312 projects across B.C.
The government says the six projects audited by the B.C.
comptroller-general, a branch of the Finance Ministry, are a representative
sample of all 312 projects.
The auditor's May 2005
report, obtained by The Vancouver Sun, raised concerns about a watermain project to link Lions Bay with
Brunswick Beach.
"We noted poor practice
regarding tendering," the report says. "The project administrator position ... was not put out to
tender but directly awarded."
As well, the lowest bidder
was allowed to resubmit after misreading the contract. The bid was still the
lowest and it won the contact, but as a result the audit warns: "the municipality may be exposed to
claims by unsuccessful contractors."
The Sunshine Coast Regional
District received $3.8 million to construct a water filtration plant.
"Poor business practice
observed," said the audit.
In this case, the engineering
contract was tendered but the audit
noted: "No evidence was kept regarding the evaluation or the bids
themselves (successful or not), thereby not allowing us to substantiate that
value for money was achieved."
The audit also raised concerns about a sports complex in Salmon Arm, noting "no
tendering" and "poor business practices." The report does not
elaborate in this case on
the nature of the poor practices.
The fourth project identified as a problem
is a recreation centre on Saturna
Island.
The report cites $56,000 in "ineligible
expenses" and "poor business practices." Three bids were
submitted and the contract did not go to the lowest bidder, the documents say.
The auditors found no
significant faults with the other two projects: the North Cowichan Advanced
Treatment for Phosphorous Removal and the White Rock Operations Green Building.
Two B.C. ministries -- Small
Business and Economic Development and the Ministry of Community Services --
helped administer the infrastructure program. The audit reports contain a response from the community
services ministry on behalf of both ministries to problems identified by the
auditor.
The ministry argued that
responsibility for project
management rests with the municipalities because "under the Community
Charter, local government is recognized as an order of government within its
own jurisdiction, which the province acknowledges and respects."
Premier Gordon Campbell has
often spoken passionately about giving more autonomy
to municipalities in the
charter.
The ministry argued against
the province managing the infrastructure program, because "local
governments have more at stake (greater vested interest in the project) and it is reasonable to assume that they will carry out
the project with due
diligence." As well, the standard contract states the recipient "is
solely responsible for all aspects of the project."
The auditors advised the
ministry to consider establishing conflict-of-interest guidelines on tendering,
so the directors of non-profit societies benefiting from specific projects "could not take
advantage of their position in
awarding contracts."
But the ministry replied:
"No action. When a proponent informs (program) staff that they are going
to award a contract to someone associated with the society -- we discourage
them from doing so. However, as there are no tendering provisions in the contract, we cannot
prohibit them from awarding contracts to those associated with the
society."
The auditors asked the
ministry to recover ineligible and unsupported costs that should have been
reimbursed. "Agreed," the ministry responded. "This is already in place, and we have recovered a
small number of overpayments from local proponents."
The auditors insisted that project contracts go out to
tender, but the ministry disagreed.
"Value for money is
somewhat subjective; it goes well beyond getting the lowest bid," the
ministry said. It argued that most of the projects are technically complex, and it is useful if
a local supplier has developed the necessary skills both to construct and
upgrade the project.
"The current situation in B.C. makes it extremely
challenging for local government," the ministry said. "There is so
much construction activity, it is often difficult to get interested parties to
submit tenders."
Ministry spokesman David Crebo said more than 90 per cent of the projects are managed by
established local governments with strong financial controls.
Lions Bay Village finance
director Robin Hicks said in
an interview that it's not fair to demand equivalent granting practices in a village and a city.
"This village has about
eight employees, and 1,500 people. Here we don't even have a purchasing agent
or a professional engineer. The District of North Vancouver has over 300 employees and dozens of
engineers."
The Lions Bay mayor and councillors could not be reached for comment.
Regarding the Sunshine Coast project, Sunshine Coast Regional
District chair John Rees said: "That was a great project, it's working extremely well, and it's right
on budget."
He referred the financial
details to district administrators, who could not be reached for comment.
Asked what would happen if
the B.C. government demanded tendering, Rees said: "We always look for as
much local control as we can possibly get.... I wouldn't be opposed to such a
policy, but I expect the private sector would. . . .
."
He added that "It seems
impractical.
"It doesn't matter to me
what level of government audits
us," said Rees. "This district is religious in our handling of grant funds."
But Baker, who is also a
former Vancouver city councillor, said proper
tendering is not a difficult process.
"The smallest town can
do tendering for taxi and tow truck contracts," he said. "It's not
like they're reinventing the atomic bomb."
To date, 158 of the 312 projects have been completed. The
rest are under construction, with an extended deadline to March 31, 2008. The
costliest project is the
Greater Vancouver Water District's Seymour filtration plant project at $100 million.
Last June, the two senior
governments created the new Canada B.C. Municipal Rural Infrastructure Fund
(MRIF), in addition to the
earlier infrastructure program.
The new $153-million fund
consists of $51-million contributions from each of the federal, provincial and
local governments over the
coming year for infrastructure projects
across the province. A minimum 80 per cent of funding will be targeted toward
communities with a population under 250,000 people.
The six-member MRIF
Management Committee (with senior federal, provincial and Union of B.C.
Municipalities' representatives) will manage the MRIF and chose proposals based
on staff advice, just as a management committee oversaw the previous
infrastructure program.
However, the MRIF committee
will develop requirements on the awarding of contracts, which might also
mandate tendering.
"Municipal governments
have far too much autonomy already," said Baker. "Instead of
protecting these governments from the people, we need rules to protect the
people from these governments.”
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MAJOR
INFRASTRUCTURE PROGRAM PROJECTS
A look at the most expensive construction projects funded by the
Canada-B.C. Infrastructure Program
Seymour Filtration Plant Project (GVWD) $100,000,000
Kamloops Water Treatment
Facilities $23,333,332
China Creek/Canoe Creek Basin
water/sewer (Vancouver) $18,266,664
Whistler Wastewater Treatment
Plant Upgrade $12,666,666
North Burnaby Combined Sewer
Separation Program $9,466,666
Nanaimo Old Downtown
Infrastructure Rehabilitation $9,287,930
Enhanced Water Supply
Disinfection (Greater Victoria) $8,631,000
Squamish Sewage Treatment
Facilities $7,486,664
Norrish Creek Filtration
Phase 2 (Fraser Valley RD) $6,697,100
West branch CSO detention
square (New Westminster) $6,666,666
Surrey Water Meter Incentive
Program $6,180,000
Sunset Community Centre
Renewal (Vancouver) $4,000,000
Burrard Bridge Seismic upgrade
$2,000,000
Vancouver Museum
Revitalization Phase 3 $2,000,000
Vancouver Aquarium Marine
Science Centre upgrade $2,000,000
Christ Church Cathedral
upgrade $538,000
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