200 Building Audit

Ah Mr. Dunbar. You really know how to hurt Windsor Council. It is what Council is noted for:

• "We question the necessity and the degree to which Council meetings relevant to this project were held in-camera. The lack of public transparency on a taxpayer funded project created challenges throughout the audit review."

I wonder if you were sick of it too and retired.

Lots of stuff to read and to try to absorb. When you read the Report there is no doubt that the way that this project was carried on was a shambles. It is a shocking indictment of the way that this City constructed the 400 building. I will outline today just some of what the Auditor said in the Report. I will talk about some of the financial information and the City's justification in another BLOG.

To be blunt, Councillor Valentinis was the big proponent and defender of this project. It would be very interesting to hear what he has to say after reading this Report. He has to be very distressed and disappointed.

Well, we only got half of it. We just got Part I of the 400 Building Audit. They did not dare give us all in one package. I think that the real juicy stuff is coming, for example why St. Clair College did not come to the building and why a number of contractors who bid on the project were furious. Is the failure to release the Dunbar Audit at this time based on the concern that the City may get sued by unhappy Contractors?

Part II is to come in several more months or so. Who knows when we get the Dunbar Audit or if we will get it without a lawsuit or a Privacy Commissioner order. It is too late for that Classified Ad in the Star that offered a reward but wouldn't it be nice if I received a copy of that Report in a brown envelope in my mailbox.

By the way, any privilege on Dunbar was waived by quoting it in the just released Audit report.

Heaven help us with the DRIC project which is described as Infrastructure Ontario's first road project using the AFP or P3 model. There must be a course given to public servants when they first join the Government to teach them how to make excuses when things go wrong.

The best excuse is one we heard for example with the Brampton Hospital Audit. There is no doubt that Infrastructure Ontario will use it. Our City did with the 400 building:

• "this being the first project undertaken by the City using the Design-Build method, it was a learning experience for the organization. Ultimately, we believe that the goal of an audit ought to be to learn from and improve upon previous results."

Fantastic, learn how to do this with the $27 million project. Improve at taxpayer expense. After all, it's not your money.

Our City also has the"reorganization" excuse that was used in the dead men don't pump gas audit as well. That works wonders when you can point the blame at someone who is not around now.

Back to the 200 audit. Here is what I still don't get and the Audit report does not explain it either. As I wrote before:

• "Back in February of 2006, the Star reported:
  
  "Councillors approved a report by an independent consultant who found the building was constructed under budget and filled an important need by bringing several city departments under one roof. "Overall, the assessment was that it was done well" and it met the objectives of the city, said John Skorobohacz, the city's chief administrative officer...
  
  Skorobohacz said the project came in under budget and the city will have an extra $1 million, based on projected revenues and operating expenses.
  
  The contractor wrote a Letter to the Editor in which he said:
  
  "After much speculation, allegations and innuendoes, it is vindicating to read in The Star report of Feb. 7 that the municipal building at 400 City Hall Square was constructed under budget. Not that we, the design builder, had any doubts about the conclusions now reached by Coun. Fulvio Valentinis, the independent consultant and the city's chief administrative officer."

One might want to call up that independent consultant and ask him if he still believes what he said based on this Audit. I certainly believe that the CAO needs to be confronted publicly at Council and asked how he could make his comment. It has to be based on something.

Interestingly, here is what the Auditor said about that Report:

• "In October 2005, the City of Windsor hired Brodel Management to conduct a review of the new building using a very limited scope for the review. The proposal to conduct the review stated that “The primary focus of this review is ‘what did we learn’ and ‘how do we do things better?’”

Take a look at this. You have to read it for yourself. Look at the timeline. It explains why it took an eternity for the Audit to be published and provided to the public. I am sure that Mr. Dunbar was frustrated and that is why he released his report.
http://www.scribd.com/doc/12554686/400-Audit-Summary-2

It is absolutely inexcusable the way the Audit group was treated. An interesting question is whether the Auditor ever approached any of the City politicians to complain, and in particular the Mayor, and what the response was.

To be blunt, Council needs to ask Administration to explain publicly at Council why information and people were kept from the Audit Group. If no satisfactory answers are given, heads should roll. It is unacceptable to keep this information away from the people whose job is to ensure that taxpayer money is used properly:

• "The 400 CHS audit review leading to the April 2007 audit draft report was subject to a significant scope limitation. A scope limitation is a restriction placed upon the internal Auditing department that precludes the department from accomplishing its objectives and plans. The scope limitation of the 400 CHS review of 2007 was defined by the Auditor as the restricted access to records, personnel, and physical properties relevant to the performance of the engagement objectives and the performance of necessary engagement procedures.
  
  The City Auditor completed a draft report in April 2007, noting the following scope limitations in the draft document:
  - The Auditor did not have access to all in-camera Council documentation
  - The project financial closeout was not completed, so the Auditor could not perform a financial analysis of total project expenditures
  - The Auditor had limited access to the project records and project staff to provide
  clarification and answers to questions.
  
  Throughout 2008, Audit had been provided with access to new information and persons to answer questions necessary to address the scope limitations of the April 2007 draft. Through an analysis of the new information, Audit has identified areas of the April 2007 draft that required updating. This issue was addressed through changes to the report objectives, a refinement of audit objectives and corrections or amendments to certain draft findings and recommendations.
  
  A significant volume of work was required to bring this report up to date with the new information. The report has been updated to reflect the new information provided by Administration and the information gathered throughout 2008 in the interviews held by Audit with the project Staff and Consultants who worked on the 400 CHS project."

I shudder to think of what the Dunbar Audit said with incomplete information. I am sure that this has to be one of the reasons why some do not want this Report disclosed:

• "The preliminary financial findings of the April 2007 draft were based on project expenditures recorded in the PeopleSoft financial system as at December 6, 2006. Due to the scope limitations identified above, it was necessary to present the City Auditor’s Office financial findings in the report without clarification or comments from the City’s Corporate Projects Group. [Emphasis in original report]
  
  To complete audit reports in compliance with our Audit Charter (2004), the audit process requires that Management ensure that a written response to the recommendations in the Internal Audit report is submitted to the City Auditor, and that the Auditor include Management’s written response in the report. A disclosure of non-compliance is required in the instances where full compliance with this written response requirement could not be obtained."

Frankly, based on this remark, do we have an Administration without respect for taxpayers? Council needs to take decisive action to let them know who is in charge!

Consider some of the remarks made with "complete" information:

• This lack of specificity makes it difficult to determine whether the City received what it bargained for when what it bargained for is not specified in the written construction agreement, and when that written agreement states that it is the entire agreement between the parties.


• Audit found it difficult, and in some cases we were unable to identify, specific and measurable project deliverables which to evaluate in the audit. It was difficult to determine what the City had negotiated for, given the ambiguously stated requirements within the various documents.


• The City has not adopted a corporate standard upon which project management is based and there was no best practice adopted and used to manage this project.


• the report did not contain the defined criteria that we would expect to be included in a business case such as, clear project objectives, scope, expected outcomes, critical success factors, risks assessment and risk mitigating measures, responsibilities and ownership.


• Administration reported that project staff could not be assigned to the project due to their busy portfolios, but had volunteered to put in the extra hours required to manage the project. We consider this to be a management procedure that is against best practices which creates an exposure of risk to the health and well being of employees working on the project long-term, risk to the success of this project and to simultaneous and future projects – therefore, to the Corporation as a whole.


• Administration adopted a project structure identifying team members and their authorities early on in the project. However, the plan fell short in the adequacy of the structure and in identifying the where, when and how many resources were required.
  The breakdown in planning and adherence to the approved project structure led to a strainedproject management environment. This had a direct impact on the risk of the project to be delivered on time, within budget and with an adequate level of quality.


• For a project with an approved budget value of approximately $27 million plus, we would suggest that allocating staff on the basis of staff “volunteering to put in the extra hours required” created risk to the project.
  The assignment of individuals to work on a project requiring “volunteer service,” in addition to their regular full time duties performed, indicates that Administration failed to adequately plan for the resources required to successfully deliver the project.


• Within three months of the start of construction, the Working Committee structure had eroded to the point where there is no senior member of Administration designated as the project manager to lead the team. Demonstrated sponsorship and continued support of the project has reached the point of critical weakness.


• The project Steering Committee was assigned the role of providing overall direction and guidance to the Working Committee and to review issues requiring Council direction. The failure to appoint replacement resources to the Steering Committee resulted in the absence of corporate leadership in the project and demonstrated a major weakness in corporate sponsorship and support.


• The Working Committee was assigned the directive to ensure the project met the objectives set by Council by day-to-day management of the Design Build Contractor, review of technical, financial and design issues and referral of material issues to the Steering Committee and/or Council. The failure to appoint replacement resources to the Working Committee left this team without adequate senior representation necessary to obtain decisions on project issues and without adequate resources to perform their required duties


• We requested but were not provided with any approved project charter or micro level project plans.


• We did not find evidence to show that a formal project risk assessment occurred in the planning phase of the project. This indicates that management of risk was performed on a re-active basis, which is contrary to best practice.


• However we were unable to identify documentation to confirm the duties of maintaining an
  up to date budget, an estimated cost to complete the project and to regularly report on thefinancial position of the project were performed and reported on a monthly or consistent
  basis to the Steering Committee.


• The project was delivered substantially complete approximately 9.5 months after the delivery date stipulated in the MOA. The delivery date was changed to an undefined date, when the City expanded the scope of the project contract to include fit-up services.
  As per the development contract schedule A, approved by Council at an in-camera meeting on or about March 31 of 2003, construction was to be completed within 66 weeks from the date of the signed agreement with a deadline for substantial completion identified as November 15, 2004.
  The project architect, J.P. Thomson, issued confirmation of substantial completion in a letter dated September 6, 2005.

Here are some comments from the City's outside counsel. They are shockingly candid:

• Ideally, the OSR would be a clear, stand-alone statement which consolidates into narrative and/or drawings the City’s requirements at the point it has agreed with Vindella that Vindella should undertake the Project. Instead, the OSR is a collection of material beginning with the RFP, including Vindella’s proposal and other materials that were (presumably) created during negotiations with Vindella. When these negotiations were concluded, the result was a Contract Price within the meaning of CCA14 and a set of requirements that Vindella must meet to earn the Contract Price. If the City was to claim a breach of contract, it is very likely that the other party would challenge the result. Anyone – including a judge adjudicating a breach of contract claim by the City – attempting to distil the City’s requirements from the OSR faces a daunting task.


• By the time the contract is signed, the workable parking solution was (or should have been) defined. That being so, the “wish list” in the RFP has no place in the OSR, having been superseded by the final parking solution to which the City and Vindella agreed.


• The City’s difficulty arises because the OSR does not provide the clear and measurable benchmarks by which the City can determine whether it received what it was due for the Contract Price. It is likely that some of the absolute dollar overrun was a function of the usual “project creep” (things being added after the Contract Price was settled) and unforeseen conditions. Changes may also have arisen because the contractor claimed that a particular item was not included in the Contract Price and the OSR – being unclear at best – did not support the argument that what the contractor was claiming an as extra was not an extra at all.


• Creating an OSR that was an accumulation of the procurement, negotiations and Q&A in
  contract negotiation stages deferred a true definition of the City’s requirements to a future date. It thereby created the condition that determining whether the Project as completed was the same as the Project when contracted would be as much of a mystery as the OSR themselves. Indeed, the approximately $300,000 dispute between Vindella and the City (albeit a minor one in a project of this size) does suggest that this concern with clarity and measurability is not entirely academic. As well, there may have been some earlier issues on which the City simply backed down rather than even dispute them, for the same reason, the unclear OSR. If there had been a serious dispute over the construction that had gone to litigation it may have been difficult for a judge to determine whether the City had received what it had bargained for – or not. The approach taken to defining the City’s requirements was not good practice and should not be repeated.

Remember, that these comments were made after the Auditor went through those 11 boxes of documents and had the opportunity to interview all the relevant people. In fact, I understand that some senior people from out of town from KPMG "cross-examined" some of the people involved in the process for hours. That was the term given to me!

Exactly why there was a need to involve the outside auditors who are merely supposed to be involved in "oversight" is a question that I have.

In passing, it would be interesting to know what the cost of the outside auditors and lawyers who were retained for this project never mind the internal costs given how long it took.

I did not want to go into a major analysis in this BLOG. It is probably long enough if you include reading the timeline which I urge you to do.

I will leave you with this thought and will really scare you even more:

• "In 2006, the City Auditor’s Office undertook a post-construction audit of the processes approving the project and managing the construction of the building. A post-construction audit is a standard procedure upon the completion of a major project such as this and is also an industry “Best Practice.”

Poor Angela Berry, Lead Auditor. Once she finishes this project, guess what her next assignment must be. Surely you can figure that one out, dear reader. What major project have we just completed: THE EAST END ARENA!

If she thought that she had it bad on this job, she will think that a piece of cake compared with what she will find I suspect on the Arena project. I wonder if it was run in a manner similar to the 400 building. A decade from now we may find out based on the 400 building audit timetable.

If I was Councillor Bill Marra and I was going to run for Mayor, I would certainly insist that the Arena audit take place now so that the blame, if any, can be put right where it belongs. I would also insist that the audit be completed before the next municipal election. In that way, if there was a screw up, certain people could not run for office against him!

After all, that project was completed before the results of this Audit came out. What a remarkable coincidence.