Thoughts and Opinions On Today's Important Issues

Tuesday, December 29, 2009

Sole Sourcing The Arena And A Public Inquiry (Part 2)

I delivered this comment at a press conference back in October, 2006:
  • "I read the Mayors comments on Saturday about the MFP settlement. He said:

    “Windsor has reached a final settlement with the former MFP, closing the books on one of the Municipality's most shameful chapters…

    "This should be something every Council across this Province and country remembers so they enforce the proper policies and vigilance to ensure this situation never happens again...

    …hopefully this is not one of those situations people ever forget about.

    It reinforces how public institutions have to be very vigilant in ensuring proper safeguards and protocols are there to ensure this never happens."


Add in now the 400 Building and it looks as if we have fallen asleep instead of remaining vigilant. It happened once---shame on them. That it has happened again---shame on us.

What does one say if it happened a third time?

This time around, unlike with the 400 Building audit, if it can be demonstrated that sole sourcing of the arena was in violation of City By-laws, will the Audit Committee and Councillor Halberstadt in particular have the guts to act and to demand that a Public Inquiry be conducted on the $70M plus deal:

  • "Rather than defending his conduct, ex Councillor Carlesimo should be thankful that the audit committee did not recommend to Council a full-blown Public Inquiry. Then he and the other members of the selection committee would have been put under oath and asked what conversations and associations they might have had with local contractor Oscar during the time this sordid mess was unraveling.
The Audit Committee wants to look at sole sourcing since
  • "there is concern over that the city is too often streering around its purchasing bylaw by failing to put projects out to competitive bids."

As I pointed out last time, the relevant sole source provision was introduced into the Purchasing By-law when Edgar (aka Eddie) was Mayor in 2004. And wait until you see the "in the best interest of Windsor" clause too that was inserted under Edgar's regime! So much for protecting taxpayers from MFP-type deals since it was described as a P3. How much extra has that fiasco cost us?

The City need not steer around the By-law; it can drive one of Transit Windsor's new hybrid buses right through it if the transaction is structured properly. The on-again, off-again Tunnel deal or the privatization of Enwin or WUC are distinct possibilities as well if P3ed.

Others had been concerned about how the City contracted for this project at the time:
  • "Meanwhile, the Windsor Construction Association is slamming city council for approving a $48-million arena project that will never be tendered.

    "It's a significant amount and they're basically bypassing the tendering bylaw," said Jim Lyons, executive director of the association that represents 380 local companies. "Our question is, 'Wait a minute, whoa, this is a (multimillion-dollar) project.'"

    Lyons said the association's president is polling its board members to see if they want to pursue further action, but he doubts the issue will go as far as the courts. "Our pockets aren't deep enough," he said. "(City officials) wanted this deal to happen and they got language to make it work."

    Lyons said he was inundated with calls and e-mails leading up to council's meeting Wednesday when the deal with the Collavino brothers' PCR firm was approved. Many companies in the construction industry won't publicly condemn the city because they rely on millions of dollars worth of municipal jobs, but they asked the association to intervene on their behalf."

  • "The Windsor Construction Association accused city council Wednesday of financial irresponsibility and negligence when it awarded the $47.9-million east-end arena project to the Collavino family's PCR firm without tender...

    "We're concerned about the fact the city didn't follow proper procedure on a $50-million award," said executive director Jim Lyons.

    Lyons said the association's lawyer concluded that council "misused the language in their (purchasing) bylaw."

    Lyons said the bylaw states "sole source" means "the purchase of a good and/or service where there is only one available supplier of that good and/or service that meets the needs or requirements of the City of Windsor."

    "What process did the city of Windsor utilize to determine PCR was the sole supplier available to meet the needs or requirements of the city?" Lyons asked in a letter to the city."

    The association says the city's bylaw for sole sourcing a multimillion-dollar contract states it can be done when the purchase is "clearly in the best interest of the city..."

    Lyons said there's no documentation to suggest the PCR proposal was in the city's best interest. "Knowing full well that these questions will be difficult to verify as a result of not being properly undertaken, we believe that administration and council are acting financially irresponsible ... and we are confident that if investigated by the Ontario Municipal Affairs office, their findings would be consistent with ours."

    The association didn't realize the deal would be receiving final approval Monday night because it -- like many others in the city -- wasn't aware the issue was on the agenda.

    "There was no public notification to us," Lyons said. "But that seems to be the way this council wants to move forward. That's the atmosphere we're working with these days."

Unfortunately, the Association wimped out and did nothing through the court system and suffered as a result. They sounded like whiny babies who backed off when push came to shove.

It looks as if Angela Berry will have to take a look at the Arena in the context of sole sourcing. Let me help her save time and effort and help her write her report for the Audit Committee:


Lack of or inadequate controls and/or failure to follow the controls in place were some of the main contributor’s to Windsor taxpayers having to pay out extra millions of dollars in unexpected payments in the MFP case. On October 14, the Mayor advised that the case had finally been settled:

  • “Windsor has reached a final settlement with the former MFP, closing the books on one of the municipality's most shameful chapters.

    An agreement on the remaining 50 outstanding equipment leases with the financial leasing corporation now called Renasant Financial Partners Ltd. will see the city recoup a final $6 million, Mayor Eddie Francis announced on Friday.

    "We are extremely happy and proud that we have a conclusion to this dispute with MFP," he said.

    "This should be something every council across this province and country remembers so they enforce the proper policies and vigilance to ensure this situation never happens again...

    …hopefully this is not one of those situations people ever forget about.

    "It reinforces how public institutions have to be very vigilant in ensuring proper safeguards and protocols are there to ensure this never happens."

    The introduction in Windsor of a whistleblower hotline, new fraud policy and conflict of interest policies have been introduced in the wake of MFP, noted Onorio Colucci, the city's chief financial officer and treasurer.

    "We are a much different organization today," he said. "We think we have made dramatic improvements."

Is what Windsor’s officials say correct or has the process for the arena demonstrated that in spite of everything, the City is still at risk again with lack of or inadequate controls?

How did PCR become the contractor of choice? Where was the tender or RFP? Why couldn’t the two new proponents who sent “unsolicited” letters make their case to Council? They could not because the process is fatally flawed

In fact, could Council legally make the decision as they purported to do?

The initial Administration report talks about “sole source” purchasing as the basis of Council’s right to deal with PCR. Administration talks about 2 sections of the by-law for Council to rely upon.

32. (1) A Sole Source purchase may be used for the purchasing of goods and/or services for Contracts of any Contract value, in the following circumstances:

(g) Where goods are offered for sale by Tender, auction or negotiation such purchase will be deemed to be a Sole Source purchase and the CAO/City Manager may authorize the submission of a Bid or the conduct of negotiations where the CAO/City Manager determines the purchase to be clearly in the best interest of the City of Windsor;

(i) Where a public/private partnership exists

Clearly what has been proposed by PCR is not a public-private partnership but a design-build project. And this not an offer of goods but the building of an arena. That is considered a "service" not a "good" under the By-law.

Michael Duben, the city’s General Manager of Client Services, was quoted in the Windsor Star saying: “Windsor’s purchasing bylaw allows for single sourcing under special circumstances. “I think the bylaw allows itself to be waived,” if the city believes it has the best possible deal it could get.” He refused to answer my direct request where this provision was found although asked to do so. Is there such a Provision in the By-law since I could not find it?

Even the Mayor stated that “City council had the authority to waive the city’s tendering bylaw because they were certain the deal with the Collavinos [PCR] wouldn’t have been found anywhere else, Francis said.” Where is such Provision in the By-law?

As I pointed out yesterday, there were alternatives to the Collavino deal that the Mayor himself knew about and that he and Council ignored for whatever reason.

Moreover, Mr. Duben and Mr. Francis are both lawyers. They should know that the Municipal Act states:

  • Section 271 (1) Before January 1, 2005, a municipality and a local board shall adopt policies with respect to its procurement of goods and services.

Where was the City Solicitor, Mr. Wilkki when this was taking place? Does his silence mean he agreed or was he ignored again as the complaint was made in the 400 Building audit:

  • "the attitude that “we will seek your legal advice when we want it” rather than “be proactive and exercise your best judgment to help us to avoid going offside legally.”

Accordingly, it would not seem that the By-law could be “waived” since it is mandatory. If they and Council believed that what they were doing is waiving the By-law at the Council meeting, then the process may be flawed and the decision may be improper.

At the Council meeting a new provision was tried when the Purchasing Manager said there was a provision “where in the opinion of Council it was in the best interest of the City to do so.” Where is such provision? It is also peculiar that the City Solicitor was not called upon to express an opinion in a legal matter such as this.

The closest provision to this is the one that was introduced when Edgar became Mayor. It effectively allows for the complete ignoring of all checks and balances in the system. Watch out for the Transit Windsor bus about to hit the taxpayer pocketbook:

  • Sec 5 (4) No provision of this by-law precludes the CAO/City Manager, General Manager, Department Head or the Manager of Purchasing and Risk Management from recommending an Award to Council where:
    (a) In the opinion of the CAO/City Manager, General Manager and/or Department Head, it is in the best interest of the City of Windsor to do so.

    (5) Council approval is required in accordance with Section 7 of this by-law.

No one in Administration has said that “it is in the best interest of the City of Windsor” to do a deal with PCR.” No one was asked since the City was mistaken as to what their authority was. Did the Purchasing Manager give incorrect information to Council?

In the initial Administration report, ten members of Administration signed it and stated that the “financial analysis is only one component that needs to be considered.” Administration asked for a 90 day due diligence period to review PCR’s proposal.

Shockingly, about two weeks later, an updated Report was filed at the very last minute signed by the CAO only recommending only that the PCR deal be approved. There is nothing in the Updated Report that states that the proposed transaction “is in the best interest of the City of Windsor” and absolutely no evidence is presented to support the Recommendation in the Report.

In fact, it can be argued that the failure of the other nine members of Administration to sign the Report means that they did not go along with the CAO. Or perhaps they did not even know about it.

Accordingly, the action of the Council to accept the PCR proposal may have been a nullity and in violation of the City’s Purchasing By-law

The City action may also be a violation of the following sections of the By-law:

3. The goals and objectives of the Purchasing By-law and each of the methods of purchasing authorized herein are:

(1) To provide the basic minimum requirements to ensure that Quotations are obtained, competitive purchasing is adhered to, and to continue to ensure that the City of Windsor obtains the Best Value of goods and/or services at the most economical cost.

(2) To the extent possible, ensure efficiency, openness, accountability and transparency in the administration of the purchasing function while protecting the financial interests of the municipality and respecting the competitive interests of those participating in the purchasing process.

(5) To ensure proper policies and procedures are in place to support the achievement of Council/Corporate goals and objectives.

8. The prescribed sections of this by-law maintain the integrity of the Bid Solicitation processes including protecting the interests of the City of Windsor, the public and persons participating in a purchasing process.

9. The Ontario Public Buyers Association’s (OPBA) “Code of Ethics for public purchasers is based upon the following tenets and members of the OPBA attempt to consistently practise their profession and deal with their day-to-day responsibilities according to these principles. Members are encouraged to display this statement in their departments as well as other locations in their agencies.”
(2) “Open and Honest Dealings With Everyone Who is Involved in the Purchasing Process. This includes all businesses with which this agency contracts or from which it purchases goods and/or services, as well as all members of our staff and of the public who utilize the services of the purchasing department.”
(3) “Fair and Impartial Award Recommendations for All Contracts and Tenders. This means that we do not extend preferential treatment to any vendor, including local companies. Not only is it against the law, it is not good business practice, since it limits fair and open competition for all vendors and is therefore a detriment to obtaining the best possible value for each tax dollar.”

The questions that need to be asked include:
 Was incorrect information given to Council about the By-law
 Why didn’t the City Solicitor or the Mayor who is a lawyer or Mr. Duben who is a lawyer correct the misinformation if it was given
 Did Mr. Duben and the Mayor also give incorrect information about “waiver”
 Why was “waiver” not mentioned in the Administration Report
 Why did the CAO only sign the Updated Report and not the other members of Administration who signed the initial Report.

If I am correct in my analysis, the provisions dealing with sole sourcing and "in the best interest of Windsor" were not applicable and waiver was never possible. The arrangement with PCR accordingly did not meet the requirements of the Purchasing By-law.

Ms. Berry has no choice but to so report to the Audit Committee.

The Audit Committee and Councillor Halberstadt (as well as Councillor Marra who is also on the Audit Committee and who would be given an election goodie on a silver platter) would have no choice but to call for a Public Inquiry!