Item - 2020.GL19.1

The General Government and Licensing Committee received the report (September 21, 2020) from the Controller and the supplementary report (November 13, 2020) from the Controller for information.

As requested by Council, this report provides information on the consulting services expenditures of City Divisions and Agencies and Corporations for the year ended December 31, 2019.  The report contains a summary and details, by category and vendor, of operating and capital consulting services expenditures for 2019, with 2018 comparatives.

Overall, the City of Toronto and its City Divisions and Agencies and Corporations spent $37.7 million on consulting services in 2019 for operating and capital combined, which represents an overall increase of $12.6 million (or 50.1 percent) compared to 2018. The overall increase in consulting expenditures consists of an $8.8 million (or 72 percent) increase within City Divisions, and a $3.8 million (or 29 percent) increase within City Divisions and Agencies and Corporations.

Information for this report is gathered from the City's divisions and verified against the City's general ledger by Accounting Services.  Information from agencies and corporations is both accumulated and verified by those entities.  Accounting Services consolidates this report on behalf of the City.

The City's use of external services varies by year and project and supplements critical skill sets and expertise that are needed just-in-time, and are not available within existing staff complements, as well as enables the City to quickly complete essential initiatives while maintaining existing service levels. All expenditures have been budgeted as part of fiscal 2019.

In 2019, consulting operating expenditures increased as a result of:

- The City's one-time investment to support enterprise-wide transformations, particularly aimed at improving the effectiveness of procurement and sourcing practices and budget modernization. These initiatives resulted in savings in excess of $40.0 million; and

- The City's receipt of legal advisory services to address the Province of Ontario's amendment of the Construction Act.

Furthermore, 2019 consulting capital expenditures increased as a result of:

- The City's initiatives associated with roads and transit services;

- Toronto Transit Commission's review of its new streetcars and subway assets; and

- Toronto Waterfront Revitalization Corporation's assessment of its Quayside project.

At its meeting of October 5, 2020, the General Government and Licensing Committee was provided with information on consulting expenditures made by City divisions, Agencies and Corporations in 2019.  The report contained a summary and details, by category and vendor, of operating and capital consulting expenditures for 2019, with 2018 comparatives, presented in a format directed by City of Toronto Council.  In 2019, City of Toronto divisions, and City Agencies and Corporations spent $37.7 million on consulting, for both operating and capital initiatives.

This report provides further information about consulting expenses over the past ten years and the reason why the amounts vary year over year.

Since 2010, total consulting expenditures ranged from a low of $11.2 million in 2014 to a high of $37.7 million in 2019; the City-wide average spent on consulting over the past ten years is $21.2 million.  Consulting expenditures incurred for operating initiatives was lowest in 2015 at $3.4 million and highest in 2019 at $13.6 million; the average was $6.1 million.  Likewise, consulting spent on capital projects was lowest in 2011 at $7.0 million and highest in 2016 at $27.2 million; the average over the past ten years was $15.0 million.

Consultants are used by Divisions and City Agencies and Corporations for a number of reasons, which do not always present in comparable patterns or trends that clearly identify a normal use in any given year.  As can be seen by the information in Appendix A, the entities with the highest use, as reported over the past ten years, have different total average levels of expenditures, together with very different initiatives for which those expenditures were incurred.  There is a frequent correlation between the use of consultants and significant infrastructure investments and when new legislation/provincial regulation is introduced or amended (AODA, Value-Based Organizational Review, Construction Act amendments etc.) regardless of the Division that is impacted by the Infrastructure investment or legislative change.  It is clear that consultants are typically used when:

- A specialized skill set is required that aligns with best practice and the most up to date expertise, such as for a system implementation or a public safety review

- The existing staff complement cannot absorb one-time special purpose or project work within existing capacity and hiring permanent staff with the required skills is not cost effective, such as for construction project design or specialized legal advice

- An independent objective review is required and/or mandated by a funding agreement, and benefits from outside involvement or expertise, such as public engagement or a service delivery review

- Work needs to be completed quickly to meet a Council or legislative deadline, such as addressing the Province of Ontario Construction Act changes or the Eglinton East Extension project

Each initiative that uses consultants has unique circumstances and requirements that are considered before determining the most cost effective way of completing the work.  Through detailed planning processes and consideration of the above factors, Divisions and City Agencies and Corporations determine when the use of consultants is justified.  This use does not necessarily follow a pattern or trend year over year or in specific Divisions/City Agencies and Corporations.  As a result, the extent of consulting work will be dependent upon the City's annual requirements, as well as business needs in order to accommodate unanticipated requests or changes in the external environment to achieve overall operational and financial efficiencies.