Item - 2023.AU2.6

The Audit Committee recommends that:  

1. City Council request the General Manager, Transportation Services Division to ensure all substituted equipment have been approved through the appropriate change order process, and ensure in future years, where the contractor requests the use of substitute equipment, that the Division ensures that the proposed rate is reflective of existing contract pricing, or if no existing contract pricing is applicable, comparable contract pricing for what the equipment can deliver.

2. City Council request the General Manager, Transportation Services Division to make the necessary updates to the Winter Maintenance Contract Administration Manual, provide continuing training, and ensure consistent and ongoing compliance over the duration of the contracts to ensure:

a. Staff verify that equipment is at the designated City Depot in accordance with the contracted mobilization and demobilization dates for every winter season and retain sufficient and appropriate records of such verification;

b. Staff appropriately determine instances where liquidated damages should apply and retain sufficient and appropriate records to support the Division’s application of liquidated damages; and

c. Staff perform the required field audits and retain sufficient and appropriate documentation of their observations to support the Division’s application of price adjustments.

3. City Council request the General Manager, Transportation Services Division to ensure activations for each winter event are accurately captured electronically to support monitoring contractor compliance with contract requirements on equipment activations and mobilizations.

4. City Council request the General Manager, Transportation Services Division to implement a process to ensure all contractor deficiencies related to winter maintenance services are captured in a timely manner in a central system that facilitates monitoring effective contractor performance.

Tara Anderson, Auditor General, Ina Chan, Deputy Auditor General, Ruchir Patel, Senior Audit Manager, Barbara Gray, General Manager, Transportation Services Division, and Vincent Sferazza, Director, Transportation Operations and Maintenance, gave presentations on Winter Maintenance Program Follow-Up: Status of Previous Auditor General’s Recommendations and Processes to Hold Contractors Accountable to New Contract Terms.

Contracted winter maintenance services are part of the City’s snow and ice management plan that is designed to prioritize the safety and mobility of all road, sidewalk, cycle, and path users. Nearly $1.5 billion in winter maintenance contracts (over a 10-year term) were awarded in December 2021.

This follow-up report addresses City Council’s December 2021 decision for the Auditor General to review the terms of the new winter maintenance contracts (2022-2032) against previous recommendations, and to review current Transportation Services' contract management processes to hold winter maintenance contractors accountable to the contract terms.

This report also provides the status of recommendations from two previous Auditor General’s reports on the City’s winter maintenance program:

1. Audit of Winter Road Maintenance Program - Phase One: Leveraging Technology and Improving Design and Management of Contracts to Achieve Service Level Outcomes (October 2020)

2. Winter Road Maintenance Program - Phase 2 Analysis: Deploying Resources (June 2021)

The 26 recommendations in the Auditor General's 2020 and 2021 reports were made in the context of the previous (2015-2022) winter maintenance contracts. In our current follow-up review, we assessed whether management’s actions, in the context of the new (2022-2032) contracts, addressed the intent of the previous recommendations – to improve the efficiency and effectiveness of contract management and divisional processes designed to hold contractors accountable to the contract terms.

During our follow-up, we verified that 10 recommendations have been fully implemented and one recommendation is no longer applicable in the context of the new (2022-2032) contracts. Management is continuing work to implement 15 recommendations (in the context of the new winter maintenance contracts).

The report in Attachment 1 provides the Audit Committee and members of City Council with the detailed results of our follow-up and management's action plan for recommendations that are not yet fully implemented.

The report also details lessons learned from the first winter season (2022/23) of the new contracts (2022-2032) for Transportation Services to continue working on as they implement more robust processes, tools, and reporting, in advance of the second winter season. Our findings are summarized in the following three areas:

A. Strengthening processes to consistently enforce payment criteria and apply liquidated damages

B. Ensuring robust monitoring of contractor performance

C. Continuing to implement systems and tools to improve efficiency and effectiveness of contract management

Our report includes four new recommendations to highlight areas for continuous improvement when administering the current contracts going forward. Management has agreed to all four recommendations and management's response to these additional four recommendations is included in the report.