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6. DELEGATION OF AUTHORITY -
CONTRACTS AWARDED FOR THE PERIOD OCTOBER 1 TO DECEMBER 31, 2007, SPONSORSHIP
AND ADVERTISING, LEGAL OUTSOURCING COSTS AND PAYMENT WITHOUT REFERENCE DÉLÉGATION DE POUVOIR - CONTRATS ACCORDÉS POUR LA PÉRIODE DU 1er
OCTOBRE AU 31 DÉCEMBRE 2007, COMMANDITES ET
PUBLICITÉS, FRAIS LÉGAUX D’IMPARTITION ET PAIEMENTS SANS RÉFÉRENCE |
Committee Recommendation
That Council receive this report for information.
Recommandation du comité
Que
le Conseil municipal prenne connaissance du présent rapport.
Documentation
1. City Treasurer’s report dated 3 April 2008
(ACS2008-CMR-FIN-0016).
2. Extract of Draft Minutes.
Report to/Rapport au:
Corporate Services and Economic Development
Committee/
Comité des services organisationels et du développement
économique
Contact/Personne-ressource :
Phil Andrews, Manager, Supply Management Division / gestionnaire par
interim, Division de la gestion de l'approvisionnement,
(613) 580-2424 ext./poste 25176; Phil.Andrews@ottawa.ca
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City-wide / À l’échelle de la ville |
Ref N° ACS2008-CMR-FIN-0016 |
SUBJECT: DELEGATION
OF AUTHORITY – CONTRACTS AWARDED FOR THE PERIOD OCTOBER 1 TO DECEMBER 31, 2007,
SPONSORSHIP AND ADVERTISING, LEGAL OUTSOURCING COSTS AND PAYMENT WITHOUT
REFERENCE
OBJET : DÉLÉGATION
DE POUVOIR – CONTRATS ACCORDÉS POUR LA PÉRIODE DU 1er OCTOBRE AU 31
DÉCEMBRE 2007, COMMANDITES
ET PUBLICITÉS, FRAIS LÉGAUX D’IMPARTITION ET PAIEMENTS SANS RÉFÉRENCE
REPORT RECOMMENDATION
That the Corporate Services and
Economic Development Committee table this report, to be received and discussed
at the next scheduled meeting of CSEDC, and then forwarded to Council for
information.
Que le Comité des services organisationnels et
du développement économique dépose le présent rapport, qui sera discuté à la
prochaine réunion prévue du CSODE, puis transmis au Conseil municipal pour
information.
On November 28, 2007, the Purchasing By-law 50-2000 approved by City Council on February 28, 2001, was amended to include the information relating to professional and consulting services in the quarterly reports and therefore eliminating the requirement for an annual report. This provides for more timely reporting.
The amended Purchasing by-law provides that the quarterly report:
1. contains information on contracts exceeding $25,000 awarded under delegated authority;
2. identifies all contracts categorized as:
(a) Consulting Services
(b) Professional Services
(c) Follow-on Contracts
(d) Amendments
3. identifies the reason for outsourcing in accordance with the definitions discussed below.
In addition to the above, this 4th quarter report includes details about the 2007 Sponsorship and Advertising, Legal Outsourcing Costs and Payments without Reference.
DISCUSSION
Document 1
The contracts approved for the period of July 1 to September 30, 2007 are listed in Document 1.
Staff used the following definitions as outlined in the Purchasing By-law to identify the contract category and the outsourcing reason.
Professional Services
Professional Services means services requiring the skills of professionals for a defined service requirement or for a specific project related deliverable including but not limited to the areas of engineering, architecture, design, planning, information technology, financial auditing and fairness commissioners;
Consulting Services
Consulting Services means assistance to management, including but not limited to the areas of strategic analysis, organizational design, change management, policy development, feasibility studies and other services intended to assist decision making within the organization.
An amendment is an increase in the scope of an approved contract, which is unanticipated. Those amendments that are both greater than $50,000 and 50% of the original contract will be identified in the quarterly report.
Follow-on Contract
A follow-on contract differs from an amendment in that the original contract or bid solicitation document recognizes the fact that it is likely that the initial defined contract scope may be expanded to include a number of related phases that are either included in the tender document, or are customary in relation to the work assignment. Rates charged for the follow-on contract are reviewed by Supply Management Division, and must be based on those rates proposed by the service provider in the original competitive “bid”.
An extension to a contract is not
categorized as an amendment or a follow-on contract. An extension is a contract term allowing the City to continue
purchasing the good or service for an extended period of time where the option
to extend the contract was outlined in the bid document.
Reasons for Outsourcing the
Work:
(a) workload related or lack of internal resources by a “W”;
(b) need for specialized expertise by an “E”;
(c) need for independent third party oversight by an “I”;
(d) regulatory requirement by an “R”;
(e) proprietary service or unique market position by a “P”; and
(f) business model required outsourcing by an “O”.
Supply Management Division certifies that all the contracts awarded under Delegation of Authority for the period of October 1 to December 31, 2007, are in compliance with the Purchasing By-law.
The following table summarizes the total number and value of the contracts as well as the different categories under which the applicable contracts fall.
|
|
Total # of Contracts |
Total $ Value |
#
Prof. Services |
#
Consulting |
Workload
|
Specialized
|
Independent
third party oversight "I" |
Regulatory
|
Proprietary
|
Business
model outsourcing "O" |
|
AG |
2 |
$110,600 |
2 |
|
|
|
2 |
|
|
|
|
CMO |
33 |
$30,327,464 |
1 |
2 |
|
3 |
|
|
|
|
|
BTS |
124 |
$21,462,942 |
24 |
0 |
|
13 |
|
|
|
11 |
|
CPS |
27 |
$4,021,394 |
4 |
1 |
|
3 |
|
|
|
2 |
|
PWS |
233 |
$77,371,953 |
40 |
|
|
4 |
|
|
|
36 |
|
PTE |
24 |
$7,437,251 |
9 |
1 |
|
8 |
|
|
|
2 |
|
Total |
443 |
$140,731,604 |
80 |
4 |
0 |
31 |
2 |
0 |
0 |
51 |
Document 2
In accordance with the Sponsorship and Advertising Policy, Supply Management Division is responsible for preparing an annual report to Council on all Sponsorships exceeding $25,000. Document 2 provides the detail of these sponsorships, which total $1,173,141.
Document 3
Pursuant to Section 13 of the Purchasing By-law, the City
Solicitor is required to report to Council on an annual basis on expenditures
for legal services of a cumulative total value of $100,000 or more per law
firm. Accordingly, Document 3 attached
to this report outlines the expenditures for outsourcing legal services for the
year 2007. It should be noted that in
keeping with past reporting practices, the amounts indicated are for legal fees
only and do not include GST or legal disbursement costs paid to these law
firms.
The
annual total for outsourced legal services decreased from $4,239,402 in 2006 to
$2,537,406, representing a decrease of 40%.
Document 4
Payment without reference to a purchase order describes a method of payment and is not a reflection of the method used to procure the goods or services. All procurement actions that go through the Supply Management Division have a corporate purchase order created and therefore these are known to be in compliance with the Purchasing By-law. A payment without reference is a legitimate payment method permitted within corporate procedure and is recognized in the Purchasing By-Law. These types of payments provide a cost effective process for low dollar value goods and services and are the standard method used for paying utility and telecommunication costs. As payments without reference do not go through the Supply Management Division, an assessment of their compliance with the Purchasing by-law can only be made after the fact.
The Auditor General’s 2005 Annual Report, Chapter 4: Audit of the Procurement Process, Recommendations #17 and #19, requires that purchasing activity greater than $25,000, paid without reference to a purchase order be reported annually. Document 4 of this report lists these purchases. Of the $78.6 million spent on purchases paid without reference, approximately $44.3 million went to utility companies or other companies that have a monopoly on the provision of a good or service. These purchases would not be set up through a purchase order. Many of the other purchases listed, valued at $32.2 million have been procured through a competitive process and therefore were made in accordance with the Purchasing By-Law.
Periodically reviewing the number of invoices per vendor and the total dollar amount paid to each vendor illustrates noticeable purchasing trends. The Supply Management Division now reviews payments without reference to ensure the purchases were in compliance to the Purchasing By-law and then consults with client departments to determine appropriate procurement methods. In this regard, eight (8) vendors who were paid through Payments Without Reference have been identified in Document 4 as having non-compliant procurements. The value of these purchases total $1.1 million.
This is a noticeable decrease from the 40 vendors paid without reference for non-compliant purchases valued at $6.6 million identified and reported in the Professional and Consulting Service Contracts and related Purchasing Activity for 2006, ACS2007-CMR-FIN-0024. These 2006 noncompliant purchases are now being procured in accordance with the Purchasing By-law.
With respect to the eight vendors paid without reference in 2007, one department has already agreed to commence a competitive process in 2008, one purchase was made in error and the department is aware of the standing offer and the Supply Management Division is discussing with the 6 other client departments whether the goods or service being purchased could be procured through a competitive process or paid through the issuance of a corporate purchase order. The results of these discussions will be presented to Council in the 2008 Delegation of Authority 4th Quarter Report.
The preparation of this report is required by the By-law and as such no public consultation is required.
Prior to a contract approval, Supply Management Division staff confirms that the appropriate funds are available in the budget, based on receipt of a funded requisition in SAP. The availability of funds is a condition of approval under delegated authority.
Document 1 - List of Contracts Awarded under the Purchasing By-law for the period October 1 to December 31, 2007 (Issued separately and held on file with the City Clerk)
Document 2 - List of suppliers awarded sponsorships and advertising contract(s) of a cumulative total value of $25,000 or more in 2007 (Issued separately and held on file with the City Clerk)
Document 3 - Expenditures
for outsourcing legal services of a cumulative total value of $100,000 or more
in 2007 (Issued separately and held on file with the City Clerk)
Document 4 - Payment
without Reference not previously reported to Council (Issued separately and
held on file with the City Clerk)
Report forwarded for information pursuant to the By-law. No further action required.
DELEGATION OF AUTHORITY - CONTRACTS AWARDED FOR THE PERIOD OCTOBER 1 TO DECEMBER 31, 2007, SPONSORSHIP AND ADVERTISING, LEGAL OUTSOURCING COSTS AND PAYMENT WITHOUT REFERENCE
DÉLÉGATION
DE POUVOIR - CONTRATS ACCORDÉS POUR LA PÉRIODE DU 1er OCTOBRE AU 31
DÉCEMBRE 2007, COMMANDITES ET PUBLICITÉS, FRAIS LÉGAUX D’IMPARTITION ET
PAIEMENTS SANS RÉFÉRENCE
ACS2008-CMR-CSE-0029 city-wide / À l’Échelle de la ville
Responding to a series of questions from Councillor McRae with respect to Document 3 “2007 Outsourcing – Legal Services”, Mr. Carey Thomson, Acting City Solicitor, confirmed that of the $755,506 paid to Borden, Ladner, Gervais in 2007, $372,243 related to Light Rail. He explained this was for 3 main undertakings: the lawsuit commenced by Siemens and the need pull together the thousands of documents in the City’s possession in order to catalogue them to get ready for pre-trial hearings and bringing a motion before the courts to have the trial venue changed; an extensive MFIPPA request filed with the City, which necessitated work; and litigation commenced by St-Lawrence Cement, which is a separate lawsuit against the City, also related to the light rail project. He noted on the last point, part of the work being done by the external lawyers was in attempting to determine whether this was already included in the Siemens claim or whether it was a separate claim. He indicated he had a list, which broke down the various invoices, what they were for, and how their dollar value. He offered to share this document with the Councillor.
In response to a follow-up question with respect to the change of venue motion, he confirmed that the motion had been argued in 2008 but that work had been done in 2007 to prepare for it.
With respect to the St-Lawrence Cement litigation, he re-iterated its status and advised the value of the claim was approximately $40M.
Councillor McRae referenced the on-going costs related to these claims and she wondered if, as part of the regular updates on this file, Committee could hear about the numbers so they could keep track of what this litigation was costing the City. Ms. Marian Simulik, City Treasurer, noted the Delegated Authority report was presented quarterly whereas the Legal outsourcing report was presented annually. However, she indicated staff could provide an update every quarter, if that was the desire of Committee.
Staff provided the following information in response to questions from Councillor Deans with respect to payments without reference listed on page 43 of the supporting documents:
· Vendor 316373, Ottawa Central Rail Inc. in the amount of $54,939 with the description “Monopoly”, Ms. Nancy Schepers, Deputy City Manager of Planning, Transit and the Environment, indicated staff had been trying to sort this one out but, to the best of their ability, she advised it looked like railway maintenance invoices. She acknowledged that staff should have provide more detail in terms of the description and that they would follow-up.
· Vendor 301954, Canadian National Railway in the amount of $60,303 with the description “Railway Utility”. Again, Ms. Schepers believed this related to railway maintenance. She indicated these did not originate from her department and staff would follow-up in order to provide some additional details.
· Vendor 326733, Via Rail Canada in the amount of $65.000 with the description “Rail Service”. Mr. Phil Andrews, Manager of Purchasing, indicated this related to a monthly fee to VIA Rail for maintenance of the auto-rail crossings city-wide. He explained this was a fee the City was obligated to pay to the rail company and it related to each instance where a rail crossing impacted an automotive thoroughfare.
Responding to another question from the Councillor, Mr. Andrews confirmed that the City had a travel policy, which required that staff travel by the most economical means. He also confirmed that a copy could be provided to the Councillor.
Councillor Deans inquired about a payment without reference listed on page 47 of the supporting document – Vendor 356198, Ottawa LRT Corporation in the amount of $1,060,000 with the description “Honorarium – Light Rail Transit”. Mr. Andrews indicated this was an honorarium paid to one of the three unsuccessful bidders and that this particular one was to Siemens.
Councillor Deans was surprised to hear the City had paid the honorarium to Siemens. She wondered why it had been paid and whether members of Council had been made aware of it. Mr. Andrews explained that because the project had been cancelled, the City had looked at all three proponents in the same light.
At this juncture, Mr. Thomson suggested additional information could be provided In Camera because of the pending litigation involving Siemens and the City.
Councillor Deans indicated she would appreciate going In Camera to receive additional information because she had been unaware that Siemens has received the honorarium and she felt Council should have been made aware of it.
Committee agreed to go In Camera at the end of the meeting to receive additional information on this issue.
Councillor El-Chantiry posed questions with respect to item 172 listed on page 15 of the supporting document - $793,826 for “Small diameter culvert replacement in Gloucester, Southgate and Osgoode Wards as a preventative project aimed at extending the service life of the culvert”. Mr. Andrews confirmed the contract was awarded through a competitive process. Mr. Alain Gonthier, Manager of Infrastructure Management, indicated he did not have the specific details however he believed it was for a number of culverts included as part of one tender package, which he explained was a common practice.
Councillor El-Chantiry appreciated staff’s explanation and was confident that the cost was for multiple small culverts. However, he was frustrated that more detailed information was not provided in the report in order to avoid negative perceptions. Ms. Simulik acknowledged the Councillor’s concerns and advised that in future iterations of the report, staff would try to get volumes or numbers in order to provide some context for the costs.
Responding to questions with respect to item 176 - $385,350 for “March Road at Second Line Road – intersection modification aimed at decreasing the congestion at this location”, Mr. Michael Flainek, Director of Traffic and Parking Operations, indicated this was for the actual road works needed at the intersection and the reference costs did not include the cost of the traffic control signals, which would be additional.
Councillor Bloess posed questions with respect to the digester at ROPEC. He recalled that when originally approved, the cost was approximately $44M but that it seemed to have escalated since then. He expressed his intention of filing a formal inquiry on this matter but in the interim, he asked staff to speak to it. Mr. Gonthier confirmed that to date, about $59M had been approved as part of the project. He explained that as it moved forward, there had been a number of amendments to account for design changes. He indicated staff would provide a detailed breakdown in response to the Councillor’s written inquiry.
In reply to a question from Councillor Wilkinson with respect to item 439 on page 37 of the supporting document - $1.4M for “Two year maintenance service contract for the Capital Railway”, Ms. Schepers indicated this was for the maintenance of the rail line, the traffic control and the signal relative to the O-Train operation.
Responding to questions from Councillor Desroches with respect to the number of invoices and total costs for electricity consumption, listed at page 47 of the supporting document, Ms. Simulik confirmed that there was a cost to the City to process that number of invoices and she indicated staff was working with Hydro to get the City onto electronic billing. However, she explained the problem with this related to the fact that the City had meters at its various facilities in order to be able to track electricity consumption at those various locations.
In response to a further question from Councillor Desroches with respect to the City’s post-amalgamation purchasing power, Ms. Simulik indicated staff would be bringing forward a report at the next meeting with respect to a spend analysis undertaken and the consultant’s recommendations on same.
Councillor El-Chantiry posed a series of questions with respect to costs associated with Fleet Services and the City’s policies on same. In response, Mr. Gillespie confirmed the City had a policy whereby, as part of an annual review of requirements, staff looked at usage to determine whether it was better to buy or to lease equipment. With respect to fuel, maintenance and repairs, he explained that the City essentially used 2 maintenance systems; one for transit and one for municipal. He indicated there were standing offers in place for each and through the year, staff drew down on different standing offers. Furthermore, he noted staff did not necessarily use the same source for all garages because location was a fact. He re-iterated that there were policies in place and that the City tended to contract out for 2 reasons: if it did not have the capability and could not afford to buy the capability because of volume; or if it could not compete because of either labour rates or job conditions.
Councillor El-Chantiry re-iterated his frustrations with respect to this report and the lack of detailed information contained therein. In response to his concerns, Ms. Simulik noted that staff tabled the report two weeks in advance in order to give Councillors time to review it and pose questions to staff. She indicated it was also a lot for staff to come to Committee with a big book and try to sort through it to respond to members’ questions. She remarked that this was how the process was currently outlined in the by-law. However, she suggested staff could go back and look at the process to see how something different could be devised.
Moved by Councillor M. McRae
That the meeting of the Corporate Services
and Economic Development Committee move In
Camera pursuant to Sections 13(1)(f) of the Procedure By-law, being the
receiving of advice that is subject to solicitor-client privilege, including
communications necessary for that purpose.
CARRIED
Upon resuming in open session, Mayor O’Brien reminded Committee members that he and the City Manager were the only people authorized to comment on the LRT litigation. He then asked legal staff to summarize the reasons for the City making the payments to all the unsuccessful bidders. Mr. Thomson re-iterated that, upon the project’s cancellation, by definition, all proponents were unsuccessful. Therefore, in order to fulfill its legal obligations to all the proponents, the City made the aforementioned honorarium payment to Siemens, as well as to the two other unsuccessful proponents.
Following these exchanges, Committee voted on the report recommendation.
That the
Corporate Services and Economic Development Committee review and discuss this
report and then forward it to Council for information, pursuant to a
recommendation approved by the Committee at its meeting of 15 April 2008.
CARRIED