Report of the Auditor General of the Ville de Montréal to the City Council and to the Urban Agglomeration Council For the Year Ended December 31, 2013 Amended - Sections 5.11 and 5.12 - September 2014 Report of the Auditor General of the Ville de Montréal to the City Council and to the Urban Agglomeration Council For the Year Ended December 31, 2013 Amended – Sections 5.11 and 5.12 – September 2014 Legal Deposit – First Quarter 2015 Bibliothèque et Archives nationales du Québec ISSN: 1925-6787 (print) ISSN: 1925-6795 (online) ISBN: 978-2-7647-1317-4 (print) ISBN: 978-2-7647-1318-1 (online) Please note that this English report has been translated from the original French version. In case of doubt or difference of interpretation, the French version shall prevail over the English. According to the Charter of the French Language and the Office québécois de la langue française, municipalities shall designate all official names, such as boroughs, departments, paramunicipal corporations as well as municipal and associated bodies by their French names alone, even in the English version. This report is available on our website at: bvgmtl.ca. January 22, 2015 Mr. Denis Coderre Mayor of the Ville de Montréal 275, rue Notre-Dame Est Montréal, QC H2Y 1C6 Subject: Auditor general of the Ville de Montréal’s annual report for the year ended December 31, 2013 – Amended version of Sections 5.11 and 5.12 – September 2014 Dear Mr. Mayor, In response to the CM14 1129 resolution of the city council, dated November 24, 2014, and as per the spirit of Section 107.13 of the Cities and Towns Act (RSQ, chapter C-19), please find enclosed the amended version of Sections 5.11 and 5.12 – September 2014 of the Annual report of the auditor general of the Ville de Montréal for the year ended December 31, 2013 to be tabled at the next regular city council meeting on January 26, 2015 and the next urban agglomeration council meeting on January 29, 2015. Yours truly, Jacques Bergeron, CPA, CA, MBA, M. Sc. Auditor general 1550, rue Metcalfe, bureau 1201, Montréal (Québec) H3A 3P1 Foreword Further to the request made by city council, at the meeting held on November 24, 2014, I reviewed the data compiled in two sections of my 2013 annual report, which was tabled to city council on June 16, 2014, and to the urban agglomeration council on June 19, 2014, regarding the amounts of the contracts for snow clearing and the collection and removal of residual materials that were awarded by the boroughs from 2005 to 2013. It should be noted that the primary focus of this audit was to ensure that there was open competition between contractors so as to enable the city to obtain the best prices, and to verify that the awarding of these contracts complied with existing laws, regulations, frameworks and processes in force at the city. At the start of the audit in July 2013, my Bureau made a formal request in writing to each of the borough directors asking them to send to us all the decision-making summaries that dealt with the awarding of contracts for both snow clearing and the collection and removal of residual materials. To my great astonishment, it appears that, despite our initial request and the many reminders issued by my Bureau, several boroughs failed to provide all the decision-making summaries needed to draw a comprehensive picture of the situation prior to the tabling the 2013 annual report. In the case of two boroughs, we made more than five attempts to obtain the said documents. These missing decision-making summaries were sent to us in summer 2014, after the annual report had been tabled, and sometimes piecemeal. I find this perplexing since, in making a formal request, my Bureau initially expected to receive all the documents needed to perform our audit. Thus, my Bureau undertook a review of the figures presented in the 2013 annual report. We met with all the designated officials in each of the city’s 19 borough to confirm that all the data had been sent to my Bureau. I then adjusted the figures accordingly. In the vast majority of cases, these adjustments were due to the fact that documents were missing at the time of the production of the 2013 annual report. Some compilation errors were also uncovered during the review process. Nevertheless, I draw your attention to the fact that these adjustments were relatively minor, as can be seen in the table below. In the case of snow clearing, the changes represent an increase of $38M, bringing the total amount of the contracts to $528M, a difference of 7.75% compared with the amount presented in the 2013 annual report. It should be noted, once again, that this difference was largely due to the fact that several boroughs failed to provide all the information requested. In the case of the collection and removal of residual materials, the difference in the amounts of the contracts was 0.04%, or very slight. Comparison of the Amended Amounts with the Initial Amounts Published in the 2013 Annual Report – Summary by Activity (in thousands of dollars) Contracts for snow clearing (2005-2013) Amended amounts, Initial amounts Sectors September 2014 (2013 annual report) 1. Snow clearing $326,298 $315,843 2. Snow clearing equipment rentals $64,280 $64,150 (with or without operators) 3. Snow loading $103,276 $86,787 4. Snow disposal operations $34,146 $23,241 Total $528,000[1] $490,021 Difference ($) $37,979 Difference (%) 7.75% Contracts for the collection and removal of household waste and recyclable materials (2005-2013) Amended amounts, Initial amounts Sectors September 2014 (2013 annual report) 1. Household waste $352,388 $351,902 2. Recyclable materials $151,728 $152,013 Total $504,116[1] $503,915 Difference ($) $201 Difference (%) 0.04% Total for both activities $1,032,116 $993,936 The following points are important to retain from this review: The adjustments made to the compilation of the amounts of the contracts do not invalidate the trends initially identified; The three recommendations made to the Direction générale remain unchanged; The general conclusions of our 2013 annual report remain unchanged, i.e. there are indicators of possible collusion in snow clearing and indicators of probable collusion in the collection and removal of residual materials; [1] The vast majority of differences are attributed to new decision-making summaries submitted to us by some boroughs. The sole purpose of calculating the cumulative amount of the contracts was to give an idea of the magnitude of the situation and help determine the concentration of companies operating in some boroughs, as well as to confirm or reject our concerns that bid rigging exists among businesses to share contracts within the two sectors of activity targeted; Beyond the numbers themselves, the many indicators of collusion that we uncovered during our audit are especially telling. These indicators of irregularities detected in the awarding of contracts are sufficiently numerous and compelling within certain boroughs to raise serious doubts about any assurance the city may have of obtaining services at the best possible price. Following is a reminder of some of these indicators presented in the two detailed sections: - The number of companies that obtained the call for tenders documents compared to the number that actually submitted a bid; - The existence of companies that submit bids without ever receiving contracts; - The frequency with which the same company was consistently awarded contracts in a given borough; - Several cases of a single tenderer; - An excessive price difference (in several cases ranging from 16% to more than 200%) between the first and second tenderer; Maps supporting the indicators of collusion changed very little when the figures were amended. Given the results of this audit, I remain convinced that the situation is troubling and that it should compel the Direction générale and the municipal authorities to inform themselves about the underlying causes of this situation and take the necessary measures to end any collusion schemes that may exist. Table of Contents 5.11 Snow Clearing Contracts Awarded from 2005 to 2013 ..................................... 481 5.12 Contracts for the Collection and Removal of Residual Materials – Household Waste and Recyclable Materials – from 2005 to 2013 .................... 545 Auditor General of the Ville de Montréal 2013 Annual Report – Amended – Sept. 2014 Report of the Auditor General of the Ville de Montréal 5.11 to the City Council and to the Urban Agglomeration Council For the Year Ended December 31, 2013 Amended - September 2014 Snow Clearing Contracts Awarded from 2005 to 2013 5.11. Snow Clearing Contracts Awarded from 2005 to 2013 Table of Contents 1. Introduction ................................................................................................................... 487 2. Purpose and Scope of the Audit ................................................................................... 488 3. Summary of Findings .................................................................................................... 489 3.1. Ville de Montréal ................................................................................................. 489 3.2. Boroughs ............................................................................................................ 493 4. Detailed Findings and Recommendations .................................................................... 495 4.1. Ville de Montréal ................................................................................................