Chapter 3 Section 3.09 Metrolinx—Public Transit Construction Contract Awarding and Oversight tracks, building tunnels and bridges for trains, and 1.0 Summary upgrading existing GO stations. Metrolinx’s construction projects proceed differ- ently depending on the contractor Metrolinx works Metrolinx is an agency of the Ministry of Transpor- with. Of the $4.1 billion Metrolinx spent over the tation responsible for operating a network of train past five years, about $3.4 billion (82%) was on and bus routes across more than 11,000 square projects where Metrolinx contracted out all of the kilometres (km) in the Greater Toronto and Hamil- work. That is, external firms designed the project, ton Area. Currently valued at $11 billion, Metrolinx constructed it and oversaw it. For almost all of uses about 680 km of railway track on seven train these projects, Metrolinx contracted with a separate lines, 66 train stations and 15 bus terminals. In company to design the project and a different com- total, about 69 million passenger boardings occur pany to construct it (this is the traditional model for Chapter 3 • VFM Section 3.09 annually on Metrolinx vehicles. delivery of construction projects). Metrolinx was established in 2006 as a planning The other $725 million (18%) of construction agency, and then merged in 2009 with GO Transit dollars Metrolinx spent in the past five years was (GO), which had been operating the regional tran- paid to Canada’s two major railway compan- sit system since 1967. With this merger, Metrolinx ies—the Canadian National Railway (CN) and the became responsible for operating, maintaining Canadian Pacific Railway (CP). When GO was first and expanding GO’s network of trains and buses. established, it used existing CN and CP track. As Expanding public transit capacity is a high priority demand for GO train service increased, GO bought for Metrolinx: under the government’s 25-year “Big as much CN and CP track and surrounding land Move” plan, announced in 2008, about $27 billion that it could. When CN and CP would not sell land is earmarked for new public transit infrastructure to GO, GO paid them to construct more track lines over the next 10 years. on their land and paid them, as per the terms of In the past five years, Metrolinx has completed their agreement, to use the lines. This continued about 520 construction projects costing a total of after Metrolinx assumed responsibility for GO. about $4.1 billion. The average cost of these pro- Thus, Metrolinx has had to hire either CN or CP as jects was about $8 million. These projects included the sole contractor for these projects on CN and CP building new parking lots, expanding GO railway land. 480 Metrolinx—Public Transit Construction Contract Awarding and Oversight 481 Our audit found that Metrolinx does not have materials required, or omit specifications—all adequate processes in place to consistently ensure with no repercussions. Because designs cre- value for money in its delivery of construction ated by consultants are used by the contractor projects. Because of deficiencies noted in its over- to calculate bid prices, they need to be free of sight processes around construction contracts, and error; otherwise, there can be considerable because of deficiencies we confirmed in a sample cost overruns during construction. Also, since of contracts, there is a risk that it is spending more construction cannot begin until the design than what is required, and there remains a signifi- is finalized, design delays can significantly cant risk that this will continue to happen. impact the overall project time frame and Metrolinx continues to award contracts to poorly cost. In our review of a sample of Metrolinx performing contractors that submit the lowest project documents from the past five years, we bids—it does not track contractors’ past perform- noted that consultants made frequent errors ance and does not consider contractors’ ability in their designs. In one project alone, errors to deliver completed projects on time, which has made by the consultant caused a project to be resulted in Metrolinx incurring additional costs. over budget by 35%, or $13.6 million, a cost Metrolinx has had many years to implement a con- that Metrolinx had to pay as a result of the tractor performance-management system but still design not including all final requirements. has not done so. In a sample of six projects whose total initial For contracts with CN and CP, Metrolinx does construction costs were over $178 million, not do work to know that it is getting what it pays $22.5 million more had to be spent just for: it does not verify charged costs; it does not because of the design consultants’ errors and ensure that charged costs are reasonable; when omissions. There were no repercussions in it requests that the parts on a project be new, and these cases, and Metrolinx did not factor in pays the cost of new parts (as opposed to less this poor performance when selecting these expensive recycled ones), it does not require that design consultants for future projects. parts be checked to ensure that they are new. It has • With the exception of two contractors, also been paying excessively high mark-up rates Metrolinx does not appear to be address- Chapter 3 • VFM Section 3.09 charged by CN for building new rails for Metrolinx ing problems caused by construction (CN’s mark-up rates are specified on its invoices, contractors that have a history of poor while CP’s are not as clear). performance on Metrolinx projects. A con- Our specific observations are as follows: tractor might repeatedly be late in delivering work, not construct the project according to the approved design, not follow safety regula- Metrolinx Rarely Holds Design Consultants and tions and/or not fix deficiencies on time—yet Construction Contractors Accountable When Metrolinx will hire the contractor for future They Deliver Work That Is of Poor Quality and/ projects, provided it is the lowest bidder. Only or Late—and It Continues to Award Them More in the cases of two contractors did Metrolinx Work. take past unacceptable performance into con- Design consultants’ errors and delays • sideration. For example: result in additional costs to Metrolinx, One contractor was awarded 22 more yet Metrolinx takes little action to recover • projects after performing poorly for costs and prevent this from reoccurring. Metrolinx. We noted that Metrolinx issued Metrolinx allows design consultants to pro- a letter of default to a contractor in 2009 duce designs that are not feasible to construct, because construction workers had not even contain errors, misestimate the quantity of 482 2016 Annual Report of the Office of the Auditor General of Ontario shown up on the project site for several • Late construction projects have resulted weeks. Despite this, since then, Metrolinx in additional costs, yet Metrolinx rarely has awarded this contractor 22 more takes action against contractors for not projects worth a total of $90 million. We delivering on time. Even though Metrolinx reviewed the contractors’ performance on a incurs significant costs because of contractors few of these 22 projects and noted that pro- completing projects late (anywhere from four ject staff continued to rate its performance months to 25 months), it seldom takes action as poor. For example, on a project in 2012, against contractors that do not deliver on this contractor installed several pieces of schedule. For example, on one project alone, substituted equipment and building materi- Metrolinx paid consultants over $350,000—or als that were not approved in the contract 160%—more than budgeted to oversee this (the substitutions were caught by Metrolinx project because the contractor was 25 months only after-the-fact). On another project in late in completing the project. In a sample of 2013, this contractor took six months, after eight projects whose total initial budget for it had already completed the project, to fix oversight services was $1.35 million, over its deficiencies—one significant deficiency $2 million more had to be spent because was the absence of a functioning camera of how late contractors were in complet- and surveillance system that posed a safety ing their projects. That is 150% more than risk to commuters using the station. the initial oversight budget total. Although • Metrolinx terminated a contract with Metrolinx could charge contractors “liquid- another poorly performing contractor, ated damages”—a pre-determined amount paid it almost the full amount, and included in contracts to cover additional then re-hired it for another contract. oversight costs if a project is late—it has Metrolinx hired the same contractor for not always included them in its contracts to Phase 2 of a project to install external allow it to charge liquidated damages. As cladding (cover) for a pedestrian bridge well, based on information provided to us by Chapter 3 • VFM Section 3.09 over Highway 401 even though the con- Metrolinx, Metrolinx has rarely sought action tractor had performed extremely poorly against contractors for the recovery of addi- on Phase 1. The contractor again had per- tional costs. formance issues on Phase 2: it significantly • Metrolinx does not take action against damaged glass covering the bridge, and contractors that breach safety regulations Metrolinx estimates it will cost $1 million during construction. Metrolinx rarely takes to replace the glass. Metrolinx terminated into account whether contractors breached the contract with the contractor because safety regulations that resulted in unsafe of performance issues, even though the site and working conditions when awarding construction had not been completed, future contracts. We found that even when and paid the contractor almost the full a contractor has caused safety issues to the $8 million of its contract.