April 24, 1999
To:Audit Committee
From:City Auditor
Subject:Review of Commissioner Street Transfer Station Project Expenditures
Recommendations:
It is recommended that:
- the Chief Administrative Officer advise all department heads that the selection and
engagement of all consulting services be made in accordance with the City's purchasing
policies;
- the Chief Administrative Officer advise all department heads of the importance of
providing accurate and complete cost estimates when submitting projects to Council for
approval, ensuring that necessary due diligence and care is exercised when preparing these
estimates, and that if changes in the scope of work are necessary, the details and
implications of the changes, as well as additional funding requirements, be clearly
communicated to Council for approval;
- as part of the 2000 to 2004 Capital Budget Process, the Budget Division, Finance
Department advise all departments and local boards that all funds relating to a particular
capital project be provided for in one capital account, so that the full funding requirements
and expenditures for each project are more readily available and known; and
- this report be forwarded to the Works Committee and Budget Committee for consideration.
Background:
At its meeting on November 13, 1998, the Budget Committee, in reviewing the preliminary
Capital Budget for Works and Emergency Services, requested that an independent review be
conducted on expenditures to date for the Commissioner Street Transfer Station.
The objective of this review was to determine whether costs, beyond the original estimates
approved, were within the scope of the project and properly authorized by Council.
Comments:
At its meeting on June 21, 1988, the former Metro Council authorized the firm of Planmac
Consulting Engineers and Planners (Planmac) to carry out a feasibility study of converting the
Commissioner Street Incinerator to a refuse transfer station.
The rationale for a new transfer station was that there had been no waste transfer or disposal
locations within the City of Toronto since 1988 when the Commissioner Street Incinerator
was shut down. Establishing a transfer station on Commissioner Street would make the waste
disposal operation in the City of Toronto more efficient by reducing the travel distance for
each load of garbage and would also allow for some streamlining of operations.
On June 7, 1989, the former Metro Council approved the conversion of the Commissioner
Street Incinerator to a transfer station at a cost not to exceed $3,925,000, and authorized that
the firm of Planmac Consultants be engaged to design and provide supervision of construction
of the work.
The preferred option presented by Planmac allowed for incineration equipment in the facility
to remain intact, so that if it was necessary to restart the incinerator in future, it could be done
with relative ease and at a low cost. However, shortly after Council approved the project, the
Province placed a moratorium on the incineration of refuse. As a result, the decision was
made to dismantle and remove the incineration equipment and redesign the facility to meet the
requirements of a more modern operation. Following a competitive process, the construction
contract was awarded and work on the transfer station commenced in December 1993.
Metro Council authorized additional funding for the project, beyond the original $3,925,000 it
approved in 1989. Details of the additional funding approvals are provided below:
- August 15, 1991, Management Committee Report No. 24, clause 20:
$1,500,000 was approved for the demolition of three existing furnaces (previously used for
incineration) and related pollution control equipment.
- October 13, 1993, Management Committee Report No. 39, clause 17:
$442,000 was approved to cover the difference between the lowest tendered price and
approved funds remaining in the project at that time, in order to award the construction
contract (SWM -1- 93) to Dineen Construction Limited, for the conversion of the
Commissioner of the Commissioner Street Incinerator to a transfer station.
- March 8, 1994, Works Committee Report No. 6, clause 1:
$450,000 was approved for the construction of a building extension which would reduce the
potential for litter outside the building by allowing operations to be conducted in an
enclosed environment and also provide additional plant storage space.
- February 22, 1995, Environment and Public Space Committee Report No. 3, clause 1:
$1,484,000 was approved for additional construction and consulting services required for
column removal and reconstruction, construction of buttress walls, tipping floor demolition
and reconstruction, repairs to ramps and additional contract administration.
- April 29, 1998, Capital Budget Approval by Council:
$107,000 was approved for additional consulting services relating to extra work orders and
review of the contractor's claim.
This approved additional funding raised the overall funding for this project from the original
approval of $3,925,000 to $7,908,000. Actual expenditures as at December 31, 1998 were
$7,603,148.
During the course of our review we were also advised by Works staff that an additional
$815,000 was spent on the construction of an emission and odour control system at the
Commissioner Street Transfer Station prior to the facility becoming operational. Funds for
this additional work were provided for in another capital account (Improvements to Transfer
Stations) and raised the total cost to date for the Commissioner Street Transfer Station to over
$8.4 million.
Conclusions:
All funding requirements relating to the construction of the Commissioner Street Transfer
Station were approved by Metro Council. The reports to Council contained full details and
justifications for funding approvals and related expenditures. A review of expenditures,
conducted on a sample basis, found that the costs incurred were within the scope of this
project and that construction contracts were awarded in accordance with the then Metro
purchasing policies. It should be noted, however, that while the engagement of the design and
construction supervision consultant, Planmac, was approved by Metro Council, a competitive
process for these services was not conducted. This deviated from the former Metro policy
with respect to the selection of consulting services. Works staff indicate that Planmac was
awarded the contract, without a competitive process, because of its involvement in the
preliminary engineering study to determine the feasibility of converting the incinerator to a
transfer station. In addition, Planmac had been involved in the construction of the Ingram
Transfer Station. It is still our opinion, however, that a competitive process should have been
conducted for the services in accordance with good business practice and the former Metro
policies at that time. To date over $900 thousand has been paid to Planmac for consulting
services relating to the Commissioner Street Transfer Station project.
The cost to date of the Commissioner Street Transfer Station is more than double the original
estimate approved by Metro Council in 1989. Staff indicate the higher cost can be partially
explained by changes in the scope of the work that included removal of the furnaces and
related pollution control equipment and the redesign of the transfer station to meet the
requirements of a modern operation. Advanced building deterioration as a result of age as well
as moisture and salt damage, and the addition of an emission and odour control system (as
requested by the then Toronto City Council and adopted by Metro) which was beyond the
standard system included in the original design, further increased the cost.
Council's decision on a particular project is premised, to a large extent, on the cost and
benefits to be derived. Once the decision is made and construction is started, it is difficult for
staff and Council to halt or defer a project since significant time and costs may have already
been invested. It is therefore important that complete and accurate cost estimates are prepared
when the project is first submitted to Council for approval. Changes to the original scope of
work should be kept to an absolute minimum and should really only occur as a result of
unforeseen circumstances which could not have been reasonably anticipated. If changes are
necessary, then the specific reasons for the changes, implications and additional funding
required should be promptly communicated to Council for approval.
The installation of an emission and odour control system was directly related to the
Commissioner Street Transfer Station, yet the costs were captured in a separate capital
account (Improvements to Transfer Stations). Since the transfer station was still under
construction and not yet operational, the additional costs and approved funding for the
emission control system should have been reflected in the Commissioner Street Transfer
Station capital account. This would have ensured the full cost to construct the transfer station
was known. It is agreed that any expenditures incurred after construction is completed and or
a facility becomes operational are more appropriately charged to a general capital account
established for a specific purpose, for example, energy efficiency improvements.
This project was substantially completed on May 26, 1996, and the transfer station became
operational January 2, 1997. There is, however, an outstanding delay/impact claim submitted
by the contractor, Dineen Construction Limited, as well as project design and administration
charges submitted by the consultant, Planmac, which are being reviewed by staff. Resolution
of these matters could further increase the cost of this project. Staff will be seeking Council
approval once any further amounts owing have been determined.
Contact Name:
Tony Veneziano, Senior Audit Manager, 392-8353
Jeffrey Griffiths
City Auditor
