The City has a large and complex construction portfolio that needs to be managed effectively, efficiently and economically by the Engineering and Construction Services Division (ECS). Between 2013 and 2017, ECS spent $460 million annually on capital projects. Change orders represent up to 10% of this cost. It is very important to ensure that changes are justified, and that change order costs are reasonable

  • $2.3B in construction and consulting costs, 2013-2017
  • $222M (or 10%) in change orders
  • $341M spent on consultants and $186M on internal staffing costs
  • 90 change orders (10 contracts) for $9.6M reviewed
  • 165 control deficiencies noted
  • 51% of change orders had design errors
  • 36% of change orders did not have approval prior to work commencing
  • 9 change orders for $1.1M did not follow proper delegation of authority

ECS provides specialized engineering and construction services to internal clients including Toronto Water, Transportation Services, and Solid Waste Management Services, and external clients such as the development industry and utility companies.

ECS’s capital program has grown over the years with more projects delivered each year. ECS delivered $466M in capital projects in 2015, $491M in 2016, and over $500M in 2017. For these projects, ECS uses in-house resources and external consultants who provide design and contract administration services.

ECS has good procedural documentation and guidelines to support the change order process. However:

  1. Staff did not always adhere to these guidelines. Controls over change order approvals and compliance needs strengthening.
  2. Documentation was either missing or needs improving for some important areas including:
  • price negotiations, liability assessment for errors and omissions, verification of work completed, and change order support.
  1. There are also opportunities to:
  • minimize design errors and omissions, and
  • where appropriate, pursue recovery for design errors and omissions.

Implementing the four recommendations will improve the controls over oversight of construction contracts and ensure the City receives the best value for money.

Read the Full Report

Engineering and Construction Services – Phase Two: Construction Contract Change Management Controls Should Be Strengthened – 2019

Audit Committee Agenda Item

AU3.15 – June 28, 2019