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Provincial city hall inquiry urged

Wyatt demands sweeping review after latest audit

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The new $210-million police headquarters project on Graham Avenue was poorly managed, the latest report on city hall real estate deals states.

MIKE DEAL / WINNIPEG FREE PRESS FILES Enlarge Image

The new $210-million police headquarters project on Graham Avenue was poorly managed, the latest report on city hall real estate deals states. Photo Store

Transcona Coun. Russ Wyatt is demanding the province call a judicial inquiry into dealings at city hall given the findings of the latest audit into a major city construction project.

Wyatt said there are too many similarities with a KPMG audit into the construction of Winnipeg's new police headquarters and two previous reviews: the EY audit on 33 real estate transactions released earlier this month and last fall's review into the fire-paramedic station replacement program.

Last week, council voted to ask Manitoba Justice to review the findings of EY's audit into 33 real estate transactions at city hall for a possible criminal investigation.

"I'm calling on the premier to call a full, independent judicial inquiry into all of these audits," said Wyatt, council's finance chairman. "I don't know if there is just not smoke but actual fire, but I think we have to find that out."

The audit released Tuesday found civic officials failed to follow city procedures put in place to manage the design, procurement and construction of major projects.

KPMG concluded the $210-million police headquarters project was badly managed by city officials.

The consulting firm concluded administrators failed to report to council about problems with the project, handed oversight responsibilities to serving and retired police officers even though they didn't have project-management expertise and approved change orders after they were already implemented, which prevented opportunities to negotiate better prices with the construction contractor, Caspian Projects.

They also slammed a "guaranteed maximum price" agreement signed with Caspian that wound up placing all the risk for design flaws on the city. They questioned how Caspian wound up with $171 million worth of work after the construction contract was initially awarded to a joint venture between that firm and Akman Construction, which quit the project.

The auditors also confirmed $74 million worth of additional costs associated with the project since city hall approved the purchase of the former downtown Canada Post warehouse and officer-tower complex in 2009.

At the time, the purchase and renovation were pegged at a combined $135 million.

In July 2011, council approved total costs of $194 million without knowing the construction component of the price tag was based on a "guaranteed maximum price" based on a design that was only 30 per cent complete and subject to change.

Council approved another $17.2 million in cost increases in 2013, which brought the price tag to $210 million.

After a wave of negative public feedback to the overruns, council ordered the KPMG audit and a value-for-money review conducted by consulting firm Turner & Townsend.

Both were tabled for council members Tuesday in closed-door sessions beforebeing presented at a special executive policy committee meeting.

EPC forwarded the reports for debate at city council today, with a recommendation all of the KPMG recommendations be implemented.

The value-for-money review concluded that despite the cost overruns, the money spent on the construction was comparable with police facilities built in other cities.

"Based on benchmarking study, the cost per (square foot) of the Winnipeg police HQ project is within the anticipated range of cost for a project of this nature and program requirements," the Turner & Townsend report found.

When comparing the construction of other police facilities, the Turner & Townsend report found the city's cost, based on construction costs of $156 million, was $228 per square foot; lower than a police facility built in Saskatoon ($289 psf) but higher than costs incurred in Kingston ($219 psf), the Niagara Region ($209 psf) and London ($205 psf).

Wyatt said he lacks confidence in the results of the KPMG audit, adding the firm placed several qualifiers on the report that raises suspicions about the depth of its finding.

KPMG refused to call its report an audit, and cautioned it spent only 10 weeks on the job before it was required to hand in the report.

"The procedures we performed were limited in nature and extent, and those procedures will not necessarily disclose all matters about the project," KPMG stated.

The KPMG probe, like the two others before it, pinned much of the administrative mismanagement on former CAO Phil Sheegl, who quit his job in the fall after another series of cost overruns associated with the project was disclosed to council.

Coun. Jeff Browaty said the audit highlighted the city's deficiencies surrounding major projects but added he's convinced council was misled by the civic administration on many financial aspects of the project.

Mayor Sam Katz said he expects all of the KPMG recommendations will be adopted by council, but he refused to accept the audit as criticism of his 10 years in office or blaming Sheegl.

"I don't think anyone can look at it in that light -- I'm sure some will," Katz said, adding he and councillors were misled by the outside engineers and consultants who improperly advised the city.

aldo.santin@freepress.mb.ca bartley.kives@freepress.mb.ca

Republished from the Winnipeg Free Press print edition July 16, 2014 A4

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Updated on Wednesday, July 16, 2014 at 7:19 AM CDT: Changes photo

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