Evidence of startling overbilling at police HQ inquiry

It’s very much mid-stream at the inquiry into the construction of the Winnipeg Police Service headquarters. And because it’s mid-stream, there may be explanations down the road for some of the evidence being presented right now.

But with the city’s nearly complete inability to bring major projects in anywhere even close to their original budgets, it’s pretty clear that the city can’t handle cost control on those projects, perhaps in part because of a history of failing to closely vet the bills it pays.

Monday’s testimony by forensic accountant Victor Neufeld about the police headquarters work is more than unsettling.

Neufeld testified that his review shows that Caspian Projects, the company that was handling the construction of the Winnipeg Police Services headquarters, submitted invoices that included $45 million to $50 million in overcharges. Neufeld said the construction company made “multiple material financial misrepresentations.”

The result? “(It appears) Caspian’s project costs were reported to the city at amounts that were higher than they were, resulting in excess claims.” In one instance, Neufeld estimated the company claimed $24.4 million for concrete and demolition work, but only $5.4 million was connected to identified costs that Caspian had incurred. The other $19 million, in Neufeld’s professional opinion, was excess costs added onto the bill.

There has already been testimony that other parts of Caspian’s bid that didn’t make sense, where the bid apparently lowballed management fees with a financial number that couldn’t cover project expenses.

“For the amount of work they were going to do and the number of people they claim they were assigning to the projects, you do the calculation, they’re not getting paid…. This makes no sense,” said Abdul Aziz, the HQ’s initial project manager, testified last week.

Major construction firms doing government work will sometimes candidly admit that they view winning a bid is only a barebones starting point for what they expect a job to cost, and that they expect to have the ability to make up lowballed expenses somewhere down the road on things like change orders and claims of increased material and construction costs.

But unsupported expense claims of $45 million to $50 million seem far beyond the range of recouping costs somewhere else.

Especially because the police HQ was still having problems after construction was supposedly complete. Among the things identified after construction was complete were a deteriorating structural slab, faulty or missing waterproofing, falling concrete, roof leaks and temperature issues.

Caspian is supposed to be making a settlement payment of between $23.5 million and $28 million dollars after the city launched a lawsuit in alleging fraud and construction deficiencies, but that payment hasn’t come yet.

You can understand why city council would like starting bids, especially on major projects, to be as low as possible, even if those bids don’t represent the true final cost of the work — lower costs mean projects are, quite simply, more palatable to taxpayers.

But municipal coffers shouldn’t be a gravy train for construction companies — and bids shouldn’t always involve expensive post-signing increases.

Especially for costs that don’t seem to have been meaningfully verified in any way.

It just makes the whole bidding process look like a joke.

The police headquarters inquiry will continue, but it’s already clear from what’s come out already — and subsequent municipal projects with absolutely eye-popping cost overruns — that there has to be a change in the process.

Clearly, there has to be much more robust review of original bids to ensure that they truly represent the costs of projects — so taxpayers don’t bear the brunt of endless cost increases — along with stringent review of the work done, and of the bills being submitted.

Period.