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Audit Mission Statement

:

Internal Audit will support City Council and Municipal Administration in meeting their
legislated responsibilities, in improving the performance of the corporation in the programs and
services it delivers and in ensuring the accountability of local government to the taxpayers.
Internal Audit will bring an independent, objective, professional and value-added approach in
evaluating the economy, efficiency, effectiveness and equity of the results of the corporation’s
programs and in evaluating the appropriateness and adequacy of risk management procedures
and management controls.

Post Construction Audit Report
On the 400 City Hall Square East Building

Part I of II

Management Of The 400 CHS
Construction Contract

January 2009

For Audit Committee Discussion
Table of Contents
EXECUTIVE SUMMARY ....................................................................................................... 1-10

Insert: Management Attachment 1: Management Comments on Executive Summary

Summary of Findings, Recommendations and Management Comments..................................... 12

(Management Attachment 3: Management Comments on the Summary of Findings and
Recommendations was incorporated into this Audit section)

Phase I: Project Management Methodology:............................................................. 12
Phase II: Comprehensive Planning. ........................................................................... 14
Phase III: Project Execution and Control................................................................... 20
Phase IV: Project Closing .......................................................................................... 25
Right To Audit Clause ................................................................................................ 30
Legal Opinion – Memorandum of Agreement............................................................ 31

Main Report ............................................................................................................................. 33-81

1. Preamble to the Main Report .................................................................................................. 34
1.1 History of the 400 CHS Report:...................................................................... 34
1.1.1 New Information and Audit Report Revisions ..................................... 34
1.1.2 Impact of New Information on the Final Review (Part I and II) .......... 39

2. Objectives, Scope & Methodology ......................................................................................... 40

3. The Memorandum of Agreement – Main Construction Project ............................................. 41

4. Management of the 400 CHS Construction Contract ............................................................. 42

4.1 About Project Management Methodology...................................................... 42

4.2 Phase I: Project Management Methodology .................................................. 47
4.2.1 Project Sponsorship & Council and Executive Commitment............... 47

4.3 Phase II: Comprehensive Project Planning.................................................... 50
4.3.1 Identification of Project Team Members .............................................. 50
4.3.2 Project Objectives and Deliverables ..................................................... 57
4.3.3 Identified Project Risks......................................................................... 57
4.3.4 Issues Register and Plan........................................................................ 58

4.4 Phase III: Project Execution and Control....................................................... 59
4.4.1 Project Task Management..................................................................... 59
4.4.2 Communication of the Working Committee and Consultant ............... 62
4.4.3 Utilization of Automation Tools:.......................................................... 63
4.4.4 Measurement of Productivity:............................................................... 63

4.5 Phase IV: Project Closing .............................................................................. 64
4.5.1 Analysis of Identified Project Deliverables: ......................................... 65

4.6 Right to Audit Clauses in Contracts and Agreements .................................... 81

Audit Report Attachments:

Attachment 1: Reserving the Right to Audit
Attachment 2: Legal Opinion –Memorandum of Agreement
Attachment 3: June 16, 2008, Administration’s Project Closeout Financial Summary

Management Attachments:

Attachment 2: Management Comments on Main Report
Attachment 4: Management Comments on the Legal Opinion
Attachment 5: Highlights of Project Accomplishments and Project Value
The Corporation of the City of Windsor

Post Construction Audit Report
On the 400 City Hall Square East Building

Part I of II

January 2009

Management Of The 400 CHS
Construction Contract

Executive Summary
City of Windsor

THE CORPORATION OF THE CITY OF WINDSOR

POST CONSTRUCTION AUDIT REPORT
ON THE 400 CITY HALL SQUARE EAST BUILDING

PART I OF II

Management Of The 400 CHS Construction Contract

January 2009

EXECUTIVE SUMMARY

In 2001, the Corporation of the City of Windsor (the City) began a process to design and
construct a building (400 City Hall Square). The purpose of the building was to consolidate the
income security programs of the City of Windsor, the Province of Ontario and the Federal
Government in one location. The building was substantially completed by 2005, and tenants
(although not necessarily all the originally intended tenants) began moving into the building.

In 2006, the City Auditor’s Office undertook a post-construction audit of the processes
approving the project and managing the construction of the building. A post-construction audit
is a standard procedure upon the completion of a major project such as this and is also an
industry “Best Practice”.

A post-construction audit is an independent and objective assessment designed to add value and
improve an organization’s project management process. It is a gathering of pertinent facts and
evidence in accordance with internationally recognized standards that, when reviewed with
integrity, objectivity and competence, provides a history of what has taken place. Comparing
that history with the applicable Policies and Procedures of the municipality and with industry
best practices provides a basis for recognizing processes that were performed well and for
recognizing areas where improvements are recommended. A post-construction audit is not a
Public Inquiry under the Public Inquiries Act.

The post-construction audit of the 400 City Hall Square East building involved extensive
discussions with various members of City Staff and Management responsible for the project,
interviews with consultants, the gathering and examination of numerous City documents (from
Council reports to Committee meeting minutes to e-mails and memos) as well as reviewing in
detail the City’s financial records.

In April of 2007, the City Auditor’s Office completed a draft document representing a summary
of audit work to that date. That work was subject to a significant scope limitation, namely,
limited availability to certain records, personnel, and physical properties relevant to the
performance of the necessary audit procedures.

In 2008, Administration further assisted the Audit department by providing increased access to
records, personnel, and physical properties to enable Audit to close the information gap created
by the scope limitation. The impact of the new information received has been significant,
requiring substantial new audit work to bring the report to completion. In order to accelerate the
completion of the audit, the Auditor decided to separate the report into two documents, Part I and
Part II.

Part I will discuss whether the project was delivered on time (as amended), within budget (as
amended) and whether the City received what it bargained for. Part II will compare the project
approval process with the City’s Purchasing By-Law, the Municipal Act and the Common Law,
governing the award of the contracts for the building design/construction and for the building fit-
ups. 1

1
Fit-ups are defined as building finishes that prepare the building for initial occupancy, including the alteration of
space for use in Tenant & common areas. Fit-ups for this project were diverse, ranging from floor & wall coverings
to office furniture and included the fit-up of office space to meet the requirements of different departments, external
agencies and other customers.

Executive Summary, January 2009 Page 1
City of Windsor

Summary of Project Staffing, Project Management Methodology & Best Practice:

The timing of this project coincided with a period of significant organizational instability within
the City. In February 2003, the City initiated a corporate wide reorganization, which would have
had a significant impact on maintaining project resources given the deficiency of documented
support outlining the roles, responsibilities and resources dedicated to the project. In considering
the issues of who is accountable for what, it must be noted that between the inception of this
project and its completion, there had been 3 different Chief Administrative Officers at the City, 3
different Heads of Corporate Services, 3 different City Treasurers and 4 different Heads of the
Public Works department. Apart from changes in key personnel, organizationally, responsibility
for the project shifted from Corporate Services to Public Works, and there were a number of
changes in personnel assigned to roles within the Project Management Team, including the role
of project manager. This resulted in gaps in continuity in the project management and in blurred
lines of management accountability.

Also during this project, a total of 5 City Councillors served, at different times, on a steering
committee that provided direction to the project. Three Councillors were part of the City’s
selection of the design-build contractor. Two of those Councillors were replaced following a
general municipal election in November 2003.

Using project management best practices as our standard, we have evaluated the activities in the
following project life cycles and have reported on those results.

Phase I Phase II Phase III Phase IV
a) Scope and b) Comprehensive c) Execution/Control d) Project Closing
Methodology Planning
Defined financial & A final plan which Following the project Project post-mortem
technical criteria identifies: plan, project conducted:
(Business Plan): documentation signifies
- Project team the monitoring and - Collection of issues
- Project purpose, members, control of: that caused delays,
- Strategic fit, - Project objectives impacted scope, etc.
- Objectives, and deliverables, - Key project to evaluate &
- Identified project - Baseline project deliverables, improve process for
risks, schedule, - Management of future projects.
- Project schedule, - Issues register and project Quality,
- Project budget. plan, Time, Cost, Risk - Assessment
- Project - Issue resolution, performed on project
Council and Executive communication plan. - Change control, success at key
commitment to the - Reporting and, intervals to measure
project demonstrated by: - Communication. how well the project
met expectations.
- An understanding of
the project.
- Approval of the
project.

It is important to note that the project was undertaken as a design build project and that this was
the first of its kind for the City. This lack of recent previous experience with similar projects
may explain why we found that an appropriate and adequate project management system was not
put in place to control, track, measure and record progress in relation to project milestones,
timelines or critical functions. Such a system would have helped to offset the gap in the
continuity of key personnel and would have provided a useful tool for accountability purposes.
Although the City did retain an outside consultant as an advisor on the project, the consultant’s
role was limited in scope and was certainly not that of project manager. Because it did not
institute a project management system appropriate to, and adequate for a project of this
complexity and magnitude the City did not employ “best practices” in managing the project.

Executive Summary, January 2009 Page 2
City of Windsor

Summary of the Project Financial Findings of the Review:

The audit review measured the financial successes of the 400 CHS project in two ways, (A)
Project Management Financial Performance – How well the project team met its mandate to
deliver the project within the total (revised) project budget and, (B) Project Financial Planning
Performance – The adequacy of the original budget: Scope and Planning.

Summary of the Evaluation of Construction Work Deliverables:

While it is important that “the project” be completed within or close to budget, it is also
important to know what “the project” is, with sufficient particularity to be able to determine
whether the City received all of what it paid for.

In assessing the adequacy of project planning and implementation, we examined whether
adequately specific and measurable deliverables of the project’s construction had been set out in
the contracting documents. We found a detailed project agreement, but the deliverables in the
agreement were at a very basic descriptive level, with no stand-alone and clear definition of the
construction requirements of the owner (City). The requirements of the owner were merely
incorporated by reference to the language of five separate document sources: the two stages of
the RFP, the proposals submitted, written submissions and four (4) document packages of
answers to questions. These documents are not, in themselves, clear or consistent as to what,
specifically and finally, the City had required the contractor to construct, leaving a lot of room
for the exercise of discretion on the part of the contractor as to what to build and how to build it.
This lack of specificity makes it difficult to determine whether the City received what it
bargained for when what it bargained for is not specified in the written construction agreement,
and when that written agreement states that it is the entire agreement between the parties.

The City’s Legal division advised Administration, providing specific and strong examples as
support, that “the present circumstances leave the City in an ambiguous legal position.” The
results of the audit suggest that Administration moved forward with the project despite that
advice, and without ever resolving the contractual terms that created that ambiguity.

Audit found it difficult, and in some cases we were unable to identify, specific and measurable
project deliverables which to evaluate in the audit. It was difficult to determine what the City
had negotiated for, given the ambiguously stated requirements within the various documents.
For example, the RFP included words such as, “a need for”, “it is preferred”, “suggests”,
“provide up to”. Incorporating such language into the written agreement did nothing to improve
its specificity.

Ultimately, we based our determination of the project deliverables on what we could ascertain
from those five sources of documents and the management representations made to Council by
Administration in the Council report documentation. Where noted, our evaluation of
construction work deliverables are not based on what the City negotiated for, but on the values
reported to Council in Council Report 8652 – September 2002.

The Root Cause of Project Issues and Successes:

The lack of best practices employed in managing the project, inadequate project staffing and
issues of planning, budgeting & contracting, led to an environment of reactive project
management. In order to complete the project and address project risk and issues, additional
funding beyond the original Council approval was required.

Within the reactive project management environment, the project team identified additional
budget needs and sought funding approvals to carry the project through to completion. As a
result, the project was completed largely on time and within a reasonable variation from the total
approved budget.

Executive Summary, January 2009 Page 3
City of Windsor

The audit concluded with 10 key financial findings, illustrated in the chart below:
Executive Summary of Project Financial Results

Variance
Unfavourable
Actual Budget / (Favourable) % Comments

Project Management Performance of the Total Approved Budget:
1 TOTAL PROJECT COSTS $ 32,034,342 $ 31,347,970 $ 686,372 2.19 % Success 2% of Total Approved Project
2 Construction Costs - Guaranteed Price $ 23,367,173 $ 23,383,061 $ (15,888) (0.07) % Success Right on target
3 Additional Approvals $ 1,636,185 Success Additional funding necessary to address project risk
during construction phase.
4 Enhancements $ 374,828 Success Project Team delivered additional work requested by
City departments.

Project Planning Performance: Scoping the City's Needs and Requirements Prior to Seeking Council Approval of the Project
5 Gross Variance Before Additional Funding $ 30,490,290 $ 27,311,957 $ 3,178,333 11.64 % Issue Budget Planning, Risk events not easy to forecast
(1)
6 Fit Up Costs (City) $ 5,650,600 $ 3,857,645 $ 1,792,955 46.48 % Issue Budget Planning
(2)
Fit Up Costs (HRDC) $ 1,734,280 $ 1,628,625 $ 105,655 6.49 % Issue Budget Planning
7 Sale of Social Services Sites $ - $ (871,500) $ 871,500 Issue Budget Presentation - Sale still pending
8 General & Administration $ 646,668 $ - $ 646,668 Issue Budget Planning
(3)
9 Temporary Financing $ 1,062,882 $ 724,783 $ 338,099 46.65 % Issue Project Delays - Additional funding requested
10 District Energy Approval $ 1,544,052 $ 2,025,000 $ (480,948) (23.75) % Success Significant favourable variance
(1)
Calculations for Budget Fit Up Costs (City): Original budget $2,271,460 + Additional approved budget $1,636,185 less the Architect fees of $50,000 = $3,857,645.
(2)
Fit Up Costs (HRDC): Not planned in original budget, $1,734,280 = actual expenses, $1,628,625 = actual recoveries.
(3)
Temporary Financing: The variance reported in Chart B (C) pg. 74 includes Administration’s pending adjustment for $ 527,852. The actual financing variance due to delays was calculated by Audit as $338,099. This is
the difference between the original budgeted financing costs and the actual financing expenditures in project 7017031 and project 7067031 as at Dec. 31, 2007.
(4)
For a detailed explanation of the 10 financial findings, refer to Chart B Pg. 74-75.

Executive Summary, January 2009 Page 4
City of Windsor

A: Project Management Performance of the Total Approved Budget

(1) Project Management delivered the total project 1 at $686,372 over the revised budget.
This represents 2% of the total approved budget, which we acknowledge as a satisfactory
performance by the project team.

(2) Project Management successfully delivered the 400 CHS Building (Main Contract), right
on target at $15,888 under budget.

(3) Project Management faced a number of significant challenges during the construction
phase of the project. These challenges, which were inherited by the Project Management
Team, were a result of project scope and planning issues leading to budgeting
deficiencies. The Project Management Team adequately addressed the resultant risk
events by seeking support and additional approvals from the Steering Committee and
Council for an incremental total of $1,636,185.

(4) In addition to completing the planned work of the 400 CHS project, Project Management
took on and successfully delivered the additional tasks of completing enhancements
requested by the other City departments that would become tenants in the new facility.
These enhancements cost $374,828.

B: Project Financial Scope and Planning Performance

(5) The gross project cost approved by Council in CR 771/2002 was $28,186,957 (not
$27,311,957 as shown in CR 771/2002). If the Social Services sites are eventually sold
for the $875,000, the budget originally assumed as the selling price, the project will have
cost approximately $3,178,333 2 (or 12%) more than was originally approved by Council.
To the extent that the proceeds from any sale of these sites are reduced by market
conditions, or are not received at all, the cost is increased by that amount. This ignores
the time value of money: the fact that any sale proceeds received some years after the
completion of the project will be of less value than the same amount of money received
before the completion of the project.

The project variance from budget is a result of a number of factors, such as issues in
project planning & administration and Steering Committee and Council approved
increases to the project scope. Some of the scope changes were a result of desired
enhancements; others were essential, such as security enhancements for desk side
interviewing and enhanced building security that would have been difficult to identify
given the low level of dedicated staff resources assigned to the project.

(6) The City did not scope out / develop specifications for building Fit-Ups for the part of the
space being occupied by the City. As a result, planning for fit-up space was completed
using financial estimates for fit up price per square foot provided by Public Works
Government Services Canada (PWGSC). The budget was for $27.87 / sq. ft., but the
actual cost incurred was $50.82 / sq. ft, close to double the initial estimate. The result
was a negative budget variance of $1,792,955 or 47% over budget.

Additionally, a non-budgeted charge of $1,628,624.77 for the estimated cost to fit-up the
space occupied by HRDC, as per the lease terms, was insufficient to cover the actual cost,
which was $1,734,280.39. The difference of $105,655.62 is non-recoverable, and was
6.49% over budget.

1
The total project includes the building (together with the specified parking spaces) in one contract, plus additional
contracts (such as HRDC fit-ups and external consultants), as well as the fit-ups for the City of Windsor (fit-up of
office spaces, common areas, interview / meeting rooms, relocation expenses and building security), less the
budgeted value for the sale of certain City of Windsor Social Services buildings.
2
Includes $3,500 in advertisement costs for the sale of the sites, incurred to date.

Executive Summary, January 2009 Page 5
City of Windsor

(7) Council is expected to review and make decisions on large volumes of information each
week. Council is highly reliant on Administration to ensure that its presentations to
Council are clear, and provide full disclosure of the risks that Council should be aware of
prior to making a final decision.

The original project budget approved by Council (CR 771/2002) contained a provision
for revenue of $875,000 from the future sale of certain City of Windsor Social Services
sites. This revenue was deducted from the total estimated expenditures, in the project
budget presented to Council for approval, and Council approved it as presented. To date,
these properties have not been sold, and therefore, the revenue has not been received,
even though all of the budgeted expenditures have been incurred. There is the risk that if
and when these properties are sold, the recovery may be considerably less than budgeted,
or may be allocated to another project or to general revenue, or that Council may choose
to retain rather than sell the properties and use them for another purpose.

The result of this project budgeting practice of including contingent, unrealized revenues
to reduce apparent project costs is a non-transparent transition from the recommended
budget presented to Council by Administration to the actual Council resolution. For
example, by including the anticipated project revenue from the sale of these two assets
within CR 771/2002, the actual total expenditure of this project approved by Council was
$28,186,957. This is not clear in resolution 771/2002 which states “…. with the total
project cost not to exceed $27,311,957 plus applicable taxes.”

(8) The project incurred additional expenses totalling $646,668 not included in the original
budget request. The nature of the expenditures is related to General & Administration
costs such as permits, hoarding charges, advertising and moving. It is suggested that
through more detailed project planning, some of these expenses might have been foreseen
and budgeting accuracy might have been improved.

(9) The City has incurred financing (interest) charges on the un-funded balance (over-
expenditures for which specific financing had not yet been approved by Council)
remaining in the project. Administration has sought Council approval to finance the
balance of the project costs through alternate resources in order to stop the interest
otherwise payable from growing. In the project close out report of June 16, 2008,
Administration approached Council with the recommendation, “THAT Project #7067031
– Post Construction Financing costs (net of the eventual proceeds of sale for the former
Social Services facilities) BE FUNDED from the Debt Reduction Fund in 2010.” The
temporary financing variance, as shown in the PeopleSoft financial system records at
December 31, 2007 was $338,099.

(10) The City District Energy Project # 7051012, (Approved in the 2005 Capital Budget)
which is linked to 1 the 400 CHS project, was delivered under budget by 24%, a saving of
$480,948.

1
The City of Windsor advised all proponents that heating and cooling for the 400 CHS building would be supplied
by District Energy, and therefore they were to exclude capital costs for the related equipment from their submission.
City Council later formally approved the use of District Energy to service the building and budgeted for this cost in
the 2005 Capital budget. Administration advised council in the June 16, 2008 project closeout report, “…
Therefore, in order to capture the full costs of the project, the District Energy expenditure need to be included as an
integral part of the project.”

Executive Summary, January 2009 Page 6
City of Windsor

The audit evaluated 5 project deliverables, illustrated in the chart below:

Executive Summary of Project Deliverable Results

Original Actual Variance Success / Issue Requirement Identification Source

1 Deadline for Substantial November 15, 2004 changed September 6, 2005 Nil Issue A23815, Schedule A, subject to scope change amendments as approved by
Completion to undefined with fit-up the City and delays such as rain days and other construction issues that
scope changes were communicated to Steering Committee. On February 6, 2009,
Administration advised Audit that when the City expanded the scope of the
project contract to include fit-up services, they did so without including the
requirement of a completion date.

2 Parking Requirements 435 399 (36) Success September 4, 2002 Council Report # 8652
Parking requirements not specific or measurable within MOA: Specific
number of parking space deliverables reported to Council. However, MOA
requirements are unclear. See attachment 2 pg. 6 for details.

3 Building Size (Sq. Ft.) 154,304 154,955 651 Success September 4, 2002 Council Report # 8652

4 As Built Drawings Due promptly following Date Received by Success Contract A23815, section 26 (C)
substantial completion, prior to City Unknown
release of holdback

5 Parking Lot Construction Basic, defined as; Amended by City Success Contract A23815, Section 11
(Former Police Site) Landscaping, Curbing, A $26,353 Credit issued to City for scope change.
Lighting, Pavement and
Surface Parking

Executive Summary, January 2009 Page 7
City of Windsor

(1) The project was delivered substantially complete approximately 9.5 months after the
delivery date stipulated in the MOA. The delivery date was changed to an undefined
date, when the City expanded the scope of the project contract to include fit-up services.
- On August 30, 2004 Council approved an alternate approach to procuring the fit-up
services for the 400 CHS building that expanded the scope of the base building
construction contract to include fit-up services.

- Administration reported the alternate approach would expedite completion of the total
project (base construction and fit-ups). However, Administration did not define the
revised project completion date that would have resulted from the change orders put
into place to complete the fit-up services.

- The completion date of the base building construction was moved to March 18, 2005
(4 month delay) as a result of lost time due to rain days and issues with the discovery
of the fibre optic cable on the construction site. (Specific time delay for each issue,
rain or cable, was not specified)

- Project Management estimated a six-week (1.5 month) delay due to the
reconfiguration of Social Services tenant space and the relocation of purchasing &
planning.

- We were able to identify a number of issues and events that caused approximately 5.5
months in delays to the project timeline. However, because the project timeline was
revised to a non-specific completion date, we could not measure and report as to
whether the project was delivered on time versus a specific approved or contracted
target date.

(2) And (5)
The parking requirements for the 400 CHS Main Building were met. We were satisfied
that the variance shortage of (15) in approved versus actual parking spaces at the 400
CHS facility are acceptable due to appropriate management decisions such as, allotments
for the increase in accessibility parking and the widening of the access to the exit-ramp.

The completed structure for parking on the former Police site was delivered short by (21)
parking spaces. Administration has commented that the site change is a result of various
significant plan changes approved at the Steering Committee level such as,

- The installation of a gravel parking lot where the contract called for a paved lot.
- The installation of asphalt sidewalks.
- The landscaping that was not put into place.
- The deconstruction of the gravel lot to install a paved lot.

We remain unclear as to how this data explains the significant variance of (21) parking
spaces delivered versus approved at the former Police site parking lot.

(3) The building size delivered was 651 sq. ft. larger than reported to Council.

(4) On January 29, 2009, we were able to confirm the City of Windsor has possession of the
“as built” drawings. Stipulated as an express requirement of the written agreement, as-
built drawings were due promptly following substantial completion, prior to release of
the normal holdback.

We were unable to confirm the date the as-built drawings were received by the City of
Windsor. We have recommended that in future construction contracts, that as-built
drawings continue to be stated as an owner’s requirement and that Management ensures
they are received as was planned in the contract agreement.

Executive Summary, January 2009 Page 8
City of Windsor

In conclusion, the audit has provided 22 key findings and 19 recommendations for the
improvement of transparency, accountability and control of project management for the
City of Windsor. The audit also evaluates 10 key financial findings and 5 key deliverables.

The documentation and interviews show:

a) The Project Management Team brought in the project with a variance of $686,372, which
was 2% over the total approved budget. This represents a satisfactory performance in
delivering the project within the approved budget. To the extent that differences between
budget and actual expenditures were avoidable, the difference is explained not by
overspending but by an error in under-budgeting.

b) The project planning and execution were weakened by a failure to assign sufficient,
knowledgeable staff resources to be dedicated to, and thus, responsible for the project. The
frequent turnover of City staff assigned to the project resulted in a continuity gap in staffing,
which created a climate lacking individual commitment to the project. Without such
commitment, and with continuing, chronic staff turnover, there was no clear assignment of
accountability for the project.

In many situations, the City established and set-up plans that we observed to be consistent
with best practices, but then, did not follow through on the processes, maintain the processes
and / or apply dedicated resources to ensure the processes were managed as planned. We
have recommended that the City adopt a corporate standard upon which project management
is based in order to establish corporate controls to ensure that projects are conducted in a
disciplined, well-managed and consistent manner promoting the delivery of a quality project
that will be completed on time, within budget and in accordance with the carefully defined
project specifications.

c) There is a concern that a certain level of opacity and confusion has been built into the City’s
budget presentation process, where project cost estimates were presented to Council
containing a potential, but as yet hypothetical revenue offset within the project expenses.
This inappropriate method of showing costs resulted in an un-funded project balance that
incurred interest costs that accrued until Administration approached Council to request
alternate funding support in the project closeout. We have recommended that this standard
practice of the project budget presentation process be discontinued, in order to improve
transparency and reduce cost.

d) Based on the advice to the City of Windsor, from the External Legal Counsel working on the
file – Andrew Roman of Miller Thomson LLP. (Attachment 2: Legal Opinion –
Memorandum of Agreement)

Typically, public bodies use an execution strategy called design/bid/build under which the
owner prepares complete drawings and specifications and obtains a fixed price for the Project
through competitive lump sum bidding. Here, the owner, the City, selected a design/build
execution strategy which, by its very nature, means that complete drawings and specifications
do not exist before construction begins. Instead, the design/build contract includes an
“Owner’s Statement of Requirements” which, if properly drafted, describes the requirements
of the owner in a manner that is both clear and measurable – often with preliminary level
drawings and outline specifications. The design/builder uses the “Owner’s Statement of
Requirements” to complete the design and then build the Project. Here, the design/build
contract incorporated, as Schedule B, the “Owner’s Statement of Requirements.” Instead of
clearly articulating the requirements of the City on a stand-alone basis – in terms that are
measurable – this statement merely refers to five other documents: two stages of the RFP, the
proposals submitted, written submissions and answers to questions. This incorporation by
reference is untidy and inconvenient, but might not be inherently wrong if the documents
being incorporated were consistent, clear and sufficiently detailed as to constitute a proper
Owner’s Statement of Requirements. However, the documents in question do not meet that
test, but are problematic, for several reasons.

We have recommended that Administration develop a policy dealing with both
design/bid/build and design/build contracting practices. We have recommended that, where

Executive Summary, January 2009 Page 9
City of Windsor

design/build is being used, the requirements of the City that are incorporated into any
contract should be clear and measurable. Because design/build involves the design/builder
engaging in both design and construction, the RFP stage will necessarily communicate the
City’s needs rather broadly, seeking creative solutions from the design/builders competing for
the work. However, the contract to be entered between the City and the successful
design/builder should incorporate a clear and measurable statement of the City’s
requirements, not merely repeat and incorporate the various RFP process documents which
illustrate a process, not its outcome. If there are any disparities or inconsistencies between a
proponent’s RFP responses and the City’s requirements, these should be resolved prior to the
execution of the written agreement. Once they have been resolved, there is no reason to
include either stage of the RFP in the written agreement, which is the entire agreement
between the parties. Where the City’s requirements are not clear and measurable, there is a
gap between what the design/builder believes is required and what the City expects. That gap
usually leads to controversy, if not litigation.

Executive Summary, January 2009 Page 10