Private construction firm recommended firing TTC project managers. Guess who got hired to manage the project?

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By Joell Ann Vanderwagen How can I say this politely? Toronto’s Mayor, the City Manager, and the head of the Toronto Transit Commission (TTC) all pressured City Councillors to rush approval of a contract for private management of the Spadina Subway extension during Council’s meeting of March 31, 2015, Not only was this $150 million job not put out to tender but the giant construction firm awarded the contract appears to have a conflict of interest in the matter. Stinky? Indeed, during the meeting, Councillor (and TTC Commissioner) Joe Mihevc was heard * to state: “I think people will be surprised when they find out who the sole source company is and their role in the evaluation process and whether there is a conflict of interest.” [*Joe Mihevc’s comments can be heard on the Roger’s video of the Council Meeting] Here is the story: Because the complex project of extending the Spadina Subway to Highway Seven--involving a Spanish construction consortium and five local contractors--was well behind schedule, TTC head, Andy Byford, had brought in outside advisors to recommend ways of meeting a revised completion date of 2017. One advisor was an Expert Panel provided by the American Public Transit Association (APTA). Another was the giant American construction firm, Bechtel. In his Staff Report, Byford briefly summarized the advice of those consultants, stating that Bechtel agreed with APTA’s recommendations but Bechtel “further added that a change in project management would be required, to deliver an end of 2017 completion date.” Not waiting for the next Commission meeting, Mr. Byford proceeded to fire the two top TTC managers (Sameh Ghaly and Andy Bertolo). Then on the 26th, he presented the TTC Board with four options, one of which was to continue with TTC project management (an option he had already prejudiced by the firings). Byford said his preference was to hire a particular company he had in mind, without going through a normal bidding process. Opening it to competitive bidding, he said, would delay the project by six months and increase costs. This was Option #1, which the TTC Commission adopted and sent to City Council for approval on March 31st. Because of the brief interval between the TTC and Council meetings, City Councillors had only one day in which to review the TTC report before being asked to vote on Option #1. Indeed each Councilor was given only five minutes in which to address questions to Mr. Byford. Many were outraged that they were not allowed to read the actual consultant’s reports, which were not available to Councilors (except TTC Board members) or the general public. After much concern was expressed about the hasty process, lack of information, and the non-tendered project, the majority on Council approved a sole-source contract for $150 million dollars. On Friday, April 10th, the TTC Board met in private to approve the contract with construction giant—you guessed it—Bechtel. Thus, we have Bechtel recommending that TTC management be replaced, and then taking over the management themselves to the tune of $150 million dollars. How much in-house expertise could the TTC have hired for a fraction of that amount? A little research has revealed that every level of government has strict guidelines to ensure transparency and integrity in public procurement of goods and services. The guidelines generally govern how a bidding process is to be conducted, what the exceptions are, and prohibit conflict of interest on the part of elected officials and civil servants. However, at this point, it is still not clear how such guidelines are legally enforced. It is also unclear how those guidelines apply to consultants hired to assist in developing a project concept. Steven Bauld, a Government Procurement expert, expresses his opinion on this question in an online article in the Daily Commercial News [January 20, 2015, Procurement Perspectives: Avoiding Consultant's Conflict of Interest.], where he states that: Common sense is enough to justify the belief that consultant conflict of interest is as much a concern as conflict of interest involving an employee or elected official.” "A common type of conflict of interest (condemned inter alia by the federal auditor general) involves the use of a consultant to draw up specifications for a contract, or to design a bidding process for a contract [and] the same consultant is then allowed to bid for the contract."    Conflict of interest problems also arise where the consultant has an interest in the outcome of the study that the consultant is hired to conduct, or where the consultant's prospect of further employment is likely to be influenced by the advice given.” In the case of the Spadina Subway extension, the facts of both the sole-sourcing of the huge contract and the consultant's previous work in developing the specifications of the job are concerns that cut across party and ideological lines—concerns about the basic integrity of our government. Councillor and TTC Board member, Joe Mihevc expressed his thoughts on the matter during an interview with this writer on April 22nd,

INTERVIEW WITH JOE MIHEVC, APRIL 22, 2015

BY JOELL ANN VANDERWAGEN

Q: So, at the council meeting of the 31styou introduced a motion asking that the project be put out to tender. Can you tell me what your reasons were? Mihevc: First, I am always uncomfortable when we don’t tender out. This is a lot of money that this contract is about and with this quantity of money we always tender out to make sure we get the best price, even if it’s more than the contract that the staff have been negotiating with Bechtel. The reason why we tender is that we’re a public institution and everyone should have the opportunity to get in on it. There has to be an overwhelming reason —and there are sometimes overwhelming reasons like purchasing from a Canadian company—but in this particular case, I was not convinced that we needed to overcome all our purchasing by-laws and protocols. Secondly, I am uncomfortable with the company that did the review having been given the bid. I am uncomfortable with the company who did one of the reviews having received the contract in an un-bid format. Staff have a reason for that. They say they are up-to-speed and can hit the floor running. My response is “that’s all very nice and it may be possible in the private sector but in the public sector that’s not the way you do business because if nothing else it gives the appearance of a possible conflict of interest and that you can’t take. Our processes at City Hall need to be squeaky clean. Q: So why do you think the other Councillors didn’t go along with you, when it seems so obvious? Mihevc: I think there was a desire to have this project completed. I think that’s part of the motivation. They want this project completed and they want it completed quickly. I don’t find that … For a subway that’s going to last a hundred years, waiting two months, six months, even a year is not unusual. I’ve talked to some folks in the transit industry, like one person who did an analysis of forty subway projects; there was only one subway project that was on-time and on-budget and THAT WAS SHEPPARD EAST. Q: Who was the manager at that time? Mihevc: Andy Bertolo. He won awards, by the way. Q: That’s significant. Was he in charge the whole time? Mihevc: He was the manager of the project. Q: You say he won an award? Mihevc: The TTC and their contractors won an award for on-time and on-budget high quality work—the International Project of the Year award for 2003, given by the Construction Management Association of America. A year later they were also given the 2004 award for Project Management Excellence, by the Consulting Engineers of Ontario Q: That’s really significant. Mihevc: Yes it is. Q: I spoke to the Procurement Department at the TTC and was directed to their procurement guidelines on the TTC website, which include conflict of interest. I also received a copy of their internal guidelines governing sole-sourcing. Do think this rush to sole-sourcing and possible conflict of interest violated any of those guidelines? Mihevc: I certainly think they push on the edges of them very heavily and that’s why I thought we should contract it out and see what the market could give us. I do think some folks felt a little panicked and voted accordingly on Council, but you know what, in two-three yearsit won’t matter whether it opened on January first or June first. Q: Is there anything illegal about violating your guidelines? Mihevc: There is nothing illegal unless it’s done surreptitiously, and it wasn’t. It was done in a very open and public format. Q: So the TTC Commission can violate its own guidelines? Mihevc: Yes of course it can, we’re the Board. Q: I don’t know about “Of course”, is there something larger like the Conflict of Interest Act or the City of Toronto Act? Auditor General? Mihevc: No there isn’t, not that I’m aware of. If we had done it all behind closed doors it could at least be perceived to be, but we did it all openly and transparently. I don’t think that there is any overt malice here. At least I couldn’t find it but I do think it was a panic to deliver that was driving this and I wasn’t comfortable with that. Q: I appreciate the fact that you at least offered the motion. How many people voted for it? On the Commission and the Council? Mihevc: On the Commission I think I had at least one other—Vince Crisanti voted with me. On Council, I think we had about a dozen votes. We can check the record. [15 yes, 28 no] Q: Another question, how long has Sameh Ghaly been Chief Capital Officer? Mihevc: About five years. Q: I remember him distinctly from the May 30, 2012 TTC Commission meeting when he presented the APTA [American Public Transit Association] report which reviewed the options for [continuing with TTC management or privatizing] the Eglinton Crosstown. The Commission just received it for information. It was never discussed there or at Council and there was no opportunity for a public deputation because [on October 30, 2012] the Master Agreement [turning the project over to Metrolinx] went straight to City Council for approval. I thought the APTA report was important because at that time they said they were very impressed with the way the TTC had organized the project. [A: yes] Mihevc: The only comment I have about that is that both Sameh Ghaly and Andy Bertolo have been long career public transit civil servants with very strong and good reputations. Q: Would you like to make any speculations as to why there was a changing of the guard? Mihevc: No. As of today, that’s water under the bridge; it’s time to move on. They’ve moved on. … As Commissioners, it’s not our job to second guess the CEO’s hiring and firing policies. Q: What I noticed was that Andy brought in APTA and Bechtel, got their reports, and then he fired the managers on March 19th. Then on the 26th he brings forth the four options, one of them is to continue with TTC management. But he’s already fired the top managers, so he’s kind of pre-empted that option. Wasn’t that a little precipitous? Mihevc: I do think the facts seem to have been organized around achieving a particular result. Q: This is just an aside, but have you ever read Shock Doctrine * by Naomi Klein? Mihevc: No, but I know the theme of the book. Q: The theme of the book is about the Chicago School of Economics and all their graduates all over the world who are pursuing the doctrine of “radical capitalism.” Once you read that book, you kind of see a pattern. [A: yeah] And you see it happening here. [A: yes] If you’re only looking at the details, then it’s this issue and that issue, but if you’ve read that book, you see a pattern. [A: yes] And how do you … so you see the pattern? Mihevc: I don’t want to assign any great ideological thing at this point. That‘s for my book, someday. Q: That will be a good book. Thank you for your time. [* End Note: Since the 1950’s, the Chicago School of Economics has been teaching Milton Friedman’s doctrines of radical capitalism—an ideology that calls for evisceration of government functions and selling off of public assets and services to the private sector, combined with elimination of social services and labour unions. Naomi Klein’s book, Shock Doctrine: the rise of disaster capitalism, documents the implementation of these policies in countries around the world. In Toronto, in the recent past, we have witnessed the firing of three of the TTC’s top managers (Gary Webster, Sameh Ghaly, and Andy Bertolo), which amounts to an evisceration of the TTC’s capacity to manage large projects, and corresponding call for private corporations to take over this work.]

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