The high cost of conducting the public's business in private

By David Broadland, September 2014

Decisive moments in the bridge and sewage projects illustrate the need for more politicians willing to work in broad daylight.

The Victoria region’s two largest public infrastructure projects are in deep trouble. The proposed $800 million sewage treatment program had already cost $90 million by the end of June even though the project didn’t have a site on which a central treatment plant could be built. Of that $90 million, $45 million appears to have gone up in smoke, and three month’s after Environment Minister Mary Polak backed Esquimalt’s right to decline hosting a central treatment plant, there’s no political agreement on how to proceed. 

Meanwhile, the Johnson Street Bridge replacement project has a new, tentative price tag of $100 million and all indications are it could go much higher. Yet when City of Victoria councillors first voted to replace the current bridge instead of repairing it, they were told the cost of replacement would be $40 million.

While proponents for amalgamation have seized on the sewage fiasco as proof that the current system of 13 independent municipalities needs to be streamlined, close examination of decisive moments in each of these projects suggests a simpler solution: election of politicians who commit to conduct the public’s business in broad daylight.

 

THE DECISIVE MOMENT that led inevitably to the current impasse in the sewage treatment program didn’t occur when Esquimalt councillors voted unanimously in April to reject the CRD’s rezoning application for a larger sewage treatment plant than existing zoning allowed. Nor was it the step before that, in July, 2013, when Esquimalt rezoned McLoughlin Point to allow for a sewage treatment plant, but one that would have to be smaller than the CRD wanted. 

No, the decisive moment was the step before that: At a June 9, 2010 closed meeting of the CRD’s Core Area Liquid Waste Management Committee (the sewage committee), directors voted to abandon a four-plant treatment plan, developed over three years, and instead focus all treatment in a single plant at McLoughlin Point.

The abandoned plan—which had the approval of then-Minister of Environment Barry Penner—would have shared the burden of hosting sewage treatment between Victoria, Saanich, Esquimalt, and either Colwood or Langford. Instead, over the course of two consecutive closed meetings of the sewage committee, culminating with that June 9 decision, committee directors were convinced to discard fairness and to dump the whole messy business on Esquimalt.

This was the moment when the whole enterprise shifted too far away from the political reality that every municipality has its own cultural identity, a right to make decisions about what happens within the borders of that identity, and a legal right to protect that identity. This is (just ask Minister Polak) a more defensible political position than, say, keeping the financial costs for other municipalities in the enterprise to a minimum. This was the moment when the process became too much about engineering and Realpolitik—and too little about respecting existing community richness. It was a vitally important moment that should have been discussed openly—in public.

Who said what at that June 9 meeting? What brought about this sudden change in approach? We don’t know, because sewage committee directors also decided that day that the public didn’t have a right to know how, or why, they voted the way they did.

Officially, the meeting was closed to the public because it included “negotiations and related discussions respecting the proposed provision of a municipal service that are at their preliminary stages and that, in the view of the [directors], could reasonably be expected to harm the interests of the [CRD] if they were held in public.”

Committee directors didn’t have to follow the staff recommendation to close the meeting, but the majority of them did.

Elected public officials in BC are required by the Community Charter to keep confidential everything said at a meeting closed to the public unless a majority agree to “rise and report” on that meeting. Even when that happens, the “report” provided to the public usually acknowledges little more than the course of action decided upon. The arguments for or against that course of action are normally excluded from that report.

This is what happened at that decisive June 9 meeting. The minutes show that after an 85-minute closed session, the committee “rose and reported” that staff had been directed to pursue consolidation of all liquid waste treatment at McLoughlin Point. The minutes provide no indication of why that change was made.

Considering that $45 million in public money appears to have been wasted as a direct result of that decision, the lack of transparency is disturbing. It’s as though the information required for holding politicians and public servants accountable for their decisions has disappeared into a black hole.

The staff report (obtained by an FOI request) given to sewage committee directors at that meeting showed the recommendation for a centralized system was made by Tony Brcic, the CRD’s project manager for the wastewater treatment program, and Jack Hull, the general manager of the CRD’s Integrated Water Services.

So Focus filed another FOI request for all emails and reports exchanged between the CRD’s Chief Administrative Officer Kelly Daniels, Hull and Brcic between April 1 and June 9, 2010, that related to the recommendation to CRD directors to shift from a four-plant configuration to one central plant at McLoughlin Point.

The record provided by the CRD shows no bolt of lightning striking project managers, urging them toward a central plant at McLoughlin Point. For example, the record shows no demand from either the Province or the federal government that tied supportive funding to a single, central plant. Instead, a picture of chaotic, last-minute planning emerges from the record. Three weeks before committee directors voted to move all treatment to Esquimalt, Daniels emailed private engineering consultant Jonathan Huggett. Daniels told Huggett, “The CRD has submitted the Business Case and Amendment #7 for the [Liquid Waste Management Plan] in application for approval and funding for a Waste Water Treatment System that includes four treatment plants and a bio-solids processing facility. Work continues to proceed on finding alternate site locations for all these facilities with the expectation that we may see significant reductions in the overall capital and operating costs of the system, particularly if we can consolidate the treatment facilities to one treatment plant site as recommended by the Peer Review Committee.” (emphasis added)

In that last sentence Daniels was referring to a report required by the CRD’s funding agreement with the Province. It appears Daniels was under the impression the Peer Review Committee had recommended consolidation to one treatment plant. If so, he didn’t have it quite right. The Peer Review Committee strongly recommended that the CRD try to secure an Upper Harbour site from Steel Pacific, because that site would have been large enough to accommodate a single, central plant including digesters for processing solids. McLoughlin Point was not large enough for digesters. Negotiations with Steel Pacific were ongoing. The FOI record provided shows the CRD was considering a price of $42 million. The possibility of acquiring that property seems to have tipped the whole planning process toward a central site. Yet no peer review report had ever recommended McLoughlin Point as an appropriate location for a single central plant.

Indeed, a May 2009 peer review report on the CRD’s four-plant treatment plan had repeatedly raised “serious reservations” about McLoughlin Point, even though the CRD was proposing a plant with considerably smaller hydraulic capacity than would be required by a single central plant.

For example, that review listed nine “concerns and restraints” with the McLoughlin site that included technical problems likely to arise from the site’s “extremely small” size, the necessity for “full buildout to the fenceline,” the likelihood of the need for lengthy and expensive site remediation, and the prominent visibility of the site “from the water as well as from the cruise ship wharves and heliport terminal on Ogden Point across the harbour entrance to the east.”

The peer reviewers concluded, “In view of the concerns and constraints expressed above, the [Peer Review Team] has serious reservations about the McLoughlin site. Resolving these issues will entail a major and possibly prolonged effort. Before proceeding too far down the path of trying to resolve these issues, it would be prudent to ensure that the facilities currently proposed for the McLoughlin site…can indeed be accommodated by the site in a reasonable and satisfactory manner.”

Yet even while negotiations on the Steel Pacific site continued, Hull and Brcic were advancing their planning for a central plant at McLoughlin. What seems clear is that senior project managers weren’t reading, thoroughly, the reports taxpayers were funding. Instead, as Daniels put it to Huggett, the managers were focussed on “reductions in the overall capital and operating costs of the system…”

A week after Daniels wrote Huggett, on May 27, Hull emailed Daniels and reported that he had reconfigured the McLoughlin plant to a larger size—including a “little” encroachment on DND lands—and had replaced the Saanich East-North Oak Bay plant with a storage tank. Hull added, “Digesters would still be at Hartland although we can look for a closer site. Cost estimate expected tomorrow but expect total to be less than $800 million.”

The very next day Hull emailed Daniels: “As it looks like Esquimalt is the likely plant location, I’m going to try to meet with Bev DeJardin [sic] to give her a ‘heads up’ before she reads about [it] in the agenda package.” Daniels quickly replied: “Good luck with that!!”

Hull, apparently unaware of how to spell Esquimalt Mayor Barb Desjardins’ name, similarly seemed to have no notion of the complex chain of political reactions the reconfiguration was destined to unleash.

The rest is history. Without any public consultation with Esquimalt residents beforehand, a majority of sewage committee directors voted to approve a centralized plant at McLoughlin Point, thus eliminating a crucial political compromise—a more equitable distribution of the burden of hosting sewage treatment. By the end of that June the new plan was sitting on Minister Penner’s desk awaiting his approval. A few weeks later, the CRD’s public consultation with Desjardins’ community took the form of two open houses.

If Brcic’s and Hull’s recommendation and verbal reports had been delivered to a public meeting, and committee directors’ comments and questions were forever immortalized on websites and in print, you can be certain every word would have been turned over and over and checked for veracity against the known record, including what the Peer Review Committee had actually reported to the CRD. There would have been the possibility of quickly holding these public officials accountable for their decisions. Instead, the people elected to protect the public interest allowed Brcic, Hull and Daniels to proceed down the McLoughlin path as far as they could go, burning through $45 million as they went, before finally being brought to a halt by “Bev DeJardin.”

 

THE GRAVE RISK TO TAXPAYERS of important decisions being made at closed meetings is even more evident in the case of a November 16, 2012 meeting of Victoria City councillors. I have written about this previously, but there have been developments, as they say.

Three bid proposals to build a replacement for the Johnson Street Bridge were received by the City of Victoria on November 1, 2012. Two weeks later, City councillors were summoned to a closed meeting and were given a report that recommended councillors authorize City staff to begin negotiation of a “fixed-price contract” to build the new bridge with PCL Constructors Westcoast. Without seeing any of the bids, the majority of councillors went along with that recommendation and, on New Years eve, they authorized City staff to sign a contract with PCL.

But this past spring councillors were told PCL had submitted a change order asking for an additional $7.9 million and five and a half months of extra time to complete the project.

What happened to the City’s “fixed-price contract” that, as Mayor Dean Fortin had promised, would protect the taxpayer? To answer that question the City then brought in engineering consultant Jonathan Huggett—yes, the same Jonathan Huggett mentioned above—to advise the City on future risks it faced with the project.

Huggett delivered his report to councillors on July 24. At the same time, the City released details of PCL’s request. The City also released a response from MMM Group—the City’s project manager—to PCL’s claim for more time and money. MMM rejected PCL’s change order, claiming PCL knew back in November, 2012, when it submitted its bid proposal, that its changes to the design were so extensive that it should have allowed a 30 percent contingency in its pricing rather than the four percent contingency it used.

At that July 24 meeting, Huggett told councillors they should expect to pay more if they wanted the project to get built. How much more he wouldn’t say, but he warned that PCL’s $7.9 million change order was likely not the last request for more money. Huggett committed to providing councillors, in September, a more complete estimate of how much additional money and time it will take to complete the bridge.

Now let’s go back to that November 16, 2012 closed meeting. Following a few months of Focus fighting with the City for the record of what happened at that meeting, Victoria councillors “rose and reported” and a slightly redacted version of the minutes and staff report from that meeting were released to us. I’ll focus on just one issue that arises from those minutes that relates to the current dispute between the City and PCL: the contingency.

At that November 16 meeting, the minutes show, at least one councillor was concerned about the tiny four percent contingency included in PCL’s bid proposal. Shouldn’t it have been higher? City engineering staff told councillors that the tiny contingency was “normal” for the stage the project was at. Councillors were also told, “This is a unique project, that is why the contingency is different.”

In the privacy of a locked room, councillors were given seriously flawed advice by City staff. Don’t take my word for it; listen to what MMM Group said about the contingency issue in its refutation of PCL’s change order request for more money, released on July 24. MMM wrote that PCL’s design “was not more than 10 percent complete at the time of PCL’s [bid] proposal submission and it appears that PCL calculated quantities either from their optimized design without considering any contingencies, or from [our] design. In either case, this would lead to a significant error in their bid.” MMM went on to suggest that a 30 percent contingency would have been more appropriate.

So let’s just review that. At that closed meeting in November 2012, councillors were advised by staff that a four percent contingency was “normal.” But now we know, thanks to MMM Group, that the contingency should have been 30 percent. Where did City staff get the idea that a four percent contingency was normal? And why did councillors believe them?

For the answers to those questions we need to look at the minutes of the closed meeting at which City of Victoria staff recommended that councillors approve signing a “fixed-price contract” with PCL. That meeting took place on December 31, 2012. City councillors recently preempted our efforts to obtain the staff report and minutes from that closed meeting by, again, rising and reporting.

That staff report stated: “The City’s Consultant, MMM Group, has reviewed the contract documents prepared by FMC and the City, including optimizations, contingency, project risks and the value engineering opportunities, and in their professional opinion recommend that the City proceed with the project and enter into a contract with PCL Westcoast.” I’ve added the emphasis to the word “contingency.” FMC, by the way, was the City’s legal adviser on the procurement.

So MMM gave its blessing to the tiny four percent contingency on December 31, 2012, even though it now says that a more appropriate contingency would have been 30 percent.

If a 30 percent contingency had been used, however, the City would have been looking at an overall project cost of $109 million, far above its “affordability ceiling” of $92.8 million. In other words, the project would have died, and along with it the $9.1 million contract MMM had inked with the City—just before councillors were encouraged to approve negotiations with PCL. Perhaps it wasn’t in MMM’s best interest back then to provide the City with its opinion that the contingency should have been 30 percent instead of four percent. But it seems to be now.

Had City staff known that the basics of PCL’s bid proposal would be exposed to an open, public meeting, rather than to a group of councillors who, politically, couldn’t afford the project to fail, would City taxpayers now be facing a $110 million bill for the bridge? And would councillors, labouring under the scrutiny of retired engineers and would-be councillors, have been more prudent and less gullible? For the record, only councillors Lisa Helps and Ben Isitt voted against signing the contract with PCL.

 

A BROWSE THROUGH the minutes of past meetings of the City of Victoria or the CRD quickly reveals the extent to which the public’s business is increasingly conducted in private. And, as these two cases illustrate, there’s a brutally high price to pay for this lack of transparency and accountability. Information is power, and those having power are generally reluctant to share it. With a civic election on the horizon there isn’t a better time to demand fuller transparency. 

David Broadland is the publisher of Focus Magazine. He wrote an open letter to Jonathan Huggett following Huggett’s appointment as bridge project director. To date Huggett has provided no response to the 15 questions posed in the letter, which can be read here.

AttachmentSize
May 2009 Peer Review.pdf1 MB
March 2010 Peer Review.pdf424.72 KB
CRD FOI # 0580.20:14-056.pdf2.49 MB
Nov 16, 2012 closed council meeting report and minutes FOI 2014-01-27.pdf3.45 MB
December 31, 2012 closed Council meeting record.pdf689.94 KB
Jonathan Huggett's report to July 24 GPC.pdf1.56 MB
MMM response to PCL Letter of Mar 17, 2014.pdf1.13 MB
PCL Request for Change Order March 17, 2014.pdf1.15 MB