Recommandation report regarding contract management by Ville de Montréal’s rolling stock and shops department

The Office of Inspector General conducted an investigation after receiving several denunciations regarding Ville de Montréal’s rolling stock and shops department (Service du matériel roulant et des ateliers, hereinafter “SMRA”), alleging various issues related to compliance with the normative framework in contracting, including few public calls for tenders and contract splitting. Furthermore, some denunciations mentioned irregularities at the contract management stage.

SMRA’s mandate is to ensure the availability and reliability of vehicles and various specialized services and products, adapted to the needs of the boroughs and units, in an environmentally responsible manner and in a safe working environment. In 2017, SMRA’s responsibility was expanded from nine (9) boroughs under the former Ville de Montréal to a total of nineteen (19) boroughs. As indicated by its name, its main mandate consists in the procurement and maintenance of Ville de Montréal’s rolling stock and, to that end, involves various contracting processes.

The investigation resulted in several findings, which can be grouped into three (3) categories. The first generally concerns SMRA management and the measures for overseeing the contracting processes that have been implemented. In this respect, the investigation led to the following findings:

• A certain lack of training and understanding of the normative framework by SMRA management, including the mistaken belief that each SMRA shop and garage is independent with respect to accounting for the expenses incurred and the associated tender thresholds;
• A lack of formal follow-up or clear assignment of personnel for several facets of contract management supervision, such as the annual amount of expenditure per supplier, compliance with contract thresholds, cost overruns, and observance of contract clauses;
• A corporate culture within SMRA management whereby compliance with contractual rules is not perceived as a requirement, but rather in opposition to the services to be provided to boroughs and the public. There is also a recurring lack of needs planning by SMRA management that often leads to invoking an emergency situation to enter into mutual agreement contracts.

The second category of findings relates to non-compliance with public contracting rules. The Office of Inspector General conducted a detailed review of all the purchase orders issued by SMRA to 10 suppliers over a five-year period. In the end, close to $9,000,000 was spent by mutual agreement by SMRA with these suppliers over a five-year period, whereas the needs were recurring and foreseeable. Under these circumstances, not issuing a public call for tenders is a breach of the public policy rules prescribed under the Cities and Towns Act.

Also in this second category of breaches of public contracting rules, the investigation revealed as well that a snow-removal equipment leasing project was mismanaged, creating an “emergency” situation and ultimately leading to the award of four (4) mutual agreement contracts to the same contractor, in violation of the supplier rotation rules under the by-law on contract management (hereinafter “RGC,” for “Règlement sur la gestion contractuelle”).

The third category of findings comprises four (4) contract management issues, including:

• Deficiencies in the process of assessing whether a supplier should be imposed contract penalties. SMRA management chose not to impose these penalties for various reasons, including the fact that the penalties would have been roughly equivalent to the amounts that could have been claimed by the supplier. However, whereas the amounts on either side totalled a few hundred thousand dollars, the decision was made without having an accurate tally of the respective amounts.
• A software licence was used by SMRA in breach of contract terms and conditions. Whereas each garage and shop was supposed to acquire its own licence, only one licence was used for all of them. At the time of the licence renewal, the vendor informed SMRA that it had become aware of the practice. However, given that the cost of acquiring a licence for each facility involved a call for tenders by invitation, SMRA chose, on the grounds that the renewal was too urgent, to acquire a licence only up to the mutual agreement threshold, and the practice has been maintained.
• A member of SMRA management handed out 100 promotional caps to SMRA employees with both logos of a supplier and Ville de Montréal side-by-side. Besides using Ville de Montréal’s logo without any indication that prior approval from City Council had been obtained, the caps presented a problem with respect to the appearance of integrity in the tendering process, that may possibly show bias or favouritism on the part of Ville de Montréal. Municipal officials must always bear in mind that they are the trustees of public funds and the front-line guardians of Ville de Montréal’s contractual integrity.
• Due to a budget shortfall, purchase orders were issued by the SMRA with an initial amount of $1 before being modified to reflect the actual value of the transaction. This is a totally unacceptable practice that results in commitments for amounts where funds have not been allocated, with even less of a possibility of being stringently monitored by SMRA management, all in the hopes of having a potential budget increase approved.

Lastly, it should be noted that the Office of Inspector General’s investigation is not the first action taken in relation to SMRA with respect to its lack of compliance with the normative framework. The Comptroller General had intervened in 2018 with respect to tender thresholds being exceeded, but there have been no changes since then. Similarly, many SMRA employees had brought up various issues of compliance with the normative framework to their supervisors, but in response to the subsequent inaction, many resigned themselves to changing jobs.

In short, all the investigation findings have revealed a marked and widespread problem in virtually all of SMRA management consisting of deep-seated dysfunction in contract management, including a lack of formal expenditure monitoring, public tendering thresholds being regularly exceeded for numerous suppliers, and failure to comply with the normative framework and RGC rules.

There are varied, numerous, and in some cases very serious breaches of the normative framework. In addition, they have been going on for a number of years and have already been brought to the attention of SMRA management.

In the opinion of the Inspector General, it is imperative that the situation within SMRA be promptly rectified. Furthermore, the Inspector General is submitting certain elements that must be included in a plan in this respect, and is undertaking to verify the measures that will be adopted by Ville de Montréal.

Despite the preceding investigation findings, it should be noted that the evidence gathered to date by the Office of Inspector General does not point to any criminal activity (e.g. fraud or corruption) by SMRA management, or any wrongdoing on the part of the suppliers mentioned in this report.