400 Audit Summary

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 fitups. 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 a) Scope and Methodology

Phase II b) Comprehensive Planning

Phase III c) Execution/Control

Phase IV d) Project Closing

Defined financial & technical criteria (Business Plan):

A final plan which identifies:

Following the project plan, project documentation signifies the monitoring and control of:

Project post-mortem conducted:

-

Project purpose, Strategic fit, Objectives, Identified project risks, Project schedule, Project budget.

-

Council and Executive commitment to the project demonstrated by: -

Project team members, Project objectives and deliverables, Baseline project schedule, Issues register and plan, Project communication plan.

-

-

Key project deliverables, Management of project Quality, Time, Cost, Risk Issue resolution, Change control, Reporting and, Communication.

-

Collection of issues that caused delays, impacted scope, etc. to evaluate & improve process for future projects.

-

Assessment performed on project success at key intervals to measure 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

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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

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

Actual

Budget

Variance Unfavourable / (Favourable)

%

Comments

Project Management Performance of the Total Approved Budget: 1 TOTAL PROJECT COSTS 2 Construction Costs - Guaranteed Price

$ 32,034,342 $ 23,367,173

$ 31,347,970 $ 23,383,061

$ $

686,372 (15,888)

2.19 % (0.07) %

Success Success

2% of Total Approved Project Right on target

3 Additional Approvals

$ 1,636,185

Success

Additional funding necessary to address project risk during construction phase.

4 Enhancements

$

Success

Project Team delivered additional work requested by City departments.

374,828

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) (2) Fit Up Costs (HRDC) 7 Sale of Social Services Sites 8 General & Administration (3) 9 Temporary Financing 10 District Energy Approval

$ $ $ $ $ $

5,650,600 1,734,280 646,668 1,062,882 1,544,052

$ 3,857,645 $ 1,628,625 $ (871,500) $ $ 724,783 $ 2,025,000

$ 1,792,955 46.48 % $ 105,655 6.49 % $ 871,500 $ 646,668 $ 338,099 46.65 % $ (480,948) (23.75) %

Issue Issue Issue Issue Issue Success

Budget Planning Budget Planning Budget Presentation - Sale still pending Budget Planning Project Delays - Additional funding requested 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

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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

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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 (overexpenditures 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

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

Executive Summary of Project Deliverable Results Original 1 Deadline for Substantial Completion

Actual

Variance

Success / Issue

Requirement Identification Source

November 15, 2004 changed to undefined with fit-up scope changes

September 6, 2005

Nil

Issue

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

Due promptly following substantial completion, prior to release of holdback

Date Received by City Unknown

Success

Contract A23815, section 26 (C)

Basic, defined as; Landscaping, Curbing, Lighting, Pavement and Surface Parking

Amended by City

Success

Contract A23815, Section 11 A $26,353 Credit issued to City for scope change.

4 As Built Drawings

5 Parking Lot Construction (Former Police Site)

Executive Summary, January 2009

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A23815, Schedule A, subject to scope change amendments as approved by the City and delays such as rain days and other construction issues that 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.

City of Windsor (1)

(2)

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.

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, asbuilt 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

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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

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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

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