Police have been called in to investigate potential bid-rigging and collusion between city staff and contractors in Toronto, after an audit of paving contracts raised “red flags”.
A report by the Toronto auditor general, Beverly Romeo-Beehler, found that inflated prices charged by one contractor had cost the city an additional $2.5m over five years. The same contractor – named ‘Contractor A’ in the report – won more than 92% of contracts on which it bid.
The report questioned whether contracts were properly monitored and said there were possible conflicts of interest between contractors and employees.
In one case, suspicions were raised that poor quality materials were being used in paving contracts. An impromptu inspection was organised but a member of city staff alerted the contractor by email. The staff member retired before his conduct could be investigated.
In another case, a city employee who played a key role in preparing a large tender retired and went to work for the winning contractor – Contractor A – a month later.
In addition, close family relationships were discovered between city employees working on tenders and prominent contractor firms.
The auditor general said it was difficult to analyse the contracting market properly and to identify questionable bidding patterns because of a lack of a centralised tendering and subcontractor database.
However, an analysis of bid prices submitted by Contractor A of eight tenders found that many of its prices were “grossly inflated”.
“Some were as high as three times more than the second lowest bidder. With just these eight contracts alone, Contractor A was able to gain an extra $2.5m from city contracts over five years,” said the report.
Bid-rigging is notoriously difficult to prove, the report argued, but a review of winning patterns over five years raised “potential red flags” indicating its existence.
These included Contractor A’s almost complete market domination in one district.
The report also called for an investigation into whether “cover bidding” was taking place, where “token” bids are submitted to give the impression of a competitive process as a result of collusion between contractors.
“A typical red flag would be repeated bids by certain bidders who rarely win. In our review, we noted one contractor who bid 24 times but never won,” said the report.
“While we are not asserting that these are cover bids, this should call for a closer examination by city staff as to whether such bids were reasonably competitive.”
In at least three tenders bids appeared to be coordinated between contractors, with quotes varying by exactly 10%.
The Toronto Star said the city had called in police to investigate and quoted Mayor John Tory as saying he was “extremely troubled” by the auditor general’s findings but was “confident the city is making changes to address all the issues identified”.
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