Accountability missing in OC’s lost-and-found

Transpo handed Heartwood House a sole-sourced, $600,000 contract

When it comes to being scandalized over sole-sourced contracts at the city, it’s hard to get too riled up over the revelation that OC Transpo handed over a multi-year, $600,000 contract to manage its lost-and-found to Heartwood House.

After all, Heartwood is a nonprofit charitable umbrella group that provides support — including physical space — to about 18 small organizations that offer everything from adult literacy to help for people with psychological disorders. It’s hard to begrudge a group like that a hand-up.

And when you consider other deals that the city has sole-sourced — the Lansdowne Park redevelopment or the Plasco Energy contract, neither of which underwent a competitive bidding process — the lost-and-found contract is small potatoes. And yet. The auditor general’s description this week of how OC Transpo handled this contract delivers a number of cringeworthy moments. First off, the outsourcing of the lost-and-found operation didn’t save nearly as much as promised back in 2001. When the service was handled in-house, OC Transpo management said it cost just over $70,000 and that outsourcing the duties would save $50,000.

That hasn’t turned out to be the case. OC Transpo has been paying Heartwood more than $48,000 annually since 2004 for a possible savings of $22,000, or less than half of what was expected.

Much worse, however, is the way the contract was handed out. Not only was it sole-sourced — meaning there was no bidding process, even though city rules clearly state there should be for a contract of this size — but someone involved in awarding it had a personal connection to Heartwood House, according to auditor Ken Hughes.

On the one hand, you can see how the entire thing happened. The transit department is told, post-amalgamation, to find some savings and someone has the bright idea to farm out the lostand-found business. One midlevel manager (as he or she was characterized by Hughes earlier this week) knows about Heartwood House, perhaps through a friend or family member. Maybe the employee knows someone who uses the services at Heartwood. Whatever the connection, the employee suggests giving the contract to this admirable organization that could use the money. Doesn’t sound terrible, right? But as worthy a cause as Heartwood House is, there are plenty of other as-worthy organizations that might have liked to bid on the contract. Those groups should have had just as much of a chance to compete for those public funds — that lost-and-found operations money isn’t OC Transpo’s to hand out as it sees fit.

And then there are the conflict problems. Heartwood House had originally charged OC Transpo about $29,000 in 2001 to run the lost-and-found business (the organization also makes several thousand dollars at its annual sale of unclaimed items). But by 2004, it realized it needed to hire someone to run the service (instead of relying on volunteers) and was asking for more money — and got an extra $19,000 with some apparent help from the Transpo employee who appears to have been in a conflict of interest.

In one 2004 email to Heartwood House, the employee wrote that “if you do not get your additional $14,000, this is not good news to OC Transpo, and we will have to find another means to achieve your revenue need.”

It appears the employee “was concerned about the organization’s revenue needs,” as auditorgeneral Hughes writes. “The employee should have been acting in the City’s interest only.”

The contract was extended three times with no competition. No audited financial statements from Heartwood appear to have been filed, as required in its contract with the city, and there was is evidence that OC Transpo asked for one.

These practices are cause for worry, not just for this particular case — again, it’s not very scurrilous in the annals of scandals — but because it’s a glimpse of corporate culture that is disturbing. We are right to demand accountability and transparency from our governments, from top to bottom.

This issue also raises the question of whether OC Transpo should be unilaterally deciding that parts of its businesses can be run by non-profit organizations. It sounds nice, but shouldn’t we have a formal discussion about whether this is sound policy? Would we be better off, for instance, trying to get the best deal possible, and using any saved money to fund social services?

No one’s talking about that. In the meantime, OC Transpo did put out a request for proposals to run the lost-and-found operations that closed earlier this year. The contract hasn’t been awarded yet, but the RFP calls for “a preferred proponent who has a strong commitment to local communities and who understands the importance of ongoing social responsibility.”

Sound familiar?