The decisions that cost Region $2.1 million
Construction project in Chippawa sparked lawsuit for wrongful termination
With a promise to do better moving forward, Niagara Region’s audit committee received a report into how problems encountered with the construction of a sewer overflow station spun out of control and resulted in the municipality losing a $2.1 million lawsuit.
An internal audit of the process by the Region’s internal control and organizational performance division zeroed in on gaps in the procurement, management and oversight surrounding the contract.
“I just want to make sure it doesn’t happen again,” Niagara Falls Coun. Bob Gale said. “I want to make sure the person or the team, that didn’t follow the process is disciplined — or talked to — because I believe it cost us $2.1 million unless I’m told otherwise. How do I make sure that the problem has been solved?”
Grimsby Coun. Tony Quirk, the chair of the audit committee, said the Region needed to be more rigorous in following the proper process when contractors are in default.
“I know everyone in this building felt the dispute resolution process was used properly, but the judge felt differently,” Quirk said.
The contractor, Kingdom Construction Ltd., which is based in Ayr, Ont., near Cambridge, in Ontario Superior Court of Justice was awarded $2.1 million in damages from the Region for wrongful termination.
The internal review presented last Monday to the audit committee examined in detail the process and significant decisions surrounding the project.
“I was chair of public works at the time, and there was a great deal of effort to correct the real problem — which was the smell,” St. Catharines Coun. Tim Rigby said. “I know at the time there was a lot of pressure to work things out and get things done.”
The audit noted that in the aftermath of the court case, the Region’s public works department improved its project management and procurement procedures. All capital projects now have a tiered project management methodology based on factors such as project complexity. It has also revised its geotechnical and hydrogeological investigation standards.
The goal of the project in Chippawa was to help solve flooding issues for nearby residents and to prepare for future development. The Region and Niagara Falls agreed to share the cost.
Hatch Mott MacDonald won the bids for construction and project management respectively. Work started on Jan. 20, 2014. The problems began in April when Kingdom encountered hydrogen sulphide (H2S) gas.
The situation worsened on May 16, 2014. On that date, Kingdom discovered a black organic substance that geotechnical reports Hatch Mott MacDonald missed.
The Ministry of the Environment stepped in and halted the project temporarily.
The finger-pointing followed. A stalemate occurred over who was responsible for finding solutions to the problems. That culminated in another work stoppage.
The Region issued its notice of default to Kingdom on Oct. 3, 2014. On Jan. 19, 2015, the Region terminated the contract and ordered Kingdom to leave the site.
A local firm, V Gibbons Contracting Ltd., of Stevensville, stepped in at the revised price $4,799,350, an increase of $531,544.
On Jan. 8, 2018, Kingdom won its lawsuit against the Region with the judge pointing out the Region had fallen short on providing sufficient detail surrounding the non-compliance by Kingdom.