Guelph’s Titanic has already hit the iceberg

Posted February 18,2013

In a Brampton courthouse, the case of the city versus Urbacon Building Group Corp. is unfolding as the final cost of the new city hall threatens to possibly double once settled.

In the summer of 2006, city council led by Mayor Kate Quarrie, awarded Urbacon a contract to build the new city hall adjacent to the then city hall. The contract, worth some $42 million, included not only the new city hall but also renovation of the old city hall into a provincial court facility.

In the 2006 election, the voters threw out the Quarrie council. Former mayor Karen Farbridge was elected along with ten councilors who supported her vision of the city.

Construction of the new city hall commenced in 2007.

As testimony unravels about what happened during the construction period, remember that the Farbridge administration terminated the contract on September 19, 2008, some 15 months after commencement of the job.

The action triggered a $19, 184,181.71 lawsuit by Urbacon for breach of contract. This is when the good ship Guelph struck the metaphorical iceberg. The city counter-sued, claiming $5 million. It also sued the bonding company, Aviva Insurance, for its performance bond of some $3 million.

The next step was for the city to hire Burlington-based Alberici Construction Ltd to finish the new city hall. It then hired a Cambridge company, Collaborative Construction Ltd., to complete the old city hall renovations to comply with an agreement made with the province to create a new provincial court.

The city has not revealed these additional completion costs. Judging from the city countersuit, those costs probably exceeded $5 million.

Next, the subcontractors hired by Urbacon demanded payment for work done on the project. The city, to avoid the embarrassment of have its new city hall with liens against it, paid out $4,825,807.92 to settle the subcontractor issue. Then turned around and sued Urbacon for the amount.

To further fuel the situation, the city sued architects Moriyama and Teshima for $2 million.

To date, only the Urbacon lawsuit is claiming damages of $7 million as part of its $19 million claim against the city.

What all this could cost taxpayers

Here’s a quick and dirty estimate of what the new city hall could cost taxpayers if judgment is in favour of Urbacon: Original contract, $42 million; subcontractor charges $4.8 million (this may be a credit to the city in judgment); estimate $5 million to pay contractors to finish the original contract; legal liability to be determined, $19 million awarded to Urbacon; legal and staff costs attributed to the case, estimate $3.5 million.

That totals $74 million rounded out. That’s an increase of $32 million over six years.

It is difficult to determine actual liability inherent because of the city’s covering up of the real costs of this project. I hope I’m wrong estimating these costs to taxpayers. But what if I’m right or even close?

Regardless, this has been the worst managed project in the history of the city. There were no apparent checks or balances.

The questions now are who was calling the shots at city hall? Why was there a breakdown of communication between contractor and city?

Testimony so far has shown that the city, Urbacon and the architects had communications failure between each other. Each complained that progress reports were either not forthcoming or understandable. And, as it turns out, there were a lot of change orders. Most came from the city, presumably funneled through the engineering department but who else had their finger in the process?. Others changes came from the architects.

A rule of thumb is that changes that exceed 10 per cent of the contract price is judged to nullify the agreement thereby opening the door for renegotiation. That didn’t happen.

In its opening testimony, Urbacon witnesses testified that the change orders delayed completion of the contract. They cited major changes from the architects shortly before the firing of the contractor.

Key senior management staff are let go

Complicating matters, in 2007, the Farbridge dominated council dumped Chief Financial Officer (CFO), David Kennedy. He was a veteran and well-respected senior civil servant. Both he and Chief Administration Officer, Larry Kotseff were shown the door. Both played a key role in 2006, when the new city hall project was being considered by council and awarded to Urbacon.

The dismissal ended up costing taxpayers more than $500,000 in lieu of notice. Translated, they were dismissed without cause.

Hans Loewig, a retired civic employee from Brantford, on contract, replaced Mr. Kotseff to fill the gap at the top. Loewig later was confirmed at CAO but never lived in the city and had an unusual perk in his contract that gave him 12 weeks of vacation time per year. This was in addition to travelling expenses including publically funded overnight stays in Guelph hotels.

Also along the way, City Clerk Lois Giles and City Solicitor Lois Payne retired. This furthered the vacuum of experience at the top levels of the administration.

Margaret Neubaur eventually replaced Kennedy as CFO. But she was fired three years later for yet-to-be revealed causes.  For unknown reasons, the Farbridge dominated council could not maintain continuity of senior financial management in the past six years.

The firing of Ms. Neubaur came as a result of her concerns about spending particularly on major capital projects without a business plan.

It remains a dereliction of responsibility on the part of the mayor and her council cohorts. Lurking in the background is former CAO, Hans Loewig, who administered the axe on Urbacon in September 2008 and later fired Ms. Neubaur, who allegedly dared to challenge the financial morass in which the city council had submerged itself.

Regardless of who wins or loses, this has been a management disaster that will exacerbate the city’s failed reputation as a good place to do business and its ability to grow responsibly.

The Urbacon affair will linger into 2014 before judgment and consequences of settlement are completed.

Long term consequences

Regardless of the outcome, it will become a major election issue in the city.

There is the possibility that the sides will settle before the case is completed.

No matter what that outcome may bring, taxpayers will still be left holding the bag for additional costs such as legal and court costs, subcontractor settlements and liabilities with other parties in the action.



Filed under Between the Lines

7 responses to “Guelph’s Titanic has already hit the iceberg

  1. joseph paul phelan

    Nothing that the current mayor has done and continues to do surpises me anymore…….the city will rest easy when she is put out to pasture…..preferably in another city…..

  2. geo

    Has it ever been clearer. How much will it cost does NOT enter into the thinking of these people.

    • joseph paul phelan

      The fair city has been mismanaged since Mayor Norm Jerry left. He was the best mayor this city ever had and the two female buffoons that followed after him lack leadership and any sense of financial knowledge. This city would have been better run by a few crack heads that hang out at the Eaton Center downtown!!!!!

    • Joseph Paul Phelan: The city has to move forward. But not on the terms that haver been established by the Farbridge gang of eight. When Dalton McGuinty declared that Municipal elections would be held every four years,that erased the the ability of taxpayers to reject excessive actions by its representatives on councils.

    • Geo: There was no thinking on September 19, 2008 when the city fired Urbacon to build the new city hall and the provincial courthouse. Now we have taxpayers paying to defend a lawsuit that had dire circumstances to the city. The judgment has yet to come. Regardless the outome will still impact the taxpayers. Bet the ranch on that!

  3. joseph paul phelan

    This makes great fodder for a song for James Gordon….if he has the cahoonies to write it….

    • joseph paul phelam: They sang that song in 2006. Now we know what the fallout was. The Dublin Street sale of the old Civic Museum was an insider deal that flowed through the Farbridge administration without a peek from the public. Another break from the requirement of the Ontario Municipal Act. The chickens will come home to roost.

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