$85M contract with Manitoba Hydro was not tendered

Manitoba Hydro awarded an untendered contract worth up to $85 million to a consulting company for work related to construction projects, but won't say why the contract wasn't put out for competitive bidding.

The contract was awarded to Tetra Tech in 2014 as a single-source contract under which the consulting engineering firm would provide engineering and technical oversight for construction of the Keeyask generating station and Bipole III transmission project.

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Scott Powell, manager of public affairs for Manitoba Hydro, said Hydro's corporate policies dictate when contracts can or cannot be awarded without competitive bidding, adding the reasons for single-source contracts are not typically made public.

"We normally wouldn't release any information due to competitive requirements," said Powell.

"We won't be releasing the justification for that publicly but the justification was made, and it was compelling. And that's why the board approved that project as a single source," Powell said.

Hydro's corporate policies dictate that single source contracts of up to $5 million can be awarded by the president alone, but above that amount they must be approved by the board of directors, Powell said.

Provincial auditor general Norm Ricard said he has not evaluated the Tetra Tech contract and could not comment on it specifically, but in 2014 his office did report on the use of single-source contracts by provincial government departments.

"Untendered contracts increase the risk of impropriety in procurement," Ricard said, describing single-source contracts as a type of  "higher risk" transaction.

"You can get into a situation where the contract isn't providing you with fair value — you're paying too much, basically. Or you're excluding qualified vendors from competing for government business," Ricard said.

Tetra Tech declined a request for comment on the contract.

Taxpayers federation questions contract

"I'm just baffled," said Todd MacKay of the Canadian Taxpayers Federation, who called on Hydro to explain why the contract wasn't tendered.

"I'm literally trying to think through and just imagine what the possible justification for this could be. First of all, to do tens of millions of dollars in contracts without shopping around to get the best deal, and then secondly to keep that a secret. What possible justification can there be for that?" MacKay said.

Powell said Hydro has a list of potential reasons it might want to deal with a single firm, such as if there are no alternatives to meet the specific technical or research requirements of a project. He said other reasons could include when responding to an emergency; when tendering could interfere with security; or when honouring guarantees or warranties, to name a few.

He said a Hydro department's perception of a particular company or a past relationship with a company are not valid reasons for single-sourcing.

Over the past five years, Hydro has awarded 2,127 single-sourced contracts, Powell said, although some of them have been for small dollar values. They add up to $463 million, or about five per cent of Hydro's total procurement, he said.

Perhaps there's a good explanation for this, but very honestly I can't even imagine what it is.- Todd MacKay

"Ninety-five per cent gets tendered," said Powell, adding even though this large contract wasn't tendered, other engineering firms do have lots of opportunity to work for Hydro.

"We're a large player in the engineering field in Manitoba. ... There's lots of work for everybody."

Powell said the contract with Tetra Tech is approved by the board for a maximum of $85 million but is being revised downward in cost depending on how much work is needed on Keeyask and Bipole III.

Less than one quarter of the amount has been spent so far, Powell said.

It's only a fraction of the $6.5 billion cost of Keeyask, which is expected to be fully operational by 2020.

Tetra Tech is a member of the Association of Consulting Engineering Companies of Manitoba (ACEC-MB), according to the association's web site.

ACEC president Alana Gauthier said she didn't know about the company's untendered contract with Hydro and would have expected work of that magnitude to be tendered.

But, she said, ACEC believes engineering contracts should be treated differently than other types of purchasing. Rather than tendering, engineering contracts should be awarded based on "qualification-based selection" or QBS, she added.

In that model, she explained, the purchasing body would request the qualifications of firms in advance of a contract and then negotiate a price with the most qualified company.  

Gauthier said in the long run QBS can save money on a large project because typically the engineering portion is just two or three per cent of the total project cost.

"If you spend a little bit more on the engineering side, you make a huge savings on the construction side and on the maintenance side because you can be more innovative on the engineering side," Gauthier said.

Gauthier said QBS is being used successfully in the United States and in Canadian cities such as Calgary and London.

For MacKay, though, nothing can replace putting a contract out for competitive bidding.

"There's dozens and dozens of huge engineering firms all over the world. No doubt, for a contract like this you could get a few of them to show some interest in it," MacKay said.

"Perhaps there's a good explanation for this, but very honestly I can't even imagine what it is."

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