Approve controversial $1.4B snow-clearing deal or put public at risk, Toronto councillors told

• UPDATE | City council voted 20-5 to approve the contracts late Thursday.

Toronto city councillors will be asked to approve $1.4 billion worth of snow-clearing contracts Thursday, even though city transportation staff won't say if the companies in line to win the bulk of the work have the plows to get the job done.

If those councillors don't OK the deal, staff are warning in a supplementary report released just ahead of the meeting there would be "considerable risk" of not being able to clear roads, sidewalks and bike lanes by the time snow starts flying in 2022. That would jeopardize public safety, they say.

CBC Toronto was first to report two companies, A & F Di Carlo and Infrastructure Maintenance Inc., and a joint venture they launched in late September, 2868415 Ontario Inc., dominated the contract process and are in line to win 9 of 11 contract areas (all of Toronto except for the Willowdale area and Gardiner and Don Valley Parkway). The work is potentially worth $893 million.

At the Dec. 2 infrastructure and environment committee debate on the matter, rival snow-clearing companies who were shut out of work they've done for decades warned they have "grave concerns" about the outcome of the city's new negotiated request for proposal (nRFP) process, and claimed it was neither fair nor transparent while also being littered with "red flags."

Committee members ultimately sent the proposal to full council without recommendations. That means 25 councillors and Mayor John Tory will have limited minutes to ask questions of staff before potentially voting on contracts that will dictate how snow-clearing in the city gets done for at least the next seven years.

At committee, Scarborough Coun. Paul Ainslie asked what happens if something goes wrong with the winning companies.

"We believe these vendors are reliable," replied Vincent Sferrazza, the city's director of operations and maintenance.

"We are very confident in their capacity operationally and financially."

But will councillors trust that analysis?

Acquiring vehicles by next winter 'virtually impossible'

Combined, the three linked companies will need 925 vehicles — everything from full-size snow plows to salters to pick-up trucks and sidewalk plows — by next winter, city staff confirmed. They can outsource a quarter of the work they win.

CBC News asked city staff if 2868415 Ontario Inc., which won six contracts, has the vehicles it needs. City officials wouldn't say yes or no. Instead, here is the full response they sent via email: 

"As part of the submission review process, each vendor was mandated to provide equipment information as per the equipment requirements identified in the procurement. Companies are required to meet the terms of agreement on the first day of the contract."

The same city department proposing this contract was burned this spring when a contractor won a $300,000 street-sweeping contract it didn't have the vehicles to complete. The city sought no punishment.

A few more details emerged in Tuesday's supplementary report, which states: "The industry advised that they require between nine and 12 months to procure and outfit the equipment required for winter maintenance services. The current market conditions may require additional lead time."

For now, only the companies themselves know how many vehicles they control. CBC News hasn't been able to reach A & F or Infrastructure Maintenance, and the city's process prohibits companies from speaking with the media until the deal is decided.

What is clear is that it's a big fleet to acquire while the COVID-19 pandemic is devastating supply chains. 

"It's virtually impossible," one industry source said, adding there are now years-long waits for trucks and other pieces of heavy equipment. 

Sam Fiorani, vice president of the U.S.-based AutoForecast Solutions, said it will prove challenging on multiple fronts. 

"Finding equipment or finding vehicles or finding anything with electronic components in the moment is extremely difficult with the semiconductor issues that we're currently going through," he told CBC News.

The companies will also need a big and skilled workforce, Fiorani said, as most snow-clearing equipment is assembled rather than purchased as a single-use item.

Vehicles and staffing aside, there are other elements of the deal councillors will want to ask about.

A massive sole-source piece of the deal

The overall contract includes a sole-sourced deal with 2868415 Ontario Inc. for two areas worth up to $396 million over a decade — a price tag that puts it among the largest non-competitive deals in recent city history. For comparison, in 2019, the city spent a combined $119 million on such deals.

Steed and Evans Ltd. was deemed a qualified bidder for one of the areas, but staff didn't negotiate with that company because its price was considered too high. Instead, staff contacted the numbered company — which did not bid on the areas in question — and agreed to a price that the company's president told committee was comparable to his.

"Steed and Evans, the only compliant bidder, was not given this advantage to learn what could be negotiated," said Steed and Evans President Jim Hurst in a letter to city councillors.

City staff said in an email they "did not see a viable negotiation path" with Steed and Evans. 

Hurst's company is already suing the City of Toronto for $5 million over the last round of snow-clearing contracts.

City staff say they didn't alert councillors to that lawsuit because it's not related to the current contracts. 

No details on land-leasing offer

One of the highlights of the deal, according to city staff, is a cash recouping measure they say can be achieved by leasing land year-round. But the city has released no details about where the snow-clearing equipment will be parked or how much the companies will be charged.

Those negotiations will happen separately if the deal is approved, staff said in an email.

Other companies told councillors they didn't know that was an option available to them and that leasing their own land was baked into their prices. 

"Is the offer to lease the land the city owns to store equipment actually a benefit to the city, or are the contractors gaining the benefit by paying significantly less than market value or saving tremendous amounts of money by not utilizing their own land?" asked Dominic Crupi, of D. Crupi and Sons Limited, in a letter to councillors. 

Limited oversight

Staff said they didn't use a fairness monitor during the process despite the billion-dollar price tag, and the auditor general will not review the deal before council's vote.

In an email, staff said three members of the Purchasing and Materials Management Division (PMMD) team were assigned to the contracts, with additional oversight coming from the department's management the legal division.

Staff maintained at committee the deal was done fairly and offers a range of benefits to the city. They also estimate savings of some $40 million per year compared to an estimated baseline it came up with before starting the process. 

However, the city won't release the proposals from the leading companies or their rivals, nor will it share the scoring of the technical evaluations that knocked many long-time plowing companies out of the running. Those are two key sets of documents that would outline how the work might get done.

The city says it needs to do that to protect the competition. 

Barbara Gray, the head of the transportation services division, declined an on-camera interview ahead of council's vote, again citing concerns around protecting the competition.  

Coun. Jennifer McKelvie, who chairs the infrastructure commitee, considered asking the auditor general to review the deal, but said she was told there wasn't enough time before this week's meeting, something city auditor Beverly Romeo-Beehler's office confirmed in a statement.

"If you are asking if I have time to review the procurement before the Dec. 15 meeting, my response is that there is not enough time to do that," Romeo-Beehler said in an email.