Auditor flags big change with Toronto's $100M per winter snow-clearing plan

Transportation staff are significantly reducing a key liquidated damages provision for the contractors that handle most of the city's snow clearing, even after a winter marked by sharp criticism from the public and councillors alike.

Staff have agreed to lower one of 10 liquidated damages contractors face — "Failure to leave a depot within the applicable mobilization period" — from $200 to $10 per minute per piece of activated equipment, according to a new report released by the city's auditor general.

So, why does this matter for your neighbourhood when the snow starts flying? The biggest problem, an industry source told CBC Toronto, is that creates an environment where contractors will now have less urgency to get their snow-clearing machines out on the roads.

The steeper liquidated damages in the original contract, the source said, indicated the city wanted the snow cleared and "they wanted it fast."

City staff denied that in a statement to CBC Toronto, calling the change a "standard matter of contract management" that will not affect the snow-clearing budget, nor the city's service levels and operations.

But councillors have already been calling staff to more rigorously police the snow-clearing work, which includes some $1.5 billion worth of contracted-out work over the next decade.

Two companies and their joint venture, now dubbed "Snow T.O.," took responsibility for almost all non-highway snow clearing in Toronto for the first time last year. The city then went $26M over budget and dealt with a barrage of snow-related complaints.

Coun. Jamaal Myers put it bluntly when the season was over: "This contracting fell well below the standards that I think most people expect and most people deserve."

Councillors were assured the contracts came with stringent penalties when voting on them in 2021. Liquidated damages are not penalties, per se, but a way of reimbursing the city for costs it incurs when a contractor fails to meet certain requirements.

In total, just $604,769 worth of damages are being sought for the companies' failure to meet the contract terms so far, transportation staff said. Those penalties stem from February to March, and are not finalized.

City management didn't seek damages earlier that winter, Toronto's auditor general revealed in July. Staff explained that decision by stating, in a report: "if we'd issued [liquidated damages], of that size, these companies may not have been able to be financially viable."

City staff made the move to lower one specific liquidated damages provision in September, but didn't tell councillors.

Staff deemed that unnecessary because it "did not alter the fundamental service levels and operations, and would not generate revenue for the City," according to the audit committee report where the decision was made public. 

But the industry source said it should matter to councillors because the city is likely now in a situation where it's paying more for less. That's because when contractors bid for the work they baked some assumed damages into their price (the source said their own bid went up by a double-digit percentage) assuming an occasional fine due to broken machinery or other issues.