Unsolved mysteries of Winnipeg’s police headquarters

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This article was published 05/09/2014 (3667 days ago), so information in it may no longer be current.

As dignitaries prepare for the opening of the Canadian Museum for Human Rights, the pending completion of another expensive and over-budget megaproject in Winnipeg may go unnoticed.

Within weeks, the Winnipeg Police Service will begin moving into its new, $210-million headquarters on Graham Avenue, a project beset by construction-oversight failures and cost overruns that led to the departure of the head Winnipeg’s last permanent chief administrator and tarnished the final year of Mayor Sam Katz’s decade in office.

The project has already been scrutinized by two external city audits, both of which are under review by the RCMP. But it remains unclear to many what went wrong with the HQ, beyond $74 million in cost overruns over five years.

It doesn’t help that only two of Winnipeg’s nine mayoral candidates — David Sanders and Paula Havixbeck — have demonstrated a detailed understanding of the scope of the problems. And many questions remain unanswered.

As the project veers toward completion, here’s what we still don’t know about the Winnipeg Police Service’s 600,000-square-foot new home — and, to some extent, what we do know:

 

1. Why did the city pursue a new police HQ?

This remains the greatest mystery. In December 2007, the city put the brakes on a plan to repair the crumbling Tyndall-stone facade on the Public Safety Building and house police in temporary, high-security offices elsewhere while construction proceeded at the Princess Street building.

The price tag for recladding the building and “decanting” officers rose to $21.7 million, prompting officials to consider whether the money would be better spent on a new headquarters to house more police units than the PSB.

In February 2008, the city began considering the purchase of the soon-to-be-decommissioned Canada Post tower and warehouse on Graham Avenue. A decision to buy the structure was made in 2009, when council approved a $31.6-million purchase and $105-million redevelopment.

It’s unclear how the city evaluated the pros and cons of fixing the Public Safety Building, building a new structure or renovating the Canada Post building. Since the city has never released the full documentation of its decision-making process, the Free Press filed a freedom-of-information request for any cost-benefit analyses or comparisons of the options at the city’s disposal.

When the city rejected this request, the Free Press filed a complaint to the provincial ombudsman. That complaint remains under investigation.

 

2. Why did the city concentrate on buying the Canada Post building?

The answer is unclear. Mayor Sam Katz and senior city officials have said it is cheaper to renovate than to build a new police HQ, even after the total cost of the Graham Avenue project mushroomed to $210 million — $31.6 million for the purchase and $178.4 million for the renovation, including financing charges.

Ernst & Young’s 2014 audit of major Winnipeg real estate transactions, however, concluded the city did not seriously consider the purchase of any other structure. The city did not even obtain an independent appraisal for the Canada Post building before the purchase, the auditors concluded. It is unclear whether any other buyer was interested in a 1950s-vintage office tower and warehouse building.

After the release of the audit, former Winnipeg chief administrative officer Phil Sheegl said no other disaster-proof building in downtown Winnipeg was available to the city.

3. Why did the cost of the project balloon by $76 million?

This question has been answered by a series of city reports and an external audit of the project conducted by KPMG.

When the police HQ was envisioned in 2009, the $105 renovation estimate somehow did not include $22.1 million for furnishings, fixtures and equipment — normally part of estimates. City officials failed to disclose this to council.

The cost was revised upwards to $194 million in 2011, when officials factored in those items, $7 million in financing charges and construction cost increases.

The city then entered into a “guaranteed maximum price” agreement with Caspian Projects to peg the core construction costs at $137.1 million. This was later revealed to be based on a design that was 30 per cent complete and subject to change.

The cost reached the current $210 million in 2013 as a result of changes to the design, which included raising the garage ceiling to ensure sufficient clearance for police vehicles — as well as the installation of an additional elevator to transport prisoners and ceilings for cells whose initial design would have allowed prisoners to escape. Crews also had to repair previously undiscovered moisture damage to the south wall and bring some facets of the building up to code.

This design process saw the city part ways with original engineering firm AECOM and hire a second consulting firm, Adjeleian Allen Rubelli. There were also changes to the overall construction model, originally conceived as a standard design-bid-build project, where construction costs are determined after a design is complete. This was amended to a construction-management model in which changes can be made as the design progresses.

The KPMG audit determined the entire project management was severely flawed, partly because of poor oversight by unqualified officials.

 

4. Why was Caspian Construction allowed to bid on the construction job?

In 2010, after the city initiated a search for a construction manager, a reliable source told the Free Press one of the contractors requesting a walk-through of the Canada Post building failed a security check. The same source alleged a high-placed city official exerted pressure on the Winnipeg Police Service to make an exception for the unnamed company.

Mayor Sam Katz denied the allegation. In 2012, however, the police service conceded it conducted a special vetting of Caspian Construction owner Armik Babkhanians, who had a separate business partnership with the late Ray Rybachuk, an organized-crime-connected ex-con listed as a “top 10 threat” by RCMP intelligence in 2010. Babakhanians, who has high-level security clearance as a national defence contractor, was in business with Rybachuk at the Boyd Building on Portage Avenue. He later severed his ties to Rybachuk. Caspian was allowed to bid on the job, which the firm initially won as part of a partnership with another Winnipeg firm, Akman Construction.

“The city was aware that both Mr. Rybachuk and Mr. Babakhanians, along with others, had investments in the Boyd Building,” the city and the police service said in a joint statement.

“Security checks, which included speaking with the owner of Caspian Construction, concluded there was no reason not to allow Caspian Construction to bid on the Winnipeg Police Service headquarters project.”

Police security checks are intended to screen out potential staff and suppliers with any connection to organized crime, sources within the service confirmed.

Former police chief Keith McCaskill declined to comment why Caspian received a separate vetting. “It’s corporate,” McCaskill said in June 2012.

Rybachuk died while snowmobiling in 2013.

 

5. What gave the city the right to award the construction contract to Caspian Projects?

The 2010 search for police-HQ construction-management services produced bids from four entities: PCL Construction, Graham Construction, Stuart Olson Dominion Construction and the joint venture between the two Winnipeg firms.

In February 2011, the city awarded a $50,000 pre-construction contract to the joint venture. In June 2011, Akman left the project. At Caspian’s request, the city assigned the contract to the firm after ensuring it could conduct the work on its own.

In November, however, the city assigned a separate construction contract, initially worth $137.1 million, to Caspian Projects. It was amended to $156.4 million in 2013.

The 2014 KPMG audit concluded the latter contract was awarded to Caspian alone even though it “did not submit a proposal.” In other words, the auditors concluded the city assigned a $156.4-million project to a firm that had submitted no bid.

 

6. Why did Akman walk away from the project?

No one knows. Akman has never commented.

7. Why was the bid amended at the last minute?

Six days before the bid period closed for the contract’s first phase, the city made a final addendum to the guidelines for bidders. The change involved a reduction in the threshold for what’s known in the construction industry as a performance bond — the amount of money a construction company has to put up to guarantee it can finish the job. This bond acts like insurance for a construction company’s client. If a firm cannot complete the work, the client may cash in the bond.

The original request for proposals for the project, issued in 2010, called for construction companies to put up a cheque for 50 per cent of the total bid price, or $51 million of what was then a $102-million project.

On Jan. 12, 2011, the city reduced this guarantee to a cheque for $25 million, less than one-quarter of the value of the work. The Surety Association of Canada, the national body for companies that issue construction bonds, said a 25 per cent bond is uncommon and noted the industry standard calls for 50 per cent or 100 per cent of the total value of the job.

The city, however, claimed in 2013 that it reduced the threshold at the Surety Association’s behest. The association denied issuing this direction and demanded to know why the city made such a assertion.

City officials responded by noting the higher bond threshold would have prevented smaller industry players from bidding.

The contract was awarded to the joint venture between the only two regional players in a field that included three large, national firms. The reduction of the construction bond threshold was outside the scope of the KPMG audit.

 

bartley.kives@freepress.mb.ca