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Politics Auditor-General says Metrolinx paid massive settlement without thoroughly reviewing claim

Metrolinx agreed to spend nearly a quarter of a billion dollars to get its troubled Crosstown light-rail line in midtown Toronto back on track without proof from the project’s builders that the additional costs were legitimate, Ontario’s Auditor-General has found.

In an annual report issued Wednesday, Auditor-General Bonnie Lysyk revealed new details about the lengths Metrolinx, the province's transit agency, had to go to get assurances the Crosstown would be finished on time in 2021.

The details come at a time when the province – led by Premier Doug Ford – has been arguing for months that Toronto can’t build transit efficiently and effectively, and that this role should be taken over by Queen’s Park.

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Ms. Lysyk’s report does show that changing transit plans cost hundreds of millions over the past decade, buttressing Mr. Ford’s argument that decisive action is needed. And she lays out details about former transportation minister Steven Del Duca’s intervention in Metrolinx’s transit planning, illustrating the agency’s willingness to bend for its political masters.

But she also lays out a series of costly issues at the agency.

She says that Metrolinx spent about $75-million extra to sort out problems related to a Bombardier vehicle order. The agency also ballooned its relationship with an unidentified consulting firm, going from one contract worth $44-million to three contracts worth $272-million, without formally assessing the quality of the work being done. And Metrolinx underestimated by tens of millions of dollars the amount it would have to compensate the Toronto Transit Commission for Crosstown-construction-related operational costs.

Metrolinx chief executive Phil Verster said that each of the costs is explicable and justified. “We continue to focus on delivering extremely complex projects on time and within budget, as we have done with Eglinton,” he said.

Ms. Lysyk’s report covered a number of issues, from government advertising to elevator safety. She looked in detail at the Crosstown LRT, now being built along Toronto’s Eglinton Avenue, and found evidence of a contract so weak that Metrolinx couldn’t hold to account the consortium of private construction companies for looming delays.

The Crosstown is one of the largest transit projects in Canada. It is being built by a consortium of ACS-Dragados, Aecon Group, EllisDon and SNC-Lavalin as a public-private partnership, which the Ontario government calls the Alternative Financing and Procurement (AFP) model. While such a model in theory requires the private sector to absorb risk, the question of who is responsible for problems can be contentious.

“The Auditor-General stated that the AFP model failed to completely transfer the risk,” said Shelagh Pizey-Allen, executive director of the transit advocacy group TTC Riders.

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“I think that all corners of Toronto are really desperate for more rapid transit, but we do need to keep the big picture in mind. And that’s that public-private partnerships are not transferring risk onto the private sector, they’re not built on time or on budget and we need to make sure that transit is built, operated and maintained publicly.”

According to the auditor, Metrolinx had “limited remedies" as long as the Crosstown builders claimed the project would be finished on time. Metrolinx had increasing concerns about hitting the 2021 deadline, but did not pursue them because of the consortium’s assurances.

In February of this year, the consortium then filed a notice of delay, seeking a one-year contract extension and compensation for delays it alleged were the fault of Metrolinx.

Metrolinx and the construction consortium eventually settled for $237-million and a renewed commitment to finishing the project by September, 2021. Ms. Lysyk found, though, that the consortium’s claim did not include evidence that Metrolinx was responsible for the delays.

“Metrolinx agreed to a settlement amount … but did not ask the [private] consortium for documentation to support the claim amount,” she concluded.

Mr. Verster, the Metrolinx CEO, said that the agency got “as much documentation as was possible” to determine the financial risk it faced.

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“Our resultant exposure was $568-million,” he said. “We settled that risk for $237-million, with $100-million recoverable should the final delivery date not be met.”

In a written response included as part of the Auditor-General’s report, Metrolinx promised more rigour in the future: “Should further claims be submitted, Metrolinx will ensure the claim-review process linking the allegations to the details observed on the ground is thoroughly documented.”

When asked about Metrolinx’s settlement, Transportation Minster Jeff Yurek noted that the agency has a new board chair and CEO, both installed in the past year, and is reporting to a new government.

“Metrolinx has already started implementing many of the recommendations the Auditor-General has put forth, and I can assure you that we will be working with Metrolinx to ensure that they are going to undertake all the recommendations,” he said.

The Crosstown was initially supposed to be ready in 2016. That was pushed to 2020 and then, in 2015, Metrolinx added another year to the schedule, changing the opening date to the fall of 2021. Many transit-watchers believe the timeline could slip again.

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