City’s bond reduction derailed company’s bid, VP says

WINNIPEG — The decision to reduce the construction bond for the Winnipeg Police Service headquarters project made it less feasible for some companies to compete for the work, one industry member says.

The national vice-president of PCL Construction testified his company bid on the initial construction management contract for the project in 2010, while appearing as a witness at a public inquiry into the headquarters project on Wednesday.

Sean Barnes said PCL later realized it couldn’t do the work by deadline after the city reduced the construction bond for $80 million of redevelopment work from $40 million to $25 million. That happened on Jan. 12, 2011, just six days before the deadline for bids on the contract, he noted.

“My first reaction was can we even attain this? …We learned that we couldn’t purchase this type of (bond),” said Barnes.

The performance bond reflects the amount of money a construction company must put up to guarantee it can complete the work. If the work wasn’t completed, the city could cash in the bond.

Barnes noted performance bonds are typically set at 50 per cent or 100 per cent of a project’s value.

He said his company works on broad agreements with bond companies to leverage competitive rates for its contracts across the country. Its leaders decided Winnipeg’s bond change to $25 million would have cost the company about $353,000 more for a new bond arrangement, based on their $86-million bid, said Barnes.

“It looked to us like, and this was just us speculating at the time, that someone that we were competing against was advocating for a lower threshold for performance security,” he said.

Barnes, who was vice-president and district manager for PCL Manitoba at the time and has now been with his company for 40 years, said he feared the city didn’t understand the effects of reducing the value of the bond, which he felt was “potentially giving someone the advantage.”

“At the time that $25-million number was thrown out there, that was something that I hadn’t seen before,” he said.

There were problems related to the police headquarters project at 245 Smith St. for years. The city bought the former Canada Post building at Smith Street and Graham Avenue in 2009 to replace the police HQ in the Public Safety Building on Princess Street, which has since been demolished.

The new HQ opened in June 2016 at a cost of about $214 million, well above its original $135-million price tag. An external audit found the project had been severely mismanaged.

The RCMP conducted a lengthy investigation into fraud and forgery allegations related to the project, but no criminal charges were laid.

Many of the allegations were linked to legal challenges over the past few years.

A court ruled in 2022 that Phil Sheegl, who was the city’s chief administrative officer at the time, had accepted a bribe from Caspian Construction, a key contractor on the project, and ordered him to pay the city compensation. Last month, the city revealed it had received a $1.15-million payment from Sheegl.

George Orle, the lawyer who’s representing Caspian at the inquiry, noted the bond change may not have suited some larger companies, but did allow some smaller companies to compete for the work.

Sheegl is scheduled to appear as a witness at the inquiry on Feb. 17.

» Winnipeg Free Press