This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its April 2015 special report on Winter Highway Maintenance, the Auditor General of Ontario found that the provincial Ministry of Transportation allowed service levels to deteriorate in the management of its winter highway maintenance program. As the report notes:
The Ministry of Transportation (Ministry) is responsible to ensure that Ontario highways—both surrounding our large urban centres as well as the thousands of kilometres of highways in rural Ontario—are kept cleared of winter snow and ice on a reasonably timely basis and that this service is being performed cost effectively. For almost two decades now, the Ministry has outsourced winter highway maintenance to private-sector contractors.
As the Auditor General noted, the public audit was prompted by a deterioration in service levels. The audit concluded that the Ministry’s “performance-based” approach to contract management resulted in lower service standards due to the Ministry’s preference for low bid awards and its failure to properly monitor contractor performance:
Essentially, the new performance-based contracting approach gave contractors full autonomy in determining how they would meet the Ministry’s winter highway maintenance outcome targets (standards) to clear the highways of snow and ice within prescribed time frames. The amount of snow plows, salters and other equipment, as well as the amount of salt, sand and anti-icing liquid used was left solely up to the contractor. However, as the overriding criterion used by the Ministry to award contracts was the lowest bid, there was an obvious incentive for contractors to minimize their equipment and use of winter treatment materials. The Ministry’s position was that as long as the contractors committed to meet the standards, this was not a critical eliminating factor in their selection. Monitoring the contracts was difficult, because ministry staff simulated storms after the fact to assess whether contractors were clearing highway snow and ice. However, in-storm monitoring of whether the contractors were actually meeting the standards was left almost entirely up to the contractors themselves.
The Auditor General found that this cost-cutting exercise led to lower public safety levels:
When private-sector contractors assume the responsibility for providing what may be an essential service to the public—where their work can impact, in this case, road conditions for driver safety—the expectation is that contractors step up and deliver. Our work at regional offices in contract areas throughout Ontario found that it is now taking much longer to return highways to a safer state after a snowfall than prior to the introduction of performance-based contracts, and the amount of salt, sand and anti-icing liquid used declined substantially. For instance, in one contract area, the amount of anti-icing liquid used went from 3.2 million litres in a winter under the previous contracts to only 9,500 litres under the new performance-based contracts.
The bottom line is that the Ministry has been successful in reducing and containing escalating winter maintenance costs, but this has been achieved at the expense of a reduction in the timeliness of ensuring Ontario highways are safe for motorists in the winter. The Ministry has taken and continues to take steps to make needed improvements in winter highway maintenance in conjunction with the private-sector contractors. However, on reflection, one wonders whether the potentially negative impact of the changes made five years ago was not somewhat foreseeable and could have been avoided at the time private-sector contractors were selected for performance-based contracts with the Ministry. One also wonders why the Ministry chose to continue awarding contracts on the same basis for the next five years.
In response to the audit findings and recommendations, the Ministry confirmed its intention to establish minimum amounts of anti-icing materials to be used in future contracts, along with cost-sharing arrangements to ensure that those materials were used in a manner that ensured better safety on winter roads. The Ministry also committed to enhancing its performance monitoring measures and to incorporating non-price performance criteria into its bid evaluations so that its contract award decisions could be made based on safety factors, as well as price savings.
