The Saskatchewan government found itself in a crossfire of criticism for cancelling a public housing construction project over a relatively minor extra-cost dispute with its contractor, Devereux Developments. Escalating news stories covering the controversial decision included the following reports, some of which feature commentary from Procurement Law Office lawyer Paul Emanuelli:

  • Initial CBC News Report: In a September 8, 2014, story by Geoff Leo, CBC News reported that the “Province abandons low-income housing project after cost overruns.” The story noted that “The provincial government has walked away from a highly touted housing project in Regina that would have provided homes for 48 low-income families, because of a contract dispute with the developer,” and that the “province entered into a $9.9 million fixed price contract with Deveraux to build the units to guarantee the finished building would be delivered without cost overruns.” As the story revealed, the deal fell through after Deveraux incurred $400,000 in unanticipated cost overruns, which it admitted were due to its own miscalculations, and was then unable to convince the government to cover half of those additional costs. After returning the government’s multi-million dollar deposit, the developer was allowed to walk away from the deal and keep the properties to rent out at full market rates.
  • Follow-Up CBC News Report: In a September 8, 2014, companion story entitled “NDP questions province’s failed low-income housing project” Geoff Leo of CBC News quoted the opposition as stating that “the provincial government should have taken Deveraux Developments to court after it failed to deliver a low-income housing project within the terms of the contract.” The story also quoted Paul Emanuelli as stating that the developer “should have to absorb that cost and continue through honouring its commitments at the originally agreed upon price rather than being allowed to walk away from the deal.” Emanuelli cautioned that developers should not be allowed to raise cost overrun issues with government and then “use that opportunity to walk away from the deal and commercialize the opportunity themselves.”
  • Prime Time CBC Radio Story: CBC Radio also reported on the controversial contract cancellation that evening on its 5:00 p.m. prime-time program with radio host Craig Lederhouse. That program featured an in-depth exclusive interview with Paul Emanuelli (click below to listen), who referred to the project as “a failure” since “the government didn’t get what it bargained for.” As Emanuelli stated, “sure the government has its money, but the delivery of the public housing units is now delayed indefinitely.” To avoid a lawsuit, Emanuelli explained, “what you need is a system of effective deterrents to guard against contractors who want to walk away from the deal.” He pointed to the use of performance bonds and irrevocable letters of credit as standard contract mechanisms used to enforce performance without requiring litigation.
  • Follow-Up CBC News Story: In his follow-up story on September 9, 2014, entitled “Minister defends decision to return low-income housing to private company“, CBC reporter Geoff Leo quoted Saskatchewan’s Minister of Social Services Donna Harpauer as admitting that “We did basically let them off the hook for the contract rather than go through any legal hassle and that way we’re (the provincial government) out no money.” In response to CBC questions about the long waiting list for social housing in Saskatchewan, the Minister was quoted as replying that “you’re assuming that there’s these desperate homeless people” in the province.
  • Prime Time Global TV Story: In a follow up television interview with Global News that evening, Paul Emanuelli remained unimpressed by the government’s explanation that it did not want to set a precedent by agreeing to paying extras and did not want to risk litigation to enforce the contract. As Emanuelli stated in his interview with Global TV reporter Kim Smith, “It’s surprising that a two per cent issue, which is a routine adjustment in a construction contract, would have been the cause of the contract being completely abandoned by the parties.” Emanuelli also observed that “Letting a contractor completely walk away from a deal sets an even bigger bad precedent. (It) begs the question, why weren’t they held to the contract terms? To me, it just seems as though there’s more to this story.”
  • Leader-Post News Story and Editorial: Notwithstanding the Minister’s assurances that the province would now retender the project, the opposition continued to take issue with the decision. In a story by Ashley Martin that appeared in the Leader-Post on September 10, 2014, entitled “Province revokes funding for low-income project,” opposition housing critic David Forbes criticized what he estimated could be a four-year delay before new units are built under the retendered contract. In this story Forbes was quoted as stating that “If you’re a single mom and looking forward to affordable housing that’s geared to your income, that’s a long, long wait.” In a related editorial entitled “Government favours developer over tenants,” Leader-Post columnist Murray Mandryk stated that the decision to cancel the project was “the latest indication that Premier Brad Wall seems unwilling to do anything to displease business … even when he knows business is dead wrong and even if it means his government failing on its promises to deliver low-income housing.”
  • Daily Herald Editorial: In a scathing editorial published on September 10, 2014, entitled “Desperate homeless people don’t exist?” the Daily Herald criticized the Minister’s prior remarks, stating “Hey, Saskatchewan Minister of Social Services Donna Harpauer, there are a couple of questions that have come up about your job title and how in-touch you are with your community. It is interesting to hear that you don’t seem to think there are any ‘desperate homeless people’ in this province. Can you clarify if that is just denial, or you really don’t believe there are desperate homeless people? In case you missed it, people in Prince Albert have died in snowbanks – last winter and the winter before that. Would those people have been considered desperate homeless people?” The editorial asked the Minister, “have you considered the desperate families who may not be homeless, but are squeezing eight or 10 family members into one-bedroom apartments?” The editorial also asked “Does this mean that fixed-price contracts the government enters into with builders, or developers, or for any project for that matter, are now optional? Will these projects now say complete within a fixed-price… if you can?”
  • CBC Follow-Up on Outrage and Ministerial Apology: In a follow-up story on September 11, 2014, entitled “Minister apologizes for ‘desperate homeless people’ remark” CBC News noted that the Minister’s statement regarding homeless people had “generated outrage” on social media and among front-line housing providers. As the story stated, “Housing coordinators like Tyler Gray at Carmichael Outreach in Regina were outraged over the statement.” It quoted Carmichael as stating “she said there’s this assumption that there (are) desperate homeless people. It’s not an assumption. It’s reality.” The story confirmed that “Gray and his coworkers are currently looking for homes for more than 50 people.” The story also reported on the government’s damage control efforts, noting “In a statement issued by the government today, Harpauer said, ‘I want to deeply apologize for my remarks earlier this week. Those words should have never been said and I apologize. In no way was I trying to say there are no homeless people in Saskatchewan.'”