Ontario’s auditor general flags maintenance oversights

Thursday, December 7, 2017

Almost $19 million was spent on operating and maintaining 812 vacant buildings in Ontario from 2016 to 2017.

Auditor general Bonnie Lysyk said in her annual report that while Infrastructure Ontario does not consistently track how long buildings are vacant, at least 600 buildings have been so for almost eight years.

The condition of government properties has also deteriorated from excellent to almost poor, with deferred maintenance more than doubling over the last six years from $420 million to $862 million.

The report also scrutinized Alternative Financing and Procurement (AFP) arrangements, and found that AFP agreements have not been structured to cover all maintenance work that hospitals require.

Under the AFP model, construction of a project is financed and carried out by the private sector, and, in some cases, the private-sector company is also responsible for maintaining the asset over a 30-year contract. A number of hospitals are maintained through AFP agreements, and, while Infrastructure Ontario is not directly involved in managing hospitals’ AFP agreements, it offers guidance to the hospitals when requested.

Lysyk wrote that hospitals are involved in long-term, ongoing disputes with private-sector companies over interpretations of the maintenance portion of their AFP agreements and aren’t getting all the benefits they expected under these agreements.

Hospitals are also paying higher-than-reasonable rates to the private-sector company for carrying out maintenance work considered outside of the AFP agreement.

New AFP contracts are also awarded without consideration of poor past performance.

Infrastructure Ontario doesn’t have a formalized performance evaluation program of private-sector companies during the maintenance phase of the AFP contract.

Despite one company being in dispute with a hospital since 2013 over what work is included in the AFP agreement, it was awarded contracts—in 2016 for $1.3 billion and in 2017 for $685 million—to design, build, finance and maintain two more hospitals.

The real estate services file of the report concluded that the agreement between Infrastructure Ontario and the Ministry of Infrastructure needs better performance standards to incentivize Infrastructure Ontario to manage and maintain government properties more cost-effectively.

Existing government properties could also be used more efficiently, with people occupying less space per person, and there should be better supervision of companies providing most capital repair and property management services to make sure these costs are reasonable and projects are completed on time.

Minister of Infrastructure Bob Chiarelli said “there’s always room for improvement.”

“Ontario holds one of the largest and most diverse real estate portfolios in the entire country,” he said. “We know that there are challenges associated with managing a pool of assets this large, especially with many of the properties dating back 40-50 years, and nearing the end of their useful lives.”

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