What we nonetheless do not learn about Winnipeg’s police HQ

After a five-year criminal investigation into the construction of Winnipeg’s police headquarters, Manitoba’s Crown prosecution service decided not to proceed with charges.

Nonetheless, questions about the police HQ remain, including why the city embarked on the project in the first place.

The RCMP spent 2½ years looking into allegations of fraud, forgery, the payment of a secret commission and breach of trust in relation to the project. Earlier this month, the Crown determined there was little likelihood of securing a conviction.

The end of the RCMP investigation led Winnipeg Mayor Brian Bowman to renew a 2017 council call for a public inquiry, not just into the police-headquarters construction but into other events at city hall before his election.

Premier Brian Pallister quickly rejected this idea, saying that there are bigger financial fish to fry in the province than examining what he described as an overbudget municipal project. 

On one hand, the police headquarters was indeed over budget.

In 2009, when city council approved the purchase of Canada Post’s old downtown Winnipeg office-and-warehouse complex and its conversion into a new police headquarters, the total project cost was pegged at $135 million.

The total cost wound up closer to $214 million by the time the Winnipeg Police Service completed its move into its new digs early in the summer of 2016.

Yet concerns about the project at city hall went beyond the ballooning cost, criminal allegations or poor project-management oversight identified in a 2014 city-commissioned audit conducted by consulting firm KPMG.

Ten years after city council approved the police HQ, it’s still unclear why the city pursued a project that continues to cause the city unanticipated expenses and logistical headaches.

The police headquarters was completed $79-million over budget, three years behind schedule and with alleged construction deficiencies that remain the subject of legal action between the City of Winnipeg and police HQ contractor Caspian Projects.

It required the city to borrow $155 million and service that debt, take possession of a Canada Post office tower it is unable to fill with tenants, and demolish a Public Safety Building once regarded as a key component of an ensemble of modernist buildings around city hall.

On the day the Crown announced the end of the criminal investigation, Mayor Bowman and former Canadian Taxpayers Federation Prairie director Colin Craig — who brought whistleblower complaints about the police HQ to Manitoba Justice in 2014 — said unanswered questions about the police HQ remain.

Here are some of those questions, for posterity’s sake.

1. Why wasn’t city council told there were alternatives to buying and renovating the Canada Post complex?

The police HQ project was set into motion in December 2007, when the city put the brakes on a plan to repair the crumbling Tyndall-stone facade of the Public Safety Building and house police in temporary, high-security offices elsewhere while construction proceeded on Princess Street.

The price tag for recladding the PSB and housing police elsewhere rose to $22 million, prompting officials to consider whether it would make more sense for the city to build a new headquarters with room for more police units.

In February 2008, the city began considering the purchase of the soon-to-be-decommissioned Canada Post tower and warehouse on Graham Avenue. Council approved the $29.25-million purchase of the complex and a $105-million redevelopment in 2009, based on a recommendation from city officials.

What those officials did not disclose to council is that there was no clear financial advantage to pursuing this scheme.

A city-commissioned report by the consulting firm Hanscomb concluded in 2009 that it would cost roughly the same amount of money to demolish and renovate the existing Public Safety Building, demolish the Civic Centre Parkade and expand the PSB over the old parkade’s footprint to the north as it would to buy and renovate the Canada Post complex.

The recommendation to city council made no mention of the Hanscomb findings.

The report to council listed benefits of amalgamating police operations in the new headquarters, but made no mention of structural and mechanical issues consultants had identified at the Canada Post complex.

2. Why was the city so focused on buying the Canada Post complex?

When consulting firm EY conducted a review of major Winnipeg real estate transactions in 2014, it found the city made no effort to consider any site other than the Canada Post complex for its new police HQ.

“While an analysis was performed to assess whether 266 Graham could accommodate the police headquarters, EY did not observe file documentation evidencing that other properties other than 266 Graham were considered as potential locations for the new police headquarters,” the auditors wrote.

The city also “did not advertise the need for such property” in order to identify other available options, the report said.

The review also found the city didn’t get an independent appraisal of the property to ensure what the vendor wanted was equivalent to market value.

“A comprehensive procurement process was not undertaken and, for a facility of this size and magnitude, should have been considered. As such, it is uncertain if value for money was achieved,” the authors of the review wrote.

The review also said former Winnipeg chief administrative officer Phil Sheegl, serving at the time as the city’s deputy CAO, had asked Canada Post for the exclusive right to buy the complex.

The city sent Canada Post an unsolicited offer to purchase the complex in November 2008, the review said — one full year before city council authorized the purchase.

3. Why was the construction criteria amended days before it closed?

The construction contract for the Winnipeg police headquarters was split into two pieces. The first was a request for proposals for $50,000 worth of pre-construction services.

Six days before the response period closed, the city made a final addendum to the guidelines.

The change involved a reduction in the threshold for what’s known in the construction industry as a performance bond — the amount of money a construction company has to put up to guarantee it can finish the job.

This bond acts as insurance for a construction company’s client. If a firm cannot complete the work, the client may cash in the bond.

Armik Babakhanians owns Caspian Construction. (Dreammakerauction.ca)

The original request for proposals for the project, issued in November 2010, called for construction companies to put up a cheque for 50 per cent of the total bid price, or $51 million of what was then a $102-million project.

On Jan. 12, 2011, the city reduced this guarantee to a cheque for $25 million, less than one-quarter of the value of the work.

The Surety Association of Canada, the national body for companies that issue construction bonds, told the Winnipeg Free Press in 2013 that a 25 per cent bond is uncommon and the industry standard calls for either 50 per cent or 100 per cent of the total value of the job.

The city, however, said in a 2013 report to council that it reduced the threshold at the Surety Association’s behest. The association told the Free Press it did not issue this direction.

City officials told the Free Press the higher bond threshold would have prevented smaller players from bidding.

Emails the RCMP presented to a judge in order to obtain police HQ investigation search warrants revealed Caspian owner Armik Babakhanians, deputy CAO Sheegl and other officials discussed the change to the bonding requirement and the award of the contract before it was awarded.

A total of four entities responded to the request for proposals: three national firms — PCL Construction, Graham Construction and Stuart Olson Dominion Construction — and a joint venture between two Winnipeg firms, Caspian Projects and Akman Construction.

On Feb. 10, 2011, the first phase of the contract was awarded to the Caspian-Akman joint venture.

4. Why did the city award the construction contract to Caspian when the company never bid for the work by itself?

The joint venture between Caspian Projects and Akman Construction dissolved in June 2011, when Akman left the venture. At Caspian’s request, the city reassigned the $50,000 pre-construction contract to Caspian alone.

In November 2011, Sheegl awarded the main construction work — a $137.1-million “guaranteed maximum price” contract — to Caspian alone. That contract was amended to $156.4 million in 2013.

The 2014 KPMG audit suggested the city awarded work to an entity that submitted no bid.

“We note that Caspian did not submit a proposal, and that Caspian was awarded the construction contract,” KPMG said in its audit.

What happens next?

Pallister has made it clear: There will be no inquiry.

He said the City of Winnipeg is free to continue its legal action against Caspian and engineering firm Adjeleian Allen Rubeli for alleged deficiencies at the police headquarters.

The premier also suggested this week that the city could explore other remedies but did not specify what those would be.

Phil Sheegl, left, served as Winnipeg’s chief administrative officer under former mayor Sam Katz, right. (CBC News)

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