17-07-2025
Changing estimates after bids close is illegal, but Montreal did it anyway
After the sole bid on a City of Montreal contract to re-engineer the traffic lights at some intersections came in 51 per cent higher than the city's cost estimate last year, the city raised its estimate to narrow the gap.
That violated the Quebec Cities and Towns Act.
But the municipal department handling the call for tenders didn't stop there. Montreal's urban planning and mobility department also altered a clause in the contract tender specifications to match a noncompliant element of the bidder's offer.
The $3.4-million, two-year contract that went to engineering firm FNX-INNOV Inc. passed under the media's radar. It was approved during the eighth hour of a 10-hour session of city council in June 2024, one of 50 contractual items on the meeting agenda that generated no headlines.
But the contract raised red flags with the opposition at city hall, which scolded the department in council for its manoeuvres to get the contract approved.
'The million-dollar question is: Are the estimations right?' Dominic Perri, an opposition Ensemble Montréal councillor who chairs city council's contracts review committee, said in an interview last week.
'How do we know if we're paying the correct price?'
His committee, which includes councillors from the opposition and the Projet Montréal majority at city hall, was created in 2011 after corruption scandals had rocked Montreal.
Contracts that must be sent to the committee for review include those worth $2 million or more that either received a sole bid or have a winning bid that is 20 per cent or more above or below the city's estimate.
'What I have a problem with is when they (city departments) present a bid in front of me and the difference from the estimation is 30 to 40 per cent,' Perri said.
'In the past two years, we see this kind of spread a lot, which makes us wonder why the estimations aren't more accurate. Sometimes we get reasonable answers, sometimes we want more explanation, sometimes we find errors and we point them out.'
Civil servants from the urban planning and mobility department told Perri's committee that they had estimated $2.4 million for the traffic light contract by taking the price of a contract passed in 2021 and adding inflation.
When FNX-INNOV's bid came in at $3.73 million, the city department negotiated with the firm, which agreed to lower its bid to $3.4 million. (Negotiation is permitted under Quebec law when there's a sole bidder.)
The firm's new price narrowed the gap with the city's estimate to 38.18 per cent from the initial 51.32 per cent.
Then the city department hiked its internal estimate by $500,000 to $2.9 million, which narrowed the gap with the firm's new price to 17.27 per cent.
The department told Perri's committee that the bidder had used 12-hour workdays to price the surveillance work called for in the contract.
The civil servants acknowledged to the committee members that the contract tenders had specified eight-hour workdays. However, the civil servants said they had underestimated the work involved and therefore amended the eight-hour workdays to 12-hour workdays in the contract specifications.
They also said they had underestimated the time required to manage the tracking of excavated contaminated soil, a new requirement in Quebec that didn't exist for the 2021 contract that served as the base for their estimate.
The Cities and Towns Act says a municipality may not amend a contract after the call for tenders is closed, unless the amendment is incidental to the contract and doesn't change its nature.
What is 'incidental' is a matter of opinion.
However, the Act offers no wiggle room on requiring municipalities to produce internal estimates on contracts over $100,000 before opening the bids.
The Quebec Municipal Affairs Department told The Gazette it can't comment on specific situations. However, the ministry confirmed that even a revised estimate must be produced before opening the envelopes.
But according to a former member of Mayor Valérie Plante's Projet Montréal administration, it's 'common practice' for the city to alter its estimates after seeing the bids.
'And do you know why?' former Plateau-Mont-Royal borough mayor Luc Ferrandez, who was on the city executive committee during Plante's first term, said on his radio program on 98.5 FM in May.
'If the submitted bid exceeds the city's assessment by, say, 30 or 40 per cent, the city must publicly justify why it is proceeding anyway. And to avoid having to publicly justify why it is proceeding anyway, it will modify its assessment to reduce the difference.'
Ferrandez made the assertion while discussing a recent study by the Institut de recherche et d'informations socioéconomiques (IRIS) that found Montreal's fees to private engineering firms have skyrocketed while the quality of work has diminished in the past decade.
Perri's committee didn't recommend approving the traffic light contract — a first in its history, according to the opposition. The panel instead recommended suspending the awarding process and asking the Bureau de l'inspecteur général (BIG) to investigate.
The committee's report on the contract 'expressed discomfort' over several aspects of the file.
It noted that 'the conditions of a call for tenders should not be changed after the bids have been opened, as this could have disadvantaged other bidders who might otherwise have decided to submit a bid. This change may also suggest that the estimate was revised to make the gap more acceptable. Furthermore, it may suggest that the firm exerted influence on the department's recommendation to award the contract.'
Nine firms had purchased the call for tenders package, but only FNX-INNOV submitted an offer.
Less than two weeks later, the BIG issued a confidential opinion to Perri's committee: Altering the estimate and the tender specifications after the fact 'had no impact on the fairness of the contract-awarding process,' the BIG concluded.
A week after, city council voted unanimously to award the contract. Perri shared the contracts committee's misgivings in council and read out the BIG's response.
His colleague, Ensemble Montréal councillor Alan DeSousa, chastised the urban planning and mobility department for its actions, starting with creating an estimate 'riddled with errors.'
Projet Montréal councillor Sophie Mauzerolle, a member of the city executive committee, cited the BIG's finding and said the tendering process was correctly handled.
'Certainly, some elements were omitted by the estimator, including data that could have been collected during negotiations, which explains the subsequent price adjustment,' she told council.
'But I want to reassure all my colleagues that everything was done properly.'
The BIG's blessing was reason enough to greenlight the contract at council, Perri maintains. The BIG has the authority and experience to judge such matters.
But even if his misgivings about the contract were allayed, Perri says he remains concerned about the city's inaccurate estimates.
Montreal still uses a 'historical price' method to estimate engineering contract prices. The method takes the price of a previous contract and adds inflation to calculate an acceptable price for the bids on a new contract.
By contrast, Montreal uses a 'fair value' method of estimation for construction contracts today to determine market value. The method assesses objective factors, like the real costs of items, the complexity of the work, market competition and the availability of labour.
'We would like estimates that reflect market price,' Perri said of his committee. 'It would help us do our work, and it would also help the city to better budget for its work.'
A shortcoming of historical-price estimation, as the 2013 Léonard report pointed out, is it assumes that historical contract prices resulted from a free and competitive market.
Colin Pratte, who authored the IRIS study, found there's little competition for Montreal's engineering contracts. Three-quarters of them are won by five firms, and a substantial portion receive a sole bid.
DeSousa, meanwhile, bats the issue of what he calls 'lazy estimation' back to the BIG to investigate.
DeSousa asked: Does the city regularly alter its estimates to come closer to bid prices? Have other contracts avoided scrutiny by the committee because the city narrowed the gap between its estimate and the bid price to less than 20 per cent?
'And how widespread is it?' he asked.
The BIG refused to discuss the traffic light contract with The Gazette.
'The Inspector General cannot comment on a matter that has not been the subject of a public report,' BIG spokesperson Linda Boutin said. Information exchanged during the contracts committee's in-camera meetings is confidential. If it discussed the opinion it gave on the traffic light contract, she said, 'the Inspector General would be violating this confidentiality rule adopted by elected officials.'
