Toronto officials are contemplating a potential five-year suspension of a construction company following an inquiry that revealed the firm had overcharged the city by over $1 million on a recent infrastructure project.
Capital Sewer Services Inc. and its related entities have been heavily involved in numerous sewer projects in Toronto, securing contracts totaling around $200 million in the past five years. Concerns have been raised that this instance of overbilling may not be an isolated incident.
An upcoming report set to be presented to the general government committee highlights that the city’s internal controls, along with complaints received via the Auditor General’s Fraud and Waste Hotline, initially flagged discrepancies in the change order documentation provided by Capital Sewer.
The controversy revolves around the Dufferin Sanitary trunk sewer system project. While Capital quoted the city $1.3 million for work by a subcontractor, the city independently sought a price from the same subcontractor, who quoted $470,000 – significantly less than what Capital invoiced.
Councillor Brad Bradford expressed concern about potential unnoticed expenses to taxpayers, stating, “If it happened once and to the tune of a million dollars, what else are Torontonians paying for that they’re not receiving?”
Although Capital has acknowledged the misconduct, attributing it to a rogue employee who exploited their position for personal gain, the company asserts it has terminated the individual and enhanced internal controls. They have also committed to reimbursing any owed amounts to the city.
An ongoing forensic audit by KPMG is delving deeper into the possibility of additional instances of overcharging.
Despite facing the prospect of being barred from bidding on new contracts for five years, Capital still retains substantial existing contracts with the city. Councillor Bradford voiced the need for reform in the city’s procurement process to prevent similar incidents in the future.
Capital Sewer and the city have reached out to Toronto police to investigate the overbilling and document manipulation.