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A longtime city procurement official says she was instructed to lower the bond amount for bidders on a contract to develop the Winnipeg Police Service’s new headquarters more than a decade ago, despite providing an opinion at the time that doing so would increase the risk the project posed to the city.
Those details from Barb D’Avignon came on the first day of the long-awaited inquiry into the procurement and construction of the troubled project, in a saga that dates back to February 2008.
The inquiry on Tuesday heard the project’s bond amount — money construction companies have to put up as part of signing on to a contract, in case they don’t finish the work — was reduced to $25 million.
That came after complaints about an original higher amount, including from an official with Caspian Construction — the company that ended up winning a contract to do most of the work on the project.
“In your 35 years working with the city, have you ever seen a bond that’s $25 million for what’s proposed to be an $80-million contract?” inquiry counsel Heather Leonoff asked D’Avignon, who said during her testimony she had identified the $25-million bond option as posing a medium to high risk to the city, compared to other lower-risk options.
“Never seen it before, and I’ve never seen it again,” D’Avignon replied.
In 2008, the Winnipeg Police Service started looking into moving its headquarters from the now-demolished Public Safety Building on Princess Street to a former Canada Post office tower and warehouse complex on Graham Avenue.
City council approved the purchase and renovation project for the new police headquarters in 2009, at a budget of $135 million. By the time the police service moved into the building in 2016, the cost had ballooned to $214 million due to construction delays, change orders and flood damage.
The project ended up subject to a pair of civil lawsuits initiated by the city, two external audits and a five-year RCMP fraud and forgery investigation that began with a raid on the offices of project contractor Caspian Construction.
While that investigation wrapped up in 2019 without any charges, the documents Mounties unearthed led the city to sue Caspian principal Armik Babakhanians and former city chief administrative officer Phil Sheegl. He was later found by a court to have accepted a $327,200 bribe from Babakhanians to show favour to Caspian in the police headquarters tendering process.
Both later paid money to the city in either damages or settlement money.
Emails presented during the inquiry Tuesday showed Sheegl emailed another city official in December 2010, around the time the discussions about lowering the bond amount were happening. Sheegl said he worried a contractor would call then-mayor Sam Katz about the situation.
“PLEASE make this thing work,” Sheegl wrote to the official. A few minutes later, Babakhanians emailed him and thanked him “for being so gracious.”
‘Old, used building for substantial dollars’
During inquiry cross-examination by George Orle — a lawyer representing Caspian, Babakhanians and others linked to the company — D’Avignon said the bonding for the police headquarters project wouldn’t just benefit Caspian.
Orle also asked D’Avignon about an envelope with a prediction inside it, which he said she referenced having in her desk during a 2015 RCMP interview. She told the inquiry the prediction was that “if they built the brand new Manitoba Hydro building for $250 million, we could have built a new police headquarters for less than that.”
“So you’re saying that $250 million was not an unreasonable amount to be looking at, in terms of this particular project?” Orle asked her.
“I was basically saying that we’re getting a brand-new building for $250 million at Hydro. And we’re getting an old, used building for substantial dollars down the street,” D’Avignon responded.
Later Tuesday, the inquiry also heard from longtime city finance official Jason Ruby, who walked through various cost overruns in the project. He’s expected to continue being cross-examined Wednesday.
Further testimony is expected to continue Wednesday with contracts expert Eleanor Andres and Sean Barnes of PCL Construction, which was among the large construction companies that lost out on the police HQ work to Caspian.
Katz, who served as Winnipeg’s mayor from 2004 to 2014, is expected to testify Thursday and possibly Friday. While he wasn’t a party to the Sheegl lawsuit and is not accused of wrongdoing, an appeal court justice said in 2023 the former mayor can be considered a material witness and “received precisely half the money” paid to Sheegl by Babakhanians.
Sheegl and Babakhanians are scheduled to appear as inquiry witnesses next week.
The province selected labour lawyer Garth Smorang as commissioner for the inquiry, which was initially requested by a Winnipeg city council led by then-mayor Brian Bowman in 2017.
The inquiry at the downtown Winnipeg offices of the Public Utilities Board is scheduled to hear from more than 30 witnesses and continue until June, examining the circumstances surrounding the project and determining which measures are needed to restore public confidence in the city’s ability to build large, publicly funded projects.
