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An audit of the Southcote Road capital project contract that was completed at an increase of $2.5 million has been completed by the City of Hamilton’s Office of the Auditor General (OAG) and the findings are telling.

The contract was awarded in August 2022 for $12.32 million and completed in 2024 at a final cost of $15.82 million – a 19 per cent increase.

The project involved re�鶹��ýӳ�� and underground infrastructure servicing of the Southcote Road–Garner Road corridor to Highway 403 in Ancaster, covering approximately 1.5 kilometres and including roadwork, watermain installation and stormwater infrastructure.��

City management requested the OAG undertake an independent review to assess how the project evolved and whether it was delivered in a manner that achieved value for money.

The objectives of the audit were to:

• To assess whether the city had adequate governance tools, internal controls and project management processes in place to support effective and efficient delivery of the project.

• Identify whether value for money was achieved, including identifying where major cost increases occurred and if internal control or process weaknesses contributed to those increases.

The OAG findings were that governance and oversight processes for the project were informal and immature, contributing to poor scope management, change management and contingency planning.

It further concluded that inadequate budget monitoring and job-cost reporting limited the city’s ability to identify and respond to cost increases. The audit also identified significant communications gaps within the public works department and between the city and procurement, resulting in an avoidable error in the tendering process.

“While the project was completed, our audit found gaps in early planning, change management, documentation and financial tracking that made the work more complex and contributed to higher costs,” said Auditor General Charles Brown. “Management has already taken steps to strengthen how infrastructure projects are delivered, and these recommendations are meant to support continued progress toward clearer, more consistent project oversight.”

The OAG made 10 recommendations to help the city strengthen project oversight, accountability and value-for-money in the delivery of capital projects.

The recommendations to management are:

• Strengthen and formalize the capital project governance framework by reviewing, updating and aligning key documents to clarify roles, responsibilities, and communication expectations across departments throughout all phases of procurement and project delivery.
• Establish requirements for early and comprehensive project scope definition, supported by the implementation of a decision log for all capital projects.
• Review and update existing processes to ensure procurement documents prepared by consultants and/or the design team are subject to an appropriate review and verification against approved scope changes prior to issuance.
• Formalize the project progress certificate review process to ensure consistent and ongoing monitoring of project budgets.
• Formalize the recently implemented monthly �鶹��ýӳ�� project reporting as a standard process all �鶹��ýӳ�� projects.
• Establish and maintain centralized records of external stakeholder notifications related to capital projects, including Public Information Centre and Public Utilities Coordinating Committee meeting minutes, permit amendments and resident notifications.
• Implement a formal, digital inspection log for documenting quality assurance activities on capital projects, supported by a standardized digital template.
• Establish and document requirements for determining contingency amounts for capital projects within the procurement policy and associated governance documents.
• Require �鶹��ýӳ�� contracts to include a structured payment schedule established at project initiation and aligned with defined milestones and anticipated progress.
• Establish a formal and effective communication and co-ordination process among all departments and stakeholders involved throughout the project lifecycle, specifically in this case between the public works and procurement departments.

City of Hamilton Engineering Services said in a response it agrees with all 10 recommendations.

“Southcote Road was tendered in 2022. Our project practices have changed a lot since then, and several of the gaps the audit found were already being addressed.

“Actions are being built into one updated project management framework, supported by our Engineering Services Management Office which is already in place,” the response said.