Examination of construction management contract for the West Block rehabilitation project
PCL Invoices for the period from December 22, 2012 to March 31, 2015 (Invoices #19 to 45)
March 29, 2016
To the Office of Audit and Evaluation, Public Works and Government Services Canada
Subject: Cost Audit of PCL Construction Management Contract for West Block Rehabilitation Project for the period from December 22, 2012 to March 31, 2015 (Invoices #19 to 45)
PricewaterhouseCoopers LLP (PwC) was engaged by Public Works and Government Services Canada, Office of Audit and Evaluation.
We recently completed a cost audit under Canadian Auditing Standards (CAS) 805 of the Construction Management (CM) Contract for West Block Rehabilitation Project between PCL Constructors Canada Inc. (PCL) and Public Works and Government Services Canada (PWGSC) for the period from December 22, 2012 to March 31, 2015 (Invoices #19 to 45).
We hereby enclose our audit report on the Summary of Invoiced and Audited Amounts (Invoices #19 to 45).
Yours very truly,
The Long-Term Vision and Plan (LTVP) for the Parliamentary Precinct, which was approved in 2001 and amended in 2007, is a detailed framework that provides direction for the renewal of Canada's seat of government, the Parliamentary Precinct. This renewal and preservation program is expected to unfold over 25 years as a series of major projects (Major Crown Projects) implemented in 5 phases.
As part of the LTVP, the Government of Canada awarded construction management services contracts and commenced rehabilitation of the Parliament Buildings including the West Block on Parliament Hill, the Wellington Building (180 Wellington Street) and the Sir John A. Macdonald Building (formerly the Bank of Montreal Building, 144 Wellington Street). The construction phases for these 3 Major Crown Projects are expected to be completed by 2017.
Following a competitive bid process PricewaterhouseCoopers LLP (PwC) was awarded a contract by the Office of Audit and Evaluation of Public Works and Government Services Canada (PWGSC) to conduct various independent audits throughout the construction phases of the 3 Major Crown Projects noted above.
PCL Constructors Canada Inc. (PCL) was awarded the Construction Management Services Contract for the West Block rehabilitation project. The construction contract was awarded on June 30, 2011, for an award value of $317 million (Harmonized Sales Tax (HST) excluded), which represented the first phase of a 2-phase contract. As of October 2015 the total budgeted award under the contract for Phases 1 and 2 sits at $603 million (HST excluded).
PwC was engaged to audit that the amounts invoiced by PCL for the period from December 22, 2012 to March 31, 2015 (Invoices #19 to 45) were in accordance with Annex B of the contract between PCL and PWGSC.
Upon the completion of our audit, PwC issued a clean auditor's report in accordance with Canadian Auditing Standards (CAS) Section 805. Refer to Section 2 of this report.
2. Auditor's report
Public Works and Government Services Canada
Summary of invoiced and audited amounts
PCL Constructors Canada Inc.
Construction management contract for West Block rehabilitation project
For the period from December 22, 2012 to March 31, 2015 (Invoices #19 to 45)
March 29, 2016
Independent auditor's report
To the Office of Audit and Evaluation, Public Works and Government Services Canada
We have audited the accompanying Schedule 1 of amounts invoiced by PCL Constructors Canada Inc. (PCL) for the period from December 22, 2012 to March 31, 2015 (Invoices #19 to 45) (the Schedule). The Schedule has been prepared by the management of PCL in accordance with Annex B—Basis of Payment of the Construction Management Contract for the Government of Canada's West Block rehabilitation project (CM Contract) dated June 30, 2011.
Management's responsibility for the schedule
Management of PCL is responsible for preparation of the schedule in accordance with the requirements of Annex B—Basis of Payment of the CM Contract, and for such internal control as management of PCL determines is necessary to enable the preparation of a schedule that is free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on the schedule based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the schedule is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the schedule. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the schedule, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to PCL's preparation of the schedule in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of PCL's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by PCL management, as well as evaluating the overall presentation of the schedule.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial information in Schedule 1 of amounts invoiced by PCL Constructors Canada Inc. for the period from December 22, 2012 to March 31, 2015 (Invoices #19 to 45) is prepared, in all material respects, in accordance with the requirements of Annex B—Basis of Payment of the CM Contract.
Basis of accounting and restriction on use
Without modifying our opinion, we draw attention to Note A of the Schedule, which describes the basis of accounting. The Schedule is prepared to assist PWGSC in meeting its fiduciary duties regarding the execution and management of Major Crown Projects such as the West Block rehabilitation project, in accordance with specified Treasury Board standards and guidelines. As a result, the Schedule may not be suitable for another purpose. Our report is intended solely for PWGSC and PCL and should not be used by parties other than PWGSC and PCL.
Chartered professional accountants, licensed public accountants
|Characteristics of costs||Amounts invoiced to PWGSC
|Direct costs (Note 4)||150,411,014||N/A||150,411,014|
|Indirect costs (Note 5)||37,430,519||N/A||37,430,519|
A. Supplementary notes
The West Block rehabilitation project involves an extensive renovation of a Classified Heritage Building and the construction of a new Courtyard Infill to allow for an interim Chamber for the House of Commons. The renovated West Block will provide interim accommodations for the House of Commons Centre Block Legislative Officials and support functions to allow the Centre Block to be vacated so its renovations can proceed. The total cost estimate of the West Block rehabilitation project is $862.9 million (this includes construction costs, design fees, information technology systems, project management fees and contingencies). A Construction Management services contract was awarded to PCL, in June 2011. As of October 2015 the total contract awards under Phases 1 and 2 of the Project are $603 million.
1. Amounts invoiced to Public Works and Government Services Canada
The amounts invoiced in the above table represent the eligible costs invoiced by PCL during the period from December 22, 2012 to March 31, 2015 (Invoices #19 to 45) to PWGSC in relation to the Government of Canada's West Block rehabilitation project, other than costs relating to 2 optional services exercised by PWGSC – the Southwest Tunnel and Visitor's Welcome Centre, which were out of scope for this audit. The amounts invoiced in Schedule 1 above were reconciled to the total amounts claimed on Invoices #19 to 45, excluding the costs deemed out of scope.
2. Total adjustments
As noted in Schedule 1 above, no exceptions arose from audited amounts and therefore no adjustments of Amounts Invoiced to PWGSC as per Schedule 1 above were required.
3. Total audited
These amounts represent the amounts invoiced to PWGSC, net of any adjustments. Total amounts audited relate to invoices #19 to 45 and does not include an audit of the contract as a whole.
The notes below describe the types of costs invoiced by PCL during the period.
4. Direct costs
Direct costs include construction costs which are incurred by all subcontractors who invoice PCL. PCL then charges these costs back to PWGSC.
5. Indirect costs
Indirect costs include Construction Manager Services, disbursements for permits, insurances and bonding, and construction general expenses which are incurred by PCL.
3. Scope, limitations in scope and restrictions
A financial statement audit is generally performed with the objective of providing reasonable assurance that financial statements as a whole are free from material error. An audit of a schedule of amounts invoiced (cost audit) is generally performed with the objective of highlighting differences between amounts invoiced and the underlying documents supporting the amounts invoiced in order to provide reasonable assurance that amounts invoiced are in accordance with the terms of a specific agreement.
PwC was not engaged to and did not perform a financial statement audit for the purpose of expressing an opinion on historical financial statements in accordance with standards established by the Chartered Professional Accountants of Canada (CPA Canada). Accordingly, PwC does not express such an opinion or any form of assurance on the financial statements of PWGSC or of PCL as a whole.
PwC was engaged to perform a cost audit on the amounts invoiced by PCL to PWGSC. The procedures undertaken were consistent with Canadian Auditing Standards 805, "Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement". As a result, we have expressed an opinion solely on whether the amounts invoiced by PCL to PWGSC in Invoices #19 to 45 are in accordance with the terms of the CM Contract.
We reserve the right, but will be under no obligation, to review this report, and if we consider it necessary, to revise our report in light of any information, which becomes known to us after the date of this report.
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