Examination of construction management contract for the Government Conference Centre Rehabilitation Project: PCL Constructors Canada Inc. invoices (1 to 26) for the period from March 6, 2014, to April 30, 2016

1. Background

The Long-Term Vision and Plan 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 Long-Term Vision and Plan, the Government of Canada awarded construction management services contracts and commenced rehabilitation of the Parliament buildings including the Government Conference Centre. The Government Conference Centre rehabilitation involves a renovation of a heritage building in order to provide an interim home to the Canadian Senate to allow the Centre Block of Parliament to be vacated so that its renovations can proceed in 2018.

PCL Constructors Canada Inc. was awarded the construction management services contract for the Government Conference Centre rehabilitation project. The construction contract was awarded on March 6, 2014, for an award value of $2.3 million (harmonized sales tax excluded) for the first phase (pre-construction services) of a two-phase contract where the second phase is for construction services. As of December 2016, the total budgeted award under the contract for phases A and B sits at $135 million (harmonized sales tax excluded).

Following a competitive bid process PricewaterhouseCoopers LLP was awarded a contract by the Office of Audit and Evaluation of Public Services and Procurement Canada (PSPC) to conduct various independent audits throughout the construction phases of the major Crown projects noted above.

PricewaterhouseCoopers LLP was engaged to audit that the amounts invoiced by PCL Constructors Canada Inc. for the period from March 6, 2014, to April 30, 2016, were in accordance with annex B of the contract between PCL Constructors Canada Inc. and PSPC.

Upon the completion of our audit, PricewaterhouseCoopers LLP issued a clean auditor’s report in accordance with Canadian Auditing Standards Section 805. Refer to section 2 of this report.

2. Auditor's report

Public Services and Procurement Canada: Summary of invoiced and audited amounts

PCL Constructors Canada Incorporated: Construction management contract for the Government Conference Centre rehabilitation project for the period from March 6, 2014 to April 30, 2016 (invoices 1 to 26)

Independent auditor's report

To: The Office of Audit and Evaluation, Public Services and Procurement Canada

We have audited the accompanying schedule 1 of amounts invoiced by PCL Constructors Canada Inc. for the period from March 6, 2014, to April 30, 2016 (the schedule). The schedule has been prepared by the management of PCL Constructors Canada Inc. in accordance with annex B—Basis of payment of the construction management contract for the Government of Canada’s Government Conference Centre rehabilitation project (construction management contract) dated March 6, 2014.

Management’s responsibility for the schedule

Management of PCL Constructors Canada Inc. is responsible for preparation of the schedule in accordance with the requirements of annex B—Basis of payment of the construction management contract, and for such internal control as management of PCL Constructors Canada Inc. determines is necessary to enable the preparation of a schedule that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

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 Constructors Canada Inc.’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 Constructors Canada Inc.’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by PCL Constructors Canada Inc. 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.

Opinion

In our opinion, the financial information in schedule 1 of amounts invoiced by PCL Constructors Canada Inc. for the period from March 6, 2014, to April 30, 2016 (invoices 1 to 26), is prepared, in all material respects, in accordance with the requirements of annex B—Basis of payment of the construction management 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 PSPC in meeting its fiduciary duties regarding the execution and management of major Crown projects such as the Government Conference Centre 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 PSPC and PCL Constructors Canada Inc. and should not be used by parties other than PSPC and PCL Constructors Canada Inc.

Signed by: PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants

Summary of invoiced and audited amounts: Construction management contract for the Government Conference Centre rehabilitation project

3. Recommendation

In connection with this audit we considered the internal control over amounts invoiced as a basis for designing our auditing procedures for the purpose of expressing our opinion on the first 26 PCL Constructors Canada Inc. invoices of the construction management contract, but not for the purpose of expressing an opinion on PCL Constructors Canada Inc.’s or PSPC’s internal controls. Accordingly, we do not express an opinion on PCL Constructors Canada Inc.’s or PSPC’s internal controls.

Our consideration of internal controls over amounts invoiced was for the limited purpose described above and was not designed to identify all deficiencies or opportunities for improvement in internal control and therefore, there can be no assurance that all internal control matters have been identified.

We are providing you with our observation and recommendation on a potential opportunity for improvement noted in conjunction with the cost audit.

Potential for misinterpretation of contract language

Observation

During our audit we noted a potential for misinterpretation of contract language in contract EP760-140543/001/FG for construction management services in the area of supporting documentation required for additional personnel.  We understand the parties involved (namely the Government of Canada and PCL Constructors Canada Inc.) have agreed on an approval process and the level of supporting documentation required for the current construction management contract.

Recommendation

We recommend any future contracts of this nature contain consistent clauses around any requirement for supporting documentation.

Public Services and Procurement Canada response

PSPC agrees with the recommendation and will ensure consistency in language for future contracts. The Parliamentary Precinct Branch is working closely with Acquisitions Branch to ensure a coordinated effort.

4. 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.

PricewaterhouseCoopers LLP 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. Accordingly, PricewaterhouseCoopers LLP does not express such an opinion or any form of assurance on the financial statements of PSPC or of PCL Constructors Canada Inc. as a whole.

PricewaterhouseCoopers LLP was engaged to perform a cost audit on the amounts invoiced by PCL Constructors Canada Inc. to PSPC. 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 Constructors Canada Inc. to PSPC in invoices 1 to 26 for the period from March 6, 2014, to April 30, 2016, are in accordance with the terms of the construction management 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.