Montreal overspending on engineering contracts, union charges, with study pegging extra cost at $40M in 2024

Montreal Gazette

26-06-2025

Montreal Politics
By
Montreal's municipal engineers were sounding the alarm even before a recent bombshell study revealed that engineering fees paid by the city to private firms have skyrocketed while the quality of work has diminished since the Charbonneau Commission a decade ago.
But it has been a frustrating year of whistleblowing for the Association des scientifiques et ingénieurs de Montréal (ASIM), says the union's president, Gisella Gesuale, who has spoken at city budget hearings, buttonholed councillors outside of council meetings, met with department managers and filed formal complaints with the city's Bureau de l'inspecteur général (BIG) and auditor general in an effort to get someone to act.
'We're at one year later and we're still at square one,' said Gesuale, who was a municipal chemist before being elected president of her union in October 2023.
'There's been no reaction. They haven't taken our hand yet.'
As it turns out, the problems pinpointed by the union in a 19-page brief it has circulated among city officials and shared with The Gazette jibe with the findings of Colin Pratte, the researcher at the Institut de recherche et d'information socioéconomiques (IRIS) who authored the study released on May 29.
Pratte's study concludes that Montreal paid at least $40 million too much on over $200 million in contracts to engineering consulting firms awarded in 2024 — in other words, at least 20 per cent above fair value.
The estimate, which Pratte describes as conservative, is based on the fact that the hourly rates paid by Montreal in its contracts with external engineering firms increased by 82 per cent from 2012 to 2024. That was more than double the inflation rate for the period.
The study looked at contracts awarded by the main three central city departments hiring external engineers: road infrastructure, water and urban planning and mobility.
Gesuale's union notes the spike in external professional fees doesn't include interest costs the city is paying on them. Most engineering contracts are in the city's capital works program, which is financed through long-term loans charging interest over 20 or more years, and not paid in cash out of the city's annual operating budget.
Moreover, the IRIS study says the city could have avoided the explosion in engineering fees if it had followed the recommendations of the Charbonneau Commission. Among other things, the 2015 report of the public inquiry into corruption and collusion in the Quebec construction industry recommended reducing the city's reliance on subcontracting, a suggestion that is reiterated by Pratte.
Gesuale's union, for its part, calculates that the total annual value of contracts awarded by Montreal to engineering consulting firms has increased by 809 per cent — from $23 million in 2012 to $209 million in 2024 — while the number of in-house engineers has remained relatively stable.
Her union represents 575 Montreal municipal engineers, many of whom are tasked with preparing estimates and correcting the plans submitted by the external engineers.
The Association des firmes de génie-conseil du Québec (AFG), which represents 71 member engineering consulting firms, maintains the 82 per cent increase in professional fees between 2012 and 2024 cited in the IRIS study is directly linked to the increase in construction projects carried out by the city.
But bigger investment in construction — from rebuilding roads and sewer pipes to installing traffic lights and creating bike paths — doesn't explain the exponential increase in the hourly rates paid to junior and senior engineers, technicians and so on within each external contract, the union noted.
'That's what started us wanting to look into what was going on,' Gesuale said.
'One (city) engineer noticed that the hourly rate that was being charged to the city was exploding. It was three to four times our salary.'
The union, like Pratte, concludes that Montreal is overpaying and that it stems from the way the city has restructured its external contracts for engineering work in the decade since the Charbonneau Commission ended.
Montreal has shifted toward paying engineering consulting firms by the hour through contracts called 'framework agreements' — and has moved away from fixed-price contracts that pay by project.
A framework agreement will provide a bank of, say, 100,000 hours over a time span for an engineering firm to work on various city projects. Engineers employed by the winning firm will bill their hours from that bank.
In 2012, the city was mostly awarding fixed-price contracts, paying engineering firms a flat amount for a project.
Framework agreements were slammed in the 2013 report of a city committee headed by former Parti Québécois minister Jacques Léonard, which issued 60 recommendations to Montreal to prevent corruption and collusion in municipal contracts.
But while the city has shifted away from framework agreements for construction work since then, it has increased their use for engineering work since Mayor Valérie Plante's Projet Montréal administration was elected in November 2017.
In 2012, 35 per cent of Montreal engineering contracts were framework agreements; in 2024, 93 per cent were, the IRIS study found.
When it was in the opposition at city hall, Projet Montréal denounced framework agreements.
Plante's office ignored The Gazette's questions about the IRIS study and the problems raised by the engineers' union. The five political aides who handle media relations for the mayor and city executive committee didn't respond to the newspaper's messages. Executive committee chairperson Émilie Thuillier also didn't respond to a direct request for comment.
On the civil service side, a spokesperson for the road infrastructure, water and urban planning and mobility departments said it's difficult to move away from hourly-rate contracts in engineering.
Framework agreements, spokesperson Gonzalo Nunez said in a written response, are 'essential due to the volume of projects and their ever-increasing scope, particularly to address the maintenance deficit in our infrastructure.'
Montreal has seen an 'acceleration of planning for certain projects,' he added, and that 'has indeed led to an increase in professional fees, but also an increase in the hours worked by city employees on these same projects.'
By comparison, Quebec City awards very few framework agreements for professional services. In fact, 97 per cent of engineering contracts awarded by Quebec City are fixed-price, Gesuale said.
Paying external firms by the hour offers no incentive for them to deliver work expeditiously, Gesuale said. Moreover, it means the city is paying external engineers to correct their errors, she said.
Meanwhile, the exponential increase in external engineering fees is reinforced by another factor that was denounced by the Charbonneau Commission and in the Léonard report, Gesuale said: Montreal's method of estimating the price of new contracts.
Quebec's Cities and Towns Act requires a municipality that plans to award a contract of $100,000 or more to establish a control estimate before opening the bids. A large difference between the estimate and bids might point to an error or lack of clarity in the plans and specifications. On occasion, it leads a municipality to cancel the call for tenders and start again.
Montreal continues to use the historical price to estimate engineering contract prices, even though it has dumped that method for construction contracts.
Under the historical-price method, Montreal takes the already inflated price of a previous contract, adds inflation and voilà — that's the city's estimated price of the next contract.
For construction contracts, the city now uses a 'fair value' method of estimation, which takes into account objective factors, like the real costs of items in the contract, market conditions and supply and demand.
Montreal's BIG has advocated internally for the city to end historical-price estimation, Gesuale noted.
Now, the union has decided to act where the city won't, she added.
Last month, the union issued instructions to its members to produce estimates according to fair value instead of historical price.
To do that, the union developed a tool that establishes fair value, based on municipal engineers' salary conditions plus an additional 90 per cent to cover firms' direct and indirect costs, such as rent, as well as benefits and profits. The factor of 90 per cent is used by different authorities, Gesuale said.
'We have no choice,' she said of developing the tool. 'It's our role because the city's not doing anything.'
The union has also advised its members to keep a written record if a manager directs them to use an estimation method that isn't 'consistent with best practices — particularly the use of prices from previous years.'
The city, for its part, didn't explain in its responses why it's sticking to the historical-price method to estimate engineering contracts.
Gesuale describes Montreal as a 'school' for external firms to send inexperienced engineers to learn from municipal engineers. In the meantime, the city isn't developing its internal expertise, she said.
As well, the city itself has complained about the quality of work by external engineers, her union discovered in the minutes of meetings between city managers and representatives of the association of engineering consulting firms. The union obtained the minutes through an access-to-information request.
The AFG says the solution has to come from both sides.
'Regarding quality, we intend to continue working with the City of Montreal to identify issues on both sides and find solutions to improve our practices on an ongoing basis,' AFG deputy general manager Pierre Nadeau said in an email. Gesuale's union is calling on the city to repatriate recurring work, the kind that's outsourced year after year or under long-term contracts.
'We know we can't do all the engineering work internally,' she said. 'There will be outsourcing. But can we not ensure it's well-balanced?'
The union is also calling on city management to form a committee to work on the union's recommendations.
'Our objective is to ensure that Montreal gets the most for its buck,' Gesuale said.
'And at the moment, that's not what I'm seeing.'