11/12/2012 03:08 EST | Updated 01/12/2013 05:12 EST

Montreal warned years ago about cost overruns in its 'closed' construction market

MONTREAL - The City of Montreal has released an old report that suggests the municipality knew eight years ago that it was significantly overpaying for construction projects, perhaps by more than 30 per cent.

In response to allegations that municipal officials were hiding old documents, the city released Monday a half-dozen reports that examined construction costs.

The earliest of those documents dated back to 2004 and it stated that Montreal was "a closed market" when it came to construction, with public-works contracts going to the same handful of companies over and over again.

"It is always the same companies that share the work, which is likely to explain the high cost," the 32-page study said. "In Montreal, the market is not considered to be very open and, in some cases, may even be quite closed."

While a half-dozen companies got most of the work in Montreal, the study said that other Quebec municipalities had up to twice that many firms vying for public contracts.

The study said the city could cut down on costs by opening up the market. It said closed markets typically come with an inflated price tag of 30 to 40 per cent and it concluded that Montreal could save 20 to 30 per with a more competitive bidding process.

But nowhere in the study was there any indication that municipal employees might have been corrupted or involved in collusion.

Such revelations are now emerging, years later, at the province's Charbonneau commission which is exposing cozy ties between the Italian Mafia, construction companies, and corrupt municipal officials.

The city's highest-ranking bureaucrat told reporters at a technical briefing Monday that former mayor Gerald Tremblay, who resigned last week, only found out about the 2004 document last month.

The current city manager, Guy Hebert, told reporters the document had been given to a former city manager, Robert Abdallah, and former executive committee chair Frank Zampino. Zampino now faces criminal corruption charges.

Two years later, another report indicated that the risk of corruption was high and that the city had "no mechanism to prevent collusion, fraud, price-fixing."

That 2006 report and a followup to it in 2009 offered a lengthy list of suggestions for dealing with the problem. Hebert said those recommendations are in effect today.

Another report from 2010, released Monday, said that a review of four sewer contracts in the late 2000s in different Quebec municipalities revealed that it cost Montreal up to 85 per cent more to do similar work. Some of those higher costs were attributed to Montreal's older streets, heavy traffic and choice of materials.

The existence of the 2004 report came to light last week when the city's second most-powerful politician, Michael Applebaum, dramatically resigned as chairman of the executive committee.

He expressed frustration with his colleagues over their decision to delay releasing the report until after city council meets to select an interim mayor this week.

Applebaum was also upset that colleagues refused his proposal to scale back planned property tax hikes; he said taxpayers were justifiably angry about waste and corruption and didn't deserve a planned 3.3 per cent tax increase.

Applebaum had another reason to be miffed with his colleagues: he was passed over as his party's choice for interim mayor. The city council will pick a temporary replacement for Tremblay, who resigned amid the fallout from a corruption controversy.

The man chosen as the new leader of Tremblay's party, and the likely front-runner to be named interim mayor, denied there was ever a coverup. Richard Deschamps said nobody on the executive committee favoured keeping the reports secret.

Members of the city's executive committee denied that the older reports ever reached their hands. Deschamps, along with other committee members, said they only learned about them last week.

The interim mayor is to be chosen by secret ballot at city council on Friday.

Opposition party Projet Montreal said there was never a political will to tackle the construction problem. It suggested anyone who wanted to fight corruption, such as the study authors, would run into a wall of resistance at city hall.

"Even in the 2004 report, the city didn't give (the authors) access to its own records, the information on relevant contracts," Bergeron said. "There was never a clear political directive that we want to get to the bottom of the costs of contracts in Montreal."

Meanwhile, the inquiry began hearing from witnesses again Monday after a week off.

Corrupt city engineer Luc Leclerc wrapped up his testimony with an apology.

After days on the stand where he had expressed little remorse for his actions, even boasting about his ability to falsify contracts, the retired civil servant pleaded for clemency.

"I regret what I did," Leclerc said. "I appeal for the mercy of the general public, of the taxpayers of Montreal, and of members of the (provincial) Order of Engineers."

Leclerc had said before wrapping up his testimony that he didn't see the point in apologizing, because the public wouldn't forgive him.

Leclerc was also forced to admit that he failed to tell inquiry investigators for months that he still had $90,000 from his kickback money, after telling them he'd spent it all. He finally handed over the $90,000 several months later, in October.

The retired engineer said there was little oversight of his department and the problem was compounded by staff cuts. He said independent auditing of some contracts was common until the mid-1990s and then the practice stopped.

Later Monday, it was Leclerc's boss who took the stand.

Gilles Vezina admitted that he also received gifts like hockey tickets, fancy dinners and golf outings but said it never affected his objectivity.

He admitted that he had a chummy relationship with Mafia-linked contractors — having attended a birthday party for construction mogul Frank Catania and the marriage of a daughter of construction boss Nicolo Milioto, where he gave a $300 present.

But Vezina was adamant that it didn't affect his relations with contractors.

"At no time, with all these advantages that we received, did my opinion or my decision on any file change to favour a contractor," said Vezina, a team leader in the infratsructure department who is currently under suspension.

"I've never done that."

Meanwhile, the inquiry lost another lawyer Monday.

Claude Chartrand, a veteran prosecutor with more than 30 years' experience, quit less than a month after Sylvain Lussier, the chief counsel for the inquiry, resigned amid allegations over the appearance of a conflict of interest.

Chartrand, who was the assistant chief counsel, reportedly indicated in a resignation letter that he was unhappy with his role and decided to resign. He wished the inquiry well in its future work.