Page: 65

Observation:

We observed that in practice, certain contract terms were modified in favor of the City and only verbal agreement with the contractor was obtained. Contract terms were not formally amended. For example, penalties applied and processed were higher in actual contract payment calculations than are specified in the agreement. Management has indicated that such items were agreed with the contractor however no documented evidence of such agreement exists.

Implication:

Without formally amending the contract terms or obtaining written consent from the contractor, the City could be possibly exposed to the risk of non-compliance to the contract and involved in contract dispute if the contractor does not agree with the City’s practice any more.

Recommendation:

Contract Management should formally amend contract terms and obtain sign off from both parties. In addition, the City’s standard Contract Dispute Resolution clause should be included in the contract to outline the process to be followed in case of disputes.

Management Action Plan

Moving forward, any and all settlements and agreements made with the contractor that are contrary or different than the terms set out in the contract will be documented with explanation and backup and formally agreed upon by both parties.

Responsible party:

Contract Co-ordinator

Due date:

Q4 2020