Ontario Provincial Police officers are investigating suspicions that companies rigged bids for City of Toronto paving contracts to drive up profits while costing taxpayers millions of dollars, the Star has learned.

The allegations were uncovered by city auditor general Beverly Romeo-Beehler, whose briefing to city councillors Thursday left many alarmed by warnings of lax internal controls and predicting her ongoing probe will unearth more evidence of possible corruption.

“I'm concerned that this is the tip of a slippery slope,” said Councillor Josh Matlow, adding that signs of “fraudulent and insidious behaviour both externally and internally is just the beginning of this story, not the end.”

Romeo-Beehler previously said she was so alarmed by findings of possible contractor collusion to drive up paving prices that she had referred her findings to police but refused to say if it resulted in any action.

The Star confirmed Thursday that provincial police are looking at the possibility of criminal conduct.

“The OPP has been contacted and we are in fact carrying out an investigation,” acting Staff Sgt. Peter Leon, spokesperson for the OPP, said in an interview, declining to provide details on the ongoing probe.

Romeo-Beehler scoped paving contracts awarded by the city to private companies between January 2010 to June 2015 to ensure the tendering process is fair and competitive, after an earlier audit raised concerns.

She found indicators of companies allegedly colluding to ensure inflated bids would win some contracts, with winning companies apparently rewarding losing firms with lucrative sub-contracts.

The auditor general also suspects possible legal “unbalanced bidding” — schemes including contractors submitting apparently low bids knowing work involved will eclipse the city estimate and drive up their eventual profits.

The audit found examples of inappropriate conduct by city staff “entrusted to independently verify the quality of the contractor work,” and raised red flags about people moving between jobs at the city and paving companies.

Councillor Justin Di Ciano asked the auditor general how much wrongdoing might have cost the city.

Romeo-Beehler identified at least $2.5 million in needless spending on her small sample of contracts, but said corruption probes including Quebec’s Charbonneau inquiry suggest uncompetitive bidding could add as much as 30 per cent to a government’s contract costs. Toronto spends $1 billion per year on construction.

City manager Peter Wallace said the audit exposed a major systemic failure within the city bureaucracy to identify possible corruption. He agreed with Romeo-Beehler that four districts within the transportation departments operated like “empires,” with their own rules and practices for paving jobs and inspections of them.

The bureaucracy failed to properly centralize after the 1998 amalgamation, Wallace said, adding in unusually frank terms that corporate transformation to protect taxpayers’ interests will be difficult and he’ll need council’s support plus money for technology and talent.

“Does anyone in this (council) chamber know how many internal auditors there are? I think it's about half a dozen. That's an absolute joke and that should never have existed,” Wallace told councillors and Mayor John Tory.

“We need your support to invest in management, your support to invest in technology, your support to change things and not just to reflect back that what was good enough last year is good enough this year.”

Tory and his predecessor Rob Ford focused on budget austerity and low tax hikes. Tory this year convinced council to demand every department try to cut 2.6 per cent of spending, which triggered job cuts and purchasing delays.

Wallace agreed with Councillor Gord Perks that such frugality can cost taxpayers money in the long run.

“Two rules that reinforce the status quo in a negative way,” Wallace said, “are across-the-board targets and a focus on (the employee) head count.”

Romeo-Beehler said she was surprised to discover contractors submit bids only on paper. To do the audit, her staff had to borrow a van from the city clerk’s department, drive to city district offices collecting paper records and then develop spreadsheets that allowed them to analyze trends and discover the signs of collusion.

Her findings have prompted the city to start switching to electronic bids that will automatically build a database. Also, responsibility for paving contracts has been transferred to a different department.

The auditor general does not name the small number of companies who dominated the winning bids in all but one of the four districts. Her detailed report was crafted to make it difficult for readers to identify the firms.

The Star reviewed all publicly-available bid awards for paving contracts for the same period studied by the auditor general, but discrepancies in the total number and type of bids and a lack of detailed bid information on those public reports made it impossible to replicate her analysis.

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Rob Bradford, spokesperson for the Toronto and Area Road Builders Association, told the Star the auditor general’s report was “very general and inconclusive.”

He said he has heard several of his members were visited by OPP officers on an apparent “fact-finding” mission in March but he would not identify the companies.

Correction — April 28, 2017:This article has been edited from a previous version that mistakenly said Rob Bradford is the spokesperson for the Ontario Road Builders’ Association.

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