The City of Ottawa's in-house waste-collection department has spent $1.7 million more in the first four years of a six-year contract than it originally pledged, according to an external audit to be tabled at the environment committee's meeting Tuesday.

City staff are blaming the deficit on unexpected additional costs for labour, fuel and fleet repairs.

"You make assumptions when you prepare your bids, and sometimes your assumptions don't pan out," said ​François Leury, an account manager with the city's financial services department.

Asked if the deficit will grow over the final two years of the contract, Leury said: "It's possible that it will be larger; it's possible that it will be smaller. It can go either way."

In-house group given downtown contract

The city's administration divides the municipality into five zones — called C1 through C5 — to manage waste collection, which includes pickup service for green, black and blue bins, yard waste and so-called "residual" garbage.

Garbage truck waste ottawa

The city's in-house wast collection group garnered fewer complaints to 311 than private contractors in other zones, according to a city manager. (Roger Dubois/CBC)

In 2011, the city issued a contract tender for four of the five zones for six years of service, beginning in October 2012.

The council at the time awarded the city's in-house collection operation the contract for the city centre, known as Zone C3, without competition. After bidding against other companies, the in-house group was also awarded Zone C5, in the city's east end.

As part of that decision, council required an annual audit.

Audit finds $1.7 million deficit

Those audits, conducted by Ernst & Young, found that in 2016 the in-house group posted a $589,900 deficit for its operations in the downtown core, and a $665,060 deficit for the Orléans area. That's on top of smaller deficits posted in 2015.

To look at it another way, if the in-house group were an independent company, it would have lost $1.7 million on the two contracts, with two years to go.

City staff point out taxpayers are still ahead by about $430,000 for the east-end contract, the difference between the in-house group's bid and the second-lowest offer. But because the contract for the central area was sole-sourced, there's no way to compare bids.

Labour, fuel, fleet 

An unexpected arbitration ruling that forbade city management from using casual labour to fill in for employees who were sick or on vacation drove up in-house overtime costs substantially, according to Leury.

And the in-house group had higher fuel costs than expected, but not necessarily because of rising prices at the pumps. The contracts have escalators built into them, which, among other things, take into consideration inflation.

Instead, poor weather and heavy traffic congestion caused delays for garbage trucks trying to get from the east end to the city's waste facility on Trail Road.

The age of the city's fleet was also an issue, with trucks needing considerable repair. It's unclear why the in-house group did not factor in these costs when bidding for the contract.

In-house group gets fewest complaints

The city's director of waste services, Marilyn Journeaux, defended the in-house group's work, pointing out that the downtown core is one of the most difficult areas to service.

"It's the hardest zone because it has all of the old infrastructure," Journeaux said. "It Includes areas like the Glebe that has back alleys, it has on-street parking through the downtown core, so [workers] have to go around the parked cars to get the bins."

It's also the area that gets shut down the most for official visits, said Journeaux. For example, when former U.S. president Barack Obama visited Ottawa in June 2016, it was on a Wednesday, which is garbage collection day in that area.

Journeaux pointed out the two zones serviced by the in-house group garner the fewest complaints to 311.

"I think the fact our complaints are low in that area just says a lot to the calibre of the work that my staff do," said Journeaux.