NDP questions province's failed low-income housing project
David Forbes says government should have sued developer
The provincial opposition says the provincial government should have taken Deveraux Developments to court after it failed to deliver a low-income housing project within the terms of the contract.
“It’s only common sense that any contract you sign should stand up in court,” said David Forbes, NDP MLA.
Forbes said if the government didn’t enforce the contract because it was poorly written, then it should come clean and say so.
“If there were problems with that contract then the government needs to own that responsibility.”
Fixed price agreement falls apart
A year and a half ago, Deveraux signed a fixed price contract with the province committing to build 48 low-income housing units for $9.9 million.
However, the company ended up with a $400,000 cost overrun and wanted the government to cover half, but the province refused to pay it.
The government also decided against taking Deveraux to court, instead opting to walk away from the deal allowing the private company to keep the building and rent it out at market rates.
Deveraux returned the full $1.98 million down payment it received from the government.
Province should take responsibility, says opposition
Forbes said that if the province wasn’t going to take the developers to court, it should have paid its share of the cost overrun.
“The Wall government needs to own that responsibility and we think they should have stepped up and paid the extra money because of their own fault,” explained Forbes.
But the provincial government said despite the failure of the social housing project in Regina, there are no problems with the way the contract was structured.
“It was done in a manner that we felt was appropriate at the time and we’re not looking at changing this general nature of the contract as a result of this,” said Tim Gross, the executive director of housing development for Sask. Housing Corp., an arm of the provincial government.
Sask. Housing has four similar projects on the go, one of which is being built by Deveraux Developments, the company that built the failed Regina project.
That project is a 36-unit low-income housing complex being built for the government in Moose Jaw.
Province says similar problems with other projects not likely
Gross said he doesn’t expect similar problems with that contract, though he admits it’s possible.
“We’ll deal with each of those on a one-off basis and we’ll see. If it’s done again we’ll have to look at all our options,” Gross said.
Paul Emaunelli, a procurement lawyer, agreed with the opposition and argued the government should hold the developer to the terms of the fixed price contract it signed with the province, despite cost overruns.
By allowing the private company to get out of the deal, he said the province may be setting a problematic precedent.
"If [the project is] not managed correctly this could allow developers to have the provinces insure and underwrite a project.”
That is what concerns the NDP.
Forbes said the government’s failure to enforce its contracts sends a terrible message to other developers.
Procurement lawyer says province should have held developer to contract
Emanuelli added that once the project is complete, private companies could be tempted to “use that opportunity to walk away from the deal and commercialize the opportunity themselves."
Emanuelli said contracts of this nature should impose significant consequences on firms that don’t live up to contracts.
"Make sure that you have realistic deterrents for non-performance built into the contract so that performance ultimately is a better option to the contractor than walking away from the deal."
Forbes said he wants to examine the contract to make sure it was written in a way that is enforceable.
The 36-unit low-income housing project in Moose Jaw is currently under construction and is expected to be completed in late November or early December.