The plethora of mistakes and oversights city staff made when it came to building Hamilton’s first outdoor shelter came into full view this week as frustrated councillors delved into a scathing audit. 

The site on Barton Street W. fully opened last March and houses about 80 people in pre-fabricated cabins. 

But the project came in almost three times over budget, with staff spending $5.1 million more than the $2.8 million council had approved, and ordering the cabins from a company, MicroShelters Inc., with no track record. The cabins arrived late and unexpectedly had to be retrofitted to meet Ontario’s building, electrical or fire codes. 

The city’s Auditor General Charles Brown investigated the debacle and released his report last month, which councillors and the mayor addressed at a special general issues committee meeting Tuesday — at times grilling staff on their decisions. 

Those decisions included staff never consulting the city’s legal team when entering into a purchase agreement with MicroShelters, or when paying large deposits for the cabins without seeing them in person, and with no contract or warranty in place, councillors heard.

City manager Marnie Cluckie said she acknowledged “the seriousness of the findings” and said she was sorry for the “gaps in oversight and governance.” 

But for several councillors, an apology wasn’t enough. 

“‘Sorry’ is not going to cut it for wasting millions of taxpayer dollars,” said Coun. Matt Francis. 

Coun. Brad Clark, who chaired the meeting, called for more accountability, although he didn’t say what exactly that could mean. 

“Everyone around in this room is pretty upset about it, pretty disappointed,” said Clark. “I don’t understand how the city manager and senior leadership did not have their eyes on the prize.”

‘In dire straights’ to open shelter, says manager

The outdoor shelter process began in August 2024, when the mayor directed staff to quickly come up with a plan to create an outdoor shelter in response to Hamilton’s homelessness crisis. She expressed urgency but didn’t give a deadline, except to report back the next month. 

In September, council approved a budget of $2.8 million and for staff to select a company rather than go through an open bidding process to save time. 

Housing staff selected MicroShelters, which had reached out to the city unsolicited but promised to quickly deliver cabins large enough for couples, said Grace Mater, general manager of healthy and safe communities. 

Staff agreed to pay 50 per cent up front, followed by another 50 per cent deposit before the cabins were delivered, said Mater. These payments were signed off by five people in senior management. 

“Did that not set off alarm bells that we had to give them the money up front before we ever see the product?” Clark asked. 

Mater said it did but they were “in dire straights to get the product to us as soon as possible.” 

“I am shocked,” Clark later said. “There’s no fall back position if [the company] fails to provide exactly what they’re contracted to do.”

Project over budget within first months

Around the end of November, some staff had an indication the project was already $2 million over budget, the auditor general told the committee. 

“We talked about how the costs were coming in all the time,” Mater said. “While we admit we were wrong in not reporting back — that was one of the huge lessons learned — we did our best to make sure we were adhering to the rules and regulations.” 

But senior leadership, such as the city manager, was not made aware until January and council until May, said Brown. By the spring, staff had spent an extra $5.1 million.

Brown said it wasn’t overly surprising the project went over budget as the money allocated in the first place was “woefully inadequate.” 

However, housing staff were leading the project without construction knowledge. 

Coun. Tom Jackson noted that department was taking a lot of blame, “but where was public works and planning?” 

Among the auditor general’s 11 recommendations is to establish steering committees with all departments to oversee major projects in the future. The special general issues committee unanimously approved all the recommendations. 

MicroShelters responds

MicroShelters said in a statement that it has cooperated fully with the auditor general’s review but doesn’t agree with all the findings. 

“The company has consistently acted transparently and responsibly, replying on representations provided by its manufacturing partner at the time of procurement and delivery,” it said.

MicroShelters ordered the cabins from China through an American supplier and delivered cabins that met the contractual agreement it had with the city, the statement said. 

“Any cost overruns determined by the auditor general … are not attributable to the product supplied by Microshelters,” it said. 

“The company will continue to protect its reputation, its partners, and its employees while remaining focused on its mission to deliver innovative and compassionate housing solutions to Canadian communities.”