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2006 May Status Report of the Auditor General of Canada

May 2006 Status Report—Chapter 7

Exhibit 7.7—Risks that can affect leases

Risks can occur throughout the life cycle of a lease—from planning, to fit-up, to moving staff into their offices. The following are examples of typical risks that can arise at various points in a leasing transaction.

Client-related risks. A client department may change its requirements for the amount and type of space and its fit-up specifications. If this situation arises, the change may result in delays and increased costs.

Legal risks. Potential legal risks may arise in the tendering process of Public Works and Government Services Canada (PWGSC). Examples of these risks include changing the bid process midstream or accepting an unsolicited proposal from a bidder.

Contractor-related risks. Part way through a project, a general contractor may not be able to finish a building because of bankruptcy. The attendant risks include cost overruns, delays, and potential liability for the Crown.

Landlord-related risks. At the end of a lease, a landlord of an occupied building may not be willing to renegotiate at favourable terms or may not want to modify buildings to meet PWGSC's project schedule. These risks may result in increased costs and delays.

Internal risks. Many PWGSC staff are involved in leasing projects, and numerous changes to projects can occur. A lack of co-operation among all involved can result in delays and cost overruns.