Previous Master Innovation and Development Plan liveblog entries available here

I highly recommend the Auditor General’s Waterfront Toronto report for those of you looking to understand how we ended up with Sidewalk Labs’ controversial smart city proposal.

What emerges from the report is a picture of a small agency, hamstrung by a lack of authority and funding, running out of seed capital (p. 680). Then, in 2016, it latches onto the smart city idea as a way to allow it to fulfill its wider development mandate. In this telling, the Quayside parcel of land, which it controls, provides Waterfront Toronto with leverage to increase its ability to develop the overall waterfront, which, the report notes many times, it does not directly control.

Unfortunately, neither Waterfront Toronto nor the Province of Ontario come across as having had any idea about what creating a smart city actually involves. Waterfront Toronto was inexperienced in this area: “Up until the awarding of a project to Sidewalk Labs for the development of the smart city, Waterfront Toronto had primarily handled traditional mixed-use developments. As a result, it had limited experience in digital data infrastructure development” (p. 689). A smart city was “originally not part of Waterfront Toronto’s Development Plan” (p. 688), only showing up on its radar with the appointment of CEO William Fleissig in January 2016 (p. 688).

The reactive April 2018 creation of a part-time Digital Strategy Advisory Panel of “limited” effectiveness is a pretty clear admission that Waterfront Toronto lacked a basic understanding of digital issues. The same can be said for Ontario, which “lacks a policy framework to guide the development of a mixed-use smart city such as the one being contemplated for Quayside” (p. 653). In particular, they were unprepared to deal with such foundational smart-city issues “intellectual property” and “data collection, ownership, security and privacy” (p. 653).

Odd approval process

And so we get a Request For Proposals process that raises one red flag after another. Some of the more dramatic involve Sidewalk Labs being given more information than other bidders, a rushed approval process and an unusual lack of consultations by Waterfront Toronto with its government stakeholders on Sidewalk Labs’ proposal.

Rather, the Auditor General notes briefly that the proposal instead “was being discussed at a senior political level.” The fact that the Waterfront Toronto Board felted pressured by the federal and provincial governments (p. 691), combined with critiques that Prime Minister Justin Trudeau’s government favours “foreign tech giants over Canadian firms,” as well as Trudeau’s presence at the initial announcement of Sidewalk Labs’ Quayside application, raise questions about the role of politics in the selection of Sidewalk Labs.

At the very least, Trudeau’s ongoing support for Sidewalk Labs should be an election issue. Of particular interest should be the circumvention of regular procedures by Waterfront Toronto, the political role of Ottawa in the process (a touchy question in the wake of the SNC Lavelin affair), and the poorly thought out consequences of depending on a foreign tech company to anchor your innovation sector: Being a branch plant economy in the digital age may not provide the same benefits as it did back when manufacturing was king (e.g., Rodrik 2016, esp. p. 6).

Weak accountability

There’s also the issue that approval of the MIDP “will not require the governments’ approval and signing” (p. 694).  “Only Waterfront Toronto’s Board is required to approve the MIDP, and Waterfront Toronto is allowed to seek approval from any or all three governments at its discretion.” (p. 694) Instead, governments can only influence Waterfront Toronto through the selection of their board members.

Few specifics on data and surveillance

The Auditor General’s report also notes that detailed information on how Sidewalk Labs and Waterfront Toronto’s high-level principles on data, security, privacy and surveillance would be realized were “not included in the Plan Development Agreement. The Master Innovation and Development Plan (MIDP) and implementation agreements are expected to address this.

The report goes on to note:

Also absent is clarification on whether personal information, which Sidewalk Labs gathers, will be linked to its sister company’s, Google’s, existing collection of personal data in its users’ accounts (p. 692).

While accurate at the time (December 2018), it’s my understanding that the MIDP claims that Sidewalk Labs will not link its data with Google’s.

Looking forward…

As we will see when we get to the other documents, Waterfront Toronto’s apparent lack of basic understanding of the central role of data governance, intellectual property and surveillance in the context of a smart-city development seems to have led it to turn  decisions about how the rules should be set in this critical area over to a foreign, for-profit company whose main claim to fame is that it is intimately linked to Google, a company with a dubious track record when it comes to foundational issues like privacy and telling the truth about what its products do.

General notes

An agency plagued by a lack of authority

Successful oversight requires that the overseer has the authority to ensure the job is done right. Unfortunately, Waterfront Toronto was never given this authority, and as a result, the development of Toronto’s waterfront lands has largely continued to be driven by historical practices, the existing bylaws, and other regulations governing commercial and residential development. Waterfront Toronto has been able to rezone just over 150 acres of land from industrial to mixed commercial-residential use. … (p. 648)

From day one, Waterfront Toronto was well aware of the constraints that it operated under … . Waterfront Toronto, on several occasions, informed the three levels of government of the constraints, but few changes were made. Waterfront Toronto’s communications to the public gave the impression that it was playing an irreplaceable role in the world-class transformation of Toronto’s waterfront, a total of 2,840 acres. This was not our conclusion. (p. 648)

Quayside: Waterfront Toronto’s chance to shine

Waterfront Toronto’s purchase of Quayside land between 2007 and 2009 created an opportunity for Waterfront Toronto to develop land in the way it sees fit. This will be Waterfront Toronto’s first development of its own land. (p. 649, emphasis added)

Waterfront Toronto’s Quayside autonomy

It was proactive of Waterfront Toronto to seek out interested parties to procure an innovation and funding partner for Quayside. This in effect gives Waterfront Toronto the autonomy that would have been beneficial for it to have had over the last 15 years. (p. 649, emphasis added)

Concerns with Sidewalk Labs Agreement

However, its new agreement with Sidewalk Labs raises concerns in areas such as consumer protection, data collection, security, privacy, governance, antitrust and ownership of intellectual property. These are areas with long-term and wide-ranging impacts that the provincial government, along with the City of Toronto, needs to address from a policy framework perspective to protect the public interest before this initiative proceeds further. (p. 649, emphasis added)

Waterfront Toronto oversight problems

Rushed agreement:

the Board of Waterfront Toronto was given just a weekend to discuss and understand the implications of the initial Framework Agreement before being asked to approve it. (p. 649)

The Intergovernmental Steering Committee also expressed concern about the lack of sufficient time given to the Board and the governments to review the initial Framework Agreement. The committee itself was only made aware of the name of the successful bidder five days before the October 17, 2017, public announcement, which involved the Prime Minister, the Premier of Ontario, the Mayor of Toronto, Waterfront Toronto and Sidewalk Labs.” (p. 649, emphasis added)

The Intergovernmental Steering Committee was briefed about the project and RFP in a June 2017 meeting, about three months after issuing the RFP. (p. 689)

The Mayor’s Office

had received ‘almost no information about the project’ according to an internal Waterfront Toronto email three weeks prior to the signing of the Framework Agreement. In addition, while Waterfront Toronto signed the Framework Agreement with Sidewalk Labs on October 16, 2017, the three levels of government expressed frustration according to the Intergovernmental Steering Committee meeting minutes that they did not receive a copy of the signed agreement until after November 2, 2017. (p. 689)

The Framework Agreement was presented by the Chief Executive Officer to Waterfront Toronto Board members on October 13, 2017, and the agreement was approved by the Board on October 16, 2017. On the same date, the Framework Agreement was signed by the Chief Executive Officer and the Chief Development Officer of Waterfront Toronto following Board approval. (p. 689)

Prior to receiving the formal draft agreement for its review and approval, the Board was given two briefings about the project on October 11 and 12, 2017. However, the two briefings were background information about the project and the RFP selection process and a high level briefing on the terms of the Framework Agreement. The three-member Investment and Real Estate Committee of the Board typically reviews similar agreements prior to recommending an agreement for Board approval. This Committee received an overview of the principles and draft terms of the Framework Agreement about one month prior to the submission of the agreement to the Board for approval and met with management a number of times to review issues. However, the Committee could not reach a consensus on whether or not to support the project. As a result, it did not issue a recommendation on October 13, 2017, to the Board on whether or not to sign the agreement. Not only did the Board not receive a recommendation from its sub-committee, it had only one business day to review the agreement prior to providing approval. (pp. 690-691)

No operational review of Waterfront Toronto

by May 2018, the federal, provincial and city governments had further committed to providing $1.25 billion to Waterfront Toronto to cover the cost of flood protection of the Port Lands. This also extended Waterfront Toronto’s operation to 2028 without the benefit of an operational review of Waterfront Toronto. (p. 649)

$US 40 million of Sidewalk Labs’ initial $US 50 million investment was contingent on $1.25 billion in government funding

Sidewalk Labs’ provision of $50 million to further explore the development in Quayside was contingent on the three levels of government providing this $1.25 billion toward Port Lands flood protection. (p. 649)

Waterfront Toronto only controls Quayside. It can’t promise anything beyond that. And yet…

A second agreement with Sidewalk Labs called the Plan Development Agreement, signed in July 2018, replaces the initial Framework Agreement and potentially opens the door to expand the Sidewalk Labs’ project to the approximately 600 acres of land in the Port Lands. Waterfront Toronto does not have the authority to grant rights to lands beyond what it owns in Quayside. (p. 649)

From our review of information from July to December 2016, we confirmed that Sidewalk Labs’ interest in Quayside from the start was being able to expand its project to the Port Lands. As noted in Section 6.2.1, Waterfront Toronto does not have authority to grant rights to lands beyond the lands in Quayside that it owns and that Sidewalk Labs is aware of this limitation. (p. 690)

Waterfront Toronto has been asked to make development financially self-sustaining

Waterfront Toronto’s mandate is to make ongoing waterfront development “financially self-sustaining.” It has failed to do so and remains dependent on government funding. It only began pursuing strategies “to generate revenues from corporate partnership and to explore strategic philanthropy” in 2016. (p. 651)

Waterfront Toronto’s projects went over cost, and were hampered by “poor oversight” and monitoring issues “due to poor documentation.” (p. 651)

 Questionable procurement processes/Favourable treatment for Sidewalk Labs

Sidewalk Labs received more information from Waterfront Toronto prior to the RFP than other parties that would be responding to the RFP. (p. 652)

As well, Waterfront Toronto provided Sidewalk Labs with surveys, drawings, topographic illustrations of the waterfront area including Eastern waterfront, and other materials. Sidewalk Labs architects signed a digital data licence agreement with Waterfront Toronto to allow Sidewalk Labs to use the information it was provided. (p. 689)

Although Waterfront Toronto did not issue the RFP until March 2017, in August 2016, Waterfront Toronto also signed a non-disclosure agreement with Sidewalk Labs in order to receive information from it. Further, in September 2016, Waterfront Toronto met with a delegation from Sidewalk Labs and provided a site visit and tour of the waterfront area. (p. 689)

Sharing agreements were also signed with Sidewalk Labs and two other organizations, one of which was also shortlisted. (p. 652)

Waterfront Toronto’s defence:

Waterfront Toronto advised us that this sharing of information was before the issuance of the RFP and part of their regular market sounding process where they were trying to gauge market interest in the Quayside project. Further, Waterfront Toronto said the information provided did not give these potential bidders an unfair advantage over other potential bidders that did not receive the information and would have been provided to any interested party that would have requested it. (p. 689)

Rebuttal:

Fair practice and equal treatment would suggest that all potential bidders receive the same information at the same time. (p. 690)

Lack of proper government consultation

Unlike its previous operating practices, Waterfront Toronto did not adequately consult with any levels of government regarding the Sidewalk Labs project. (p. 652)

However, in issuing the original RFP for a funding and innovation partner for the smart city project, Waterfront Toronto did not ask the City to review the RFP or be involved in the evaluation and selection of the successful bidder. (p. 693)

Shorter-than-usual timeframe

Waterfront Toronto gave respondents only six weeks to respond to the RFP for the smart city project. Six proponents responded, of which three were shortlisted. The unsuccessful respondents that we interviewed indicated to us that the six- weeks response timeframe for a project of this magnitude was too short. In comparison, in the past Waterfront Toronto has given bidders significantly longer to respond to more traditional tenders. (p. 690)

A very political deal

Unlike its previous operating practices, Waterfront Toronto did not adequately consult with any levels of government regarding the Sidewalk Labs project. … Waterfront Toronto did not adequately consult with any [relevant government departments] prior to signing an initial agreement on October 16, 2017, and beyond. This was being discussed at a senior political level. (p. 652, emphasis added)

we found internal Waterfront Toronto emails indicating that the Board felt it was being ‘urged—strongly’ by the federal and provincial governments to approve and authorize the Framework Agreement with Sidewalk Labs as soon as possible. The October 17, 2017, public announcement by the Prime Minister, the Premier, the Mayor, Waterfront Toronto and Sidewalk Labs about the signing of the Framework Agreement was arranged on October 12, the day before the Board received the final Framework Agreement for review and approval. (p. 691)

The Quayside proposal brings into play multiple overlapping jurisdictions (e.g., transportation, construction, economic development, privacy, planning, waste management), with little adequate consultation:

Prior to the signing of the Plan Development Agreement, Waterfront Toronto had not adequately engaged these ministries or divisions in consultation on the potential impact of the smart city project on the sectors they oversee. (p. 693)

• Question: Do the other levels of government believe that consultations around the MIDP sufficiently reflected their interests in these policy areas?

Data collection and use: murky waters

The Plan Development Agreement also proposes new data governance approaches, such as the use of a data trust, where data is stored by a third-party organization. However, the agreement does not provide specifics on data governance. (p. 692)

Also absent is clarification on whether personal information, which Sidewalk Labs gathers, will be linked to its sister company’s, Google’s, existing collection of personal data in its users’ accounts. (p. 652) [although see update in main text above]

Treatment of intellectual property: vague

 the Plan Development Agreement is generally vague as to ownership, use and commercialization, leaving many of the details to be deter- mined in the MIDP and subsequent implementation agreements. If the Plan Development Agreement is terminated, then it is likely that Sidewalk Labs will retain ownership of any intellectual property it has developed to date, but Waterfront Toronto would receive a perpetual, royalty-free licence of site- specific (only in Quayside) intellectual property. (p. 694)

Digital Strategy Advisory Panel: “limited” effectiveness; busywork; resignations

Based on discussions with Panel members, the Panel’s effectiveness in providing management guidance on key issues in the smart city project has been limited. (p. 652)

Members assessed some meetings as primarily focused on administrative work, such as project background and confidentiality, and technical and scheduling issues. (p. 652)

There have also been two resignations due to concerns over lack of transparency and apathy on the part of Waterfront Toronto over residents’ concerns over data privacy. (p. 652)

Various members of Waterfront Toronto’s Digital Strategy Advisory Panel raised concerns with respect to the proposal including the following:

• the location of the storage of data—within Canada or outside Canada (whereby Canadian privacy laws can be bypassed);

• the access to and use of data stored in the trust; and

• what proportion of the data collected will actually be stored in the trust.” (p. 692)

Waterfront Toronto and Sidewalk Labs: Jointly responsible for future Requests for Proposals

The current agreement between Sidewalk Labs and Waterfront Toronto requires the two parties to jointly issue requests for proposals (RFPs) to developers if the project goes ahead. (p. 653)

Waterfront Toronto had revised its procurement policy in June 2018, making it easier to procure goods and services without a competitive tender process and no requirement to document the rationale for awarding the contract to a single or sole supplier. (p. 693)

Ontario doesn’t have an effective framework to guide a smart-city project like this

the Province lacks a policy framework to guide the development of a mixed-use smart city such as the one being contemplated for Quayside. (p. 653)

This framework should address:

• intellectual property;
• data collection, ownership, security and privacy;
• legal issues;
• consumer protection issues;
• infrastructure development; and
• economic development. (p. 653)

Waterfront Toronto’s response to the Auditor General’s report on data privacy issues was quite limited:

At the same time, people are interested in issues about data privacy and what role technology should have in our lives. (p. 654)

Waterfront Toronto commits to consulting with the three levels of government “and giving the governments an opportunity to review and comment on any key documents before they are approved by the Waterfront Toronto Board. (p. 654)

The provinces’ response does not address the Auditor General’s call for a smart-city framework.

The Auditor General’s Quayside-related recommendation (p. 695):

“that the provincial government, in consultation with partner governments:

• conduct further study on the activities of Waterfront Toronto and Sidewalk Labs in the planning and development of the smart city in Quayside and the broader waterfront area;
• reassess whether it is appropriate for Waterfront Toronto to act on its own initiative
• in making commitments and finalizing a long-term partnership arrangement with Sidewalk Labs or whether a separate governance structure is needed that allows for more direct provincial oversight;
• establish an advisory council comprised of smart city/digital data infrastructure experts (e.g., information technology, privacy, legal, consumer protection, infrastructure development, intellectual property and economic development) to provide proactive advice
• on the development of a policy framework to guide the establishment of a smart city in Ontario;
• conduct public consultations to consider in the development of a policy framework for a smart city in Ontario;
• consult throughout government on the roles and responsibilities government ministries and agencies could have during the development, implementation and operation of a smart city;
• to protect the public’s interest, establish the policy framework, through legislation, for the development of a smart city in Ontario that addresses: intellectual property; data collection, ownership, security and privacy;
• legal; consumer protection issues, infrastructure development and economic development; and
• communicate openly and transparently with the public on what to expect from a smart city project.”

The province commits only to studying these issues.