That is understood.....but, surely, if internal issues with the contractor/construction manager have caused delays and financial overruns it seems a bit illogical that that financial burden should fall on the client.
They don't necessarily fall on the client. Most of the time, the contractor has to eat it. It usually bites into their big safety net that they've built into the price (if they're smart).
^Can happen but isn't it hard to really say sometimes what is scope creep and what is incompetence? If I were a client or the owner and I had impunity to use scope creep as an excuse couldn't I massively massage the numbers in my favour?
There is certainly always going to be a risk that a contractor that is losing money is going to use extra work or additions to the contract as an opportunity to make up for losses. That situation can happen on any project. But that is exactly why the client retains consultants, whose specific job is to look after their interests and evaluate contractor performance, claims, invoices, etc.
If the contractor has "wasted tens of millions of dollars", that doesn't necessarily mean any addition financial burden is placed on the client. Construction contracts don't really work like that. Contractors bid a price and are generally held to that price. If the client and their consultants have evaluated any claims well, then they might have negotiated additions to the scope for fair prices, which means they've come out ahead. The only way to know for sure would be to evaluate the additions to the contract on a case-by-case basis and determine if the City ended up paying a fair price, or an inflated price.
Financial overruns can also occur due to unforseen circumstances, especially when you're dealing with the unknown that the contractor can't be expected to fully know from bid documents. In that case, financial overruns are expected, and can't be looked at in a black & white manner.