Fair competition matters when big infrastructure dollars roll in


June 8, 2016

Fair competition matters when big infrastructure dollars roll in

As the federal government gets set to shower municipalities with billions of dollars in new infrastructure funding, there is a welcome warning from the Federal Competition Bureau. “I think it’s fair to say that when procurement is done in haste and perhaps the competitive bidding process is done quickly and there’s not a lot of care taken, it increases the likelihood of bid-rigging,” said Commissioner of Competition John Pecman.

With approvals fast-tracked and minimal strings attached, municipalities should be exercising extra due diligence to ensure that the bidding process is fair, open and competitive. Ironically, this process is anything but in too many Ontario municipalities, including the Region of Waterloo.

At the level of regional government, as well as in Toronto, Hamilton and Sault Ste. Marie, there is no fair and open competition on construction projects that are funded by taxpayers. In these municipalities, there are companies who already have an unfair advantage. Right now, the Region of Waterloo can only tender construction work to companies with ties to select unions. Everyone else is shut out of the bidding process. As a result, many highly respected contractors aren’t allowed to bid on publicly funded construction projects, even when they can do the work at lower prices. It doesn’t sound right, does it? Still the Ontario government, which is well aware of the problem, and implications, allows it to continue.

It’s not that there hasn’t been a fight to change this. The Region of Waterloo tried and lost its appeal to the Ontario Labour Relations Board in 2014. Others have also taken up the cause. The Ontario Chamber of Commerce, the Large Urban Mayors’ Caucus and the Association of Municipalities of Ontario have also urged the Ontario government to fix antiquated labour laws that stifle construction competition and drive up costs. “Restricted tendering increases project costs, harms local economic development and prevents the public from getting the best value for its tax dollars,” said Association of Municipalities of Ontario president Gary McNamara in a letter to the province’s labour minister just over a year ago.

There’s been a good deal of study showing that when there’s less competition, it leads to significantly higher costs for taxpayers. According to research by the Cardus think-tank, the Region of Waterloo is paying anywhere from 20 to 30 per cent more than it should for construction projects. Apply that to the millions of dollars in work the region performs, and it translates into major savings — money that could go toward the light rail transit project, or defraying this year’s tax increase.

The reality is that when federal funding for infrastructure arrives in Waterloo region, it will not go nearly as far as it should. Project costs will be higher and that means taxpayers will not get the best value.

Legislative change is needed for this to stop, but no matter how great the impact on taxpayers and municipalities, or influential the bodies urging change, the province has not been willing to budge.

With construction projects across the country about to be infused with generous amounts of federal funding, why should the Region of Waterloo taxpayers be getting a smaller bang for their buck? If there’s any plausible explanation, now would be a good time to hear it.

Darrel Reid is vice-president for policy and advocacy at the Progressive Contractors Association of Canada.