Transport Committee on May 21st, 2013

[Ed Holder, Conservative, London West, ON]

Thank you, Chair.

I'd like to thank our guests for being here today.

It's rather interesting that I heard Mr. Sullivan ask some questions supporting our Canada jobs act, which was announced in the budget. He was so positive about it that I'm actually looking forward to the official opposition supporting the budget, going forward.

[Some hon. members]

Oh, oh!

[Mike Sullivan, NDP, York South—Weston, ON]

It's too bad there are so many bad things in it.

[Ed Holder, Conservative, London West, ON]

When he broached the issue of CETA to you, Mr. Buda, I was impressed that you said you're pretty happy with the progress of the dialogue relating to CETA that has gone on between our trade team and the provinces it is communicating with.

You made another comment that I thought was interesting. You talked about the unprecedented level of federal support. If you think about it, it really is true. Under this government, we made permanent the gas tax, we have doubled it, and now we've indexed it to the cost of living. I think those are reliable funds that municipalities can look forward to. So I appreciate your vote of confidence, but I'd like some clarification, if I may have it.

Mr. Thompson, you seem lonely over there. I'd like to bring you into the discussion, if I can.

We have heard in discussion here a lot of talk about the issue of union shops and non-union shops, from the standpoint of bargaining or being able to compete for work. We heard that there may or may not be a financial difference. Mr. Dijkema made it clear that he felt there was. Mr. Buda expressed caution.

Mr. Thompson, even if there were not one cent of financial difference between a union shop and a non-union shop, assuming that the skill levels were the same—and I think that's what we heard Mr. Dijkema say—on what grounds could you justify the FCM's taking the position that we discriminate against non-union workers?

I'm trying to understand the moral imperative there. I'm trying to ask the question: how could we imagine that we could say to folks, just because they don't belong to a union, they don't have the right to work? Can you help me understand that, please?

[Adam Thompson, Senior Analyst, Policy and Research, Federation of Canadian Municipalities]

Sure. As my colleague Mr. Buda said, municipalities are in the business of already providing the best value for tax dollars, and that comes with a predictable stream of investments that you can bank on and plan on.

From what we've heard from the members we've consulted with, the discussions at the council table rarely involve moral imperatives. Most of the time, municipalities are fully consumed with their primary business model, which is how to provide infrastructure to both create jobs and enable the private sector to flourish within their community.

[Ed Holder, Conservative, London West, ON]

Mr. Thompson, I'm sorry to interrupt you. Do you not believe that there's a moral obligation that the FCM must take up to give every worker the right to work in Canada, regardless of their union or non-union status, as long as they're qualified?

What's your view?

[Adam Thompson]

Well, certainly the work FCM does in Ottawa is about enabling and facilitating our members in their work. Decisions about the best case at the local level we reserve for discussions around the council table. In that sense, with that frame, we rarely get into presenting moral imperatives to our members.

[Ed Holder, Conservative, London West, ON]

It's just the right thing to do.

Mr. Buda, you can chip in here. If someone has a view on doing the right thing.... Now, maybe I'm wrong, but it strikes me that whether I'm a union worker—and I have belonged to unions in the past in my part-time jobs as a kid growing up. When I worked full-time I did not work in a union environment. By the way, these are good, decent people whether they work in a union or don't work in a union; I don't particularly care.

But do you have a personal view? You already said earlier that your bosses are who they are, and I get that. Let's forget even the personal view. At what point do you—or do municipalities, more fairly—have the right to say to a person, even if they're legally allowed to do so through their provincial regulations, and I understand that as well, that just because of their union or non-union status that person does not have the right to work with you?

You'll notice that I haven't touched on any financial issues here. I'm just talking about the decent and right thing to do.

Let's even forget the words “moral imperative”. Those are big words. Let's just talk about the right thing to do, and tell me why you as a senior policy adviser to FCM wouldn't come back and say to these folks, “Sometimes we just have to do the right thing”?

Help me get that part, because I just don't.

[Michael Buda]

Personally, I think that in an ideal world what you're suggesting should apply. I think the real world is incredibly complicated, and politics in fact is really deciding among a series of greys, not black and white.

I'll give you a very specific example. Obviously a portion of the municipal workforce, especially on the operational side, is unionized. That's just the way it is and has been—just as it is, in fact, at the federal government level. There are certainly cases in which collective bargaining agreements that have been negotiated with the municipal union have been negotiated with the understanding that some of their outsourced contracts are going to include closed tendering.

So hypothetically, if that were the case and you used it as a negotiating tactic to reduce the cost of your contract terms with the bargaining units of your operating unions, and the savings outweighed any potential increase in costs of your outsourced work, might that not be a trade-off that a politician sitting around a council table would have to take an interest in?

[Ed Holder, Conservative, London West, ON]

Sir, maybe a bureaucrat with FCM finally has to say that we need to look at things in black and white, that it is not shades of grey and sometimes it is just the right thing to do, and let's be measured by doing the right thing.

I would hope, going forward, that when you're giving advice to your people, you would say that ultimately, we sometimes just have to do the right thing.

Thank you, Chair.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Watson, you have the last question.

[Jeff Watson, Conservative, Essex, ON]

How to follow Mr. Holder....

Mr. Dijkema, let me just pick up where I left off before.

Were an agreement between Canada and Ontario for the next generation of building Canada programs to include the requirement that contracting be open for infrastructure projects, we already established in your report that 91% of Ontario municipalities wouldn't have to be concerned about such a procedure. They already have open tendering.

Four municipalities in your study, you say, representing a quarter of the population of the province of Ontario, are subject to labour monopolies. You identified that three-quarters of a billion dollars of infrastructure funding is subject to these restrictions currently.

Did I read your report correctly? The estimated inflation that your organization has identified on that three-quarters of a billion dollars is about $83 million. Is that the number? I read that in one of the charts there.

Is that what you're saying?

[Brian Dijkema]

The number—if we're including Waterloo and let's presume that is the case—is actually $942 million in Ontario alone. It doesn't include, for instance, any funds that have gone into energy infrastructure in Ontario, which is also subject to closed bidding but on which we haven't done the fine work that we've done at the municipal level. It doesn't include Manitoba, as well, and there are hundreds of millions there. So if we're looking at that number, the range that we've suggested is anywhere from 2% to 40%. So on $941 million, that's anywhere from about $4 million to $78 million of savings.

[Jeff Watson, Conservative, Essex, ON]

In figure 11, what does the $83-million figure attributed to Cardus mean?

[Brian Dijkema]

That is the percentage.... I'm just going to refer back to my paper for a minute.

[Jeff Watson, Conservative, Essex, ON]

It's on page 12, figure 11.

[Brian Dijkema]

That's 10% of the initial study, which was $747 million.

[Jeff Watson, Conservative, Essex, ON]

The inflation would be higher than that.

[Brian Dijkema]

Right.

[Jeff Watson, Conservative, Essex, ON]

Okay.

That number, if it's higher than that, would purchase the entire capital plan for the City of Belleville, Ontario. If my numbers serve me correct, I think that's a value that the taxpayers should be concerned about.

We've had witnesses here who've testified that U.S. studies show that closed tendering increases the inflation, if you will, to taxpayers 12% to 18%. The Greater Essex County District School Board, after religiously tracking purchase order invoices for a period of three years for one of the six unions that used to be part of the monopoly there, said 10% to 20%. So these numbers are not insignificant when you're looking at value for money.

Is closed competition troublesome because it removes the possibility of a low bid coming in that keeps the pack honest? How would you characterize the inflation in terms of the mechanics of the process?

[Brian Dijkema]

As I noted in my initial presentation, there are really three factors at play when you open bidding up to competition. One is that, as the bidders increase, you have an incentive to try to beat your competitor. As there are more competitors, you are less able to anticipate the behaviour of somebody else. If you're regularly competing against the same two players, for instance, in the local environment, you may know that they're busy right now and aren't going to be able to handle it. So you're going to read their behaviour and bid slightly higher and deal with that accordingly.

But there are also times in the construction world where companies are what they call hungry. They want to keep their workforce employed because they know they have work two years down the road and they'll take a haircut on their profit to win. That's the second one. Then the third reason, of course, is that it does have the tendency to reduce collusion.

[Jeff Watson, Conservative, Essex, ON]

The collusion factor, that relates directly to the predictability of knowing the players in the bidding pool?

[Brian Dijkema]

There are a variety of reasons for collusion. Infrastructure is big dollars. It's a major source of revenue for construction companies, so there are a variety of reasons for collusion. Sometimes there are unsavoury elements at play. Other times it's if you scratch my back, I'll scratch yours.

[Jeff Watson, Conservative, Essex, ON]

Just for folks who are watching, and with respect to Ontario, for example, how does a municipality become a construction employer? It seems a little strange.

[Brian Dijkema]

Right. This a matter of provincial legislation, this particular issue. But the way in which the construction labour relations legal regime was set up, it was set up in the seventies to anticipate certain types of unions and certain types of relationships, and it was modified slightly later again. But as I've said, it's outdated. There's a lag between the policy and the reality on the ground. The reality on the ground is that there are a variety of labour players in the spectrum. The reality is that the policy does not recognize that.