Transport Committee on May 23rd, 2013

[The Chair, Conservative, Larry Miller]

We'll call our meeting to order.

Thank you to our witnesses, Mr. McDonald and Mr. Harris, for being here today. We apologize for the delay, but it is silly season in Ottawa and it does come every year.

Without further ado we're working on the study on how competition can make infrastructure dollars go further. We appreciate your being here.

Mr. Aubin.

[Robert Aubin, NDP, Trois-Rivières, QC]

I would like to ask for a clarification.

[The Chair, Conservative, Larry Miller]

Yes.

[Robert Aubin, NDP, Trois-Rivières, QC]

I certainly don't want to slow down the process, but given the report that will be produced, I have a question about Mr. Harris. It is not of a personal nature.

The orders of the day list the Legislative Assembly of Ontario. I would like to know whether Mr. Harris is speaking on behalf of the Legislative Assembly of Ontario or whether this is simply a reference to the fact that he is a member of that assembly. This implies that we are meeting with the Legislative Assembly of Ontario through Mr. Harris.

[The Chair, Conservative, Larry Miller]

No. The clerk pointed this out to me when I first arrived, Mr. Aubin. This is a mistake, and it will be corrected in the minutes.

I believe Mr. Harris is here speaking about a private member's bill he has brought forward.

[Robert Aubin, NDP, Trois-Rivières, QC]

Okay.

Thank you.

[The Chair, Conservative, Larry Miller]

Mr. McDonald, you have 10 minutes, please.

[David McDonald, Spokesperson, Melloul-Blamey Construction Inc.]

Thank you very much for the opportunity to speak before this committee on an issue very close to our hearts, concerning value for taxpayers and fundamental human rights.

I am here as a representative of Bernie Melloul of Melloul-Blamey Construction, one of the largest contractors in the Kitchener-Waterloo region of Ontario. Mr. Melloul wanted to speak before you today, but due to another commitment is unable to attend. I have included in my presentation—which I regret has not been translated, so hopefully you'll get it later—a short bio of Mr. Melloul and his firm.

I am here as a representative due to our 20-year-long relationship as founding members of Merit Ontario, of which I am a past chair, and our shared cause of demanding that taxpayers get value for money in public construction tendering, that qualified contractors and workers not be disqualified from public tendering, and that the federal government respect charter rights in the expenditure of public money.

Others have come before this committee as representatives of various groups and organizations, but I come before you in Mr. Melloul's name as an aggrieved individual speaking directly for open-shop contractors, our employees, and employees in Ontario we have known for many years.

Others have brought forward the issue of waste in public tendering across Canada caused by monopoly tendering, so we will keep our comments short and stick to Ontario and issues from a perspective that others have not.

I've noted in other deputations that people have discussed some articles in The Record, on the shed issue. This is going to cause the Region of Waterloo to be threatened by a loophole in the Labour Relations Act whereby the labour board can certify the region to a carpenters' collective agreement as a private sector construction company, and thereby take over public tendering without negotiating with the region at all and create a monopoly for the carpenters' union and their affiliated contractors.

The same thing has happened in the city of Hamilton and ninefold in the city of Toronto. Essentially this means that the private sector interests will control public policy without democratic consent, and Melloul-Blamey, which has performed work for the region for decades—30 years to this point—and is currently working on the region's largest construction project, will be disqualified from any further public tendering for the region. One of its major clients will simply disappear because of a loophole in the Labour Relations Act. It and all other contractors in the region will be excluded from any federal funding that the region may receive, particularly the one-third financing of the $800 million Kitchener-Waterloo LRT line.

The attached industry survey of union density in Ontario, prepared by organized labour itself through the Ontario Construction Secretariat, shows the devastating impact this certification would have on the taxpayers of the region and the local contracting community. Fully 87% of area contractors have no union affiliation, and they would all be disqualified from public tendering for the region. Yet the apologists for the building trades corporate control and monopoly over public tendering claim there is no cost in eliminating 87% of the competition. How absurd is that?

Listening to building trade apologists, one would think that the infrastructure of Waterloo is rotting, when it is not. The truth is that the infrastructure of Quebec and Toronto is rotting under the unaffordable and wasteful burden of building trade monopoly tendering.

The vacuous, politically motivated sophistry of those who support closed tendering and discrimination against open-shop contractors and employees must be exposed for what it is—pure self-serving, politically motivated hypocrisy. We implore the federal government to step in and impose national standards of ethical and moral tendering practices where federal tax dollars are involved. If a province does not wish to abide by these standards, they do not get the money.

There are those, of course, who say that the federal government should not or cannot impose standards that might infringe on provincial jurisdiction and authority over labour law. To that we say “nonsense”.

As per the attached excerpt from Supreme Court of Canada, Justice Bastarache in R. v. Advance Cutting & Coring Ltd., 2001, noted that union-only construction tendering by governments is a violation of the charter rights of open-shop employees, and it is a form of compelled association and ideological conformity.

Of particular note in the attached Supreme Court of Canada excerpt is the reference to the most fundamental of the Etherington rights of what constitutes a violation of an individual's freedom of association:

The first liberty interest that might be threatened by forced association was the government's establishment or support of parties or causes. The second was defined as the impairment of individual freedom to join a cause of one's choice. The third and fourth consisted of the imposition of ideological conformity.

The Supreme Court of Canada is the ultimate authority and law of our country for both federal and provincial jurisdictions, and we submit that our rights are being violated by closed-shop tendering and that it is not a federal intervention into provincial jurisdiction to enforce upon them the law they chose to ignore because of misguided political motivation.

On a more practical note, there are some simple procedural processes whereby the federal government can better guarantee value for dollar and more fairness in the tendering process.

We are aware that the federal government often tenders projects in the National Capital Region under an RFP for construction management. Construction management in Ontario labour law is a process whereby a contractor puts in a bid essentially based upon time and material for managing the project, and the contracts of the subcontractors who actually perform the work on the project are made directly with the owner, with the government. In those circumstances, construction management is allowed whether the general contractor is unionized or not. It permits open tendering. You are not obligated by union affiliation of the general contractor because the government is making the contracts and it has no obligations.

So we've had circumstances where the capital region has tendered a major project and a union general contractor has gotten the job, but then they haven't told anybody that they're going to enforce their union restrictions on the contract. That makes a huge difference in the price. The government should simply understand what the labour law is and not permit it. You can have open tendering with a unionized general contractor under a construction management agreement. There's no problem. It's done all the time.

The same thing would apply to P3 projects if you write the project properly.

Project labour agreements, I'll just say, are disasters. There should be no federal funding at all allowed in a project labour agreement with a building trade-only clause. The United States is a mass of corruption because of project labour agreements. I've experienced that personally.

Our favourite and perfect analogy on the subject of open tendering is the auto industry. Following the logic of supporters in the building trade monopoly tendering, Honda and Toyota produce in Canada poor-quality, over-priced, and unsafe vehicles by exploiting their workers because they are not unionized, whereas the public who buys the vehicles knows the truth, and the CAW would be laughed out of any public forum if it tried to make that claim.

The problem with public tendering is that politicians and public administrations buy construction services, and the public is kept in the dark as to the inflated costs, and the perverse and perhaps anti-democratic decisions politicians can make for their own political gain.

In conclusion we would ask, where does corruption start? We believe that somewhere in the long, dark history of the corrupt Quebec industry it began with little favours by politicians to gain political support based on them being sold a bill of goods that union was better, and selling that to the public and ignoring the facts. Then step by step, a political disease was thereby created and everyone soon became beholden to the “construction industry" for money and political favour.

Let's not let that happen in Canada. As others have said, this is not an anti-union versus union issue, but a private sector versus public sector issue. Whenever you have closed tendering, you are giving monopoly profits to the contractors affiliated to the unions, and the left and the labour movement seem to completely ignore that. You are eliminating 87% of the corporate competition and giving monopoly profits to the 13% who are left. You put two private sector partners—the labour movement and the contractors—together in a room, you eliminate all their competition for them, and if you don't expect that the public is going to get the short end of the stick out of that deal, somebody needs to have a checkup.

Thank you.

[The Chair, Conservative, Larry Miller]

Thank you very much, Mr. McDonald.

Mr. Harris, you have 10 minutes.

[Michael Harris, MPP Kitchener-Conestoga, Legislative Assembly of Ontario]

Thank you, Chair, and thank you for giving me the opportunity to speak to you today about the importance of preserving open tendering for public infrastructure projects, specifically as it relates to Ontario.

As your committee has heard during recent meetings, Ontario has a growing problem with closed tendering. For years, certain construction unions have successfully exploited a legal loophole in our outdated labour laws that allows them to certify public sector employers as construction companies. Once certified, these bodies are then bound by a collective agreement that is bargained at a provincial level on behalf of all construction employers and that contains strict contracting-out clauses.

The restrictions in these agreements stipulate that a certified employer must only award contracts to companies organized by a specific union. In other words, this legal loophole allows certain unions to set up labour monopolies that inflate costs and deny qualified contractors the right to work on infrastructure projects, including those funded by all three levels of government.

Sault Ste. Marie, for instance, has been certified by the United Brotherhood of Carpenters and Joiners of America, as well as the Laborers' International Union of North America. This particular set-up has restricted the overwhelming majority of contractors from working on public infrastructure in Sault Ste. Marie, since municipal projects must be awarded to companies organized by both unions. It goes without saying that this lack of competition inevitably pushes costs up. The Greater Essex County District School Board reports that its costs for public projects have jumped by 10% to 20% after being certified by several trade unions since the early 1980s.

Similarly, the City of Hamilton reported an initial 5% uptick in public infrastructure costs after it was certified by the carpenters' union in 2005. It later found, however, that the increase was closer to 40% after a consultant analyzed the impact of certification.

The millions of dollars that are needed every year to pay for these inflated costs come from taxpayers, regardless of their financial situation. Canadians are willing to pay their fair share, but they don't want to see their taxes rise simply because the government allows certain unions to restrict open competition.

I have to say this issue got personal for me when I learned that the carpenters' union was attempting to certify my own region, the Region of Waterloo. By now, I know all of you have heard the story of how two regional workers tasked with building a blue garden shed in Wilmot Township on a Saturday signed union cards asking to join the carpenters. The Region of Waterloo, just like the other public sector employers I already mentioned, did not enter this process voluntarily. These two workers, who constituted a majority of the workforce that day, took it upon themselves to submit a certification application. If this application is successful, nearly every regional project that is put out to tender will have to go to a company organized by the carpenters' union. That means thousands of contractors and their employees will be deprived of the right to work on publicly funded infrastructure projects in the Waterloo region. In fact, this development would block as much as 90% of contractors from bidding on certain infrastructure projects.

For example, Waterloo region has tendered more than $140 million worth of water and waste water infrastructure projects since December 2009, according to the Progressive Contractors Association of Canada. For each of these projects, 27 companies pre-qualified to bid on the work. However, if the region had been certified over that same period of time, only two companies would have pre-qualified to bid on those projects. With so few bidders, the result of this union monopoly would undoubtedly be higher infrastructure costs. In fact, Cardus estimates the increase for the Region of Waterloo could be as much as $78 million a year. These additional costs would have to be covered by the region, as well as the province and the federal government for jointly funded infrastructure projects like the light rail transit system, which is worth roughly $820 million.

Now just think. If this project were subject to a labour monopoly that pushed up the price by 40%, it would cost an additional $325 million. That represents significantly higher costs for all three levels of government.

To stop this from happening in my region, and to prevent it elsewhere, I tabled a bill in the Ontario legislature last week called the fair and open tendering act. This bill is based on two fundamental principles. The first is fairness. I believe all Ontarians, regardless of their affiliation with a particular union, should have the right to work on publicly funded infrastructure projects.

The second is competition. When all qualified unionized and open-shop companies have the opportunity to fairly compete for contracts to build bridges, new schools, and other public buildings, we can ensure that taxpayers get the highest quality work at the lowest possible cost.

Following these two principles, this bill, if passed, would exempt municipalities and school boards from province-wide bargaining in the construction industry. In other words, unions would no longer be able to certify municipalities and school boards under the construction sector provisions contained within Ontario's labour laws.

This bill also protects workers' rights by expressly stating that unions still have the ability to organize public sector employers under the provisions in the Labour Relations Act not related to the construction industry. This is a fair and reasonable solution that has already gained a significant amount of support from both unionized and non-unionized contractors.

In fact, to date, the Christian Labour Association of Canada, Merit Ontario, the Ontario Road Builders' Association, and the Progressive Contractors Association of Canada have all backed the fair and open tendering act. Having all of these organizations publicly endorse this bill demonstrates the overwhelming support from both unionized and non-unionized contractors to preserve and maintain open tendering in Ontario by correcting a long-standing problem.

Although closed tendering has been identified as a major issue for quite some time, municipal leaders have not been able to persuade the Liberal government in Ontario to act. The Large Urban Mayors' Caucus of Ontario passed a resolution in 2008 calling on the province to exempt municipalities from province-wide collective bargaining in the construction industry, but unfortunately, it fell on deaf ears.

So clearly, there is a lot of work to be done at Queen's Park to get members of the provincial government on board with this legislative solution. But if history is any indication of the future, I'm sure the province will need an incentive to act. That's where the federal government could come in.

To ensure all workers, regardless of union affiliation, have the right to work on publicly funded projects, the federal government could require that transfer payments for infrastructure be subject to open tendering. This requirement would be similar to the federal government's open-tendering clause in the building Canada fund agreement with Nova Scotia. By taking this action, the federal government could ensure that federal tax dollars were used to improve our communities instead of subsidizing labour monopolies in Ontario.

I think what we all need to realize is that at the end of the day, there's only one taxpayer, and considering that Ontario has a $60 billion infrastructure deficit, we should be doing everything in our power to make tax dollars go even further.

That's why I'm calling for legislative change at the provincial level and for an open dialogue with all levels of government to determine what reasonable conditions can be put in place to guarantee fair and open competition. Ensuring that all workers have the right to work on publicly funded infrastructure projects would be a good first step towards bringing our labour laws into the 21st century and protecting taxpayers across this country.

Again, I'd like to thank the committee for giving me the opportunity to speak today. I'll be happy to take your questions.

[The Chair, Conservative, Larry Miller]

Thank you very much, Mr. Harris. We'll move right to questions.

Mr. Aubin, go ahead for seven minutes.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you, Mr. Chair.

Welcome, gentlemen. Thank you for joining us.

If you have been following this committee's work for some time, I assume you will not be surprised to hear that a few other witnesses have presented the same position as you. However, I think we agree on one issue. The Quebec and Ontario construction systems differ considerably. You are probably in a better position than me to talk about the Ontario system, and vice versa.

People have been quick to make comparisons between the astronomical costs closed bidding processes are criticized for and costs resulting from open bidding processes. That has not yet been explained to me. We have always been given figures—but they were always the same ones and always based on the same experiences.

I would like to hear an objective explanation of the situation in Ontario, so that I can understand it better. You have the right to consultation.

How many municipalities are there in Ontario, approximately?

[David McDonald]

I've heard of—

[Michael Harris]

Hundreds of municipalities.

[David McDonald]

—hundreds of municipalities, I know. But the LUMCO group, which was mentioned in Mr. Harris' deputation, is basically urban centres of over 100,000 people, and that was 30.

[Robert Aubin, NDP, Trois-Rivières, QC]

Can you give me an estimate of how many of those hundreds of municipalities use closed bidding processes? Of course, I don't expect you to give me the exact figures—an estimate will do.

[Michael Harris]

We have identified, or I have spoken to, several large municipalities: Hamilton, Toronto, Sault Ste. Marie. I referred to the Essex school board as being one of them. On top of that would be the Region of Waterloo, if certified. So a large percentage of the construction work in Ontario would be made up within those municipalities.

[Robert Aubin, NDP, Trois-Rivières, QC]

Do you have an idea of how many companies bid for a contract when a competition is launched in one of those municipalities?

[Michael Harris]

In my deputation, looking at the Region of Waterloo over the past two years, I mentioned the waste water treatment infrastructure upgrades alone, which I believe were around $120 million. There were about 27 eligible bidders on that project. If these restrictions come into effect, the region would see that list whittled down to just two of those 27 eligible bidders.

[David McDonald]

I would point out that when the City of Hamilton was certified, the staff did a detailed analysis of contractors who were already pre-qualified to bid on carpenter-related work. They found that out of the more than 200 contractors only 17 were qualified now that they had to have a carpenters' agreement.

When the city put out its first request for pre-qualification on a large water treatment plant, it got no applicants. It took a year and a half.

[Robert Aubin, NDP, Trois-Rivières, QC]

Mr. Harris, did you want to add anything?

[Michael Harris]

Yes, I just have an example here. There was a biosolids facility built in Kitchener and there were nine eligible bidders in 2009. If these restrictive clauses come into effect, that would have been whittled down to just one eligible bidder for that project.

[Robert Aubin, NDP, Trois-Rivières, QC]

I have a bit of an issue with another part of your testimony. You implied—and I am not saying you did that intentionally, but that is my perception—that the absence of open bidding processes basically eliminates competition. It would appear that, when business is conducted with companies whose employees are unionized, competition among companies disappears.

Mr. McDonald, you are part of the business world. Are your employees unionized? Is the leverage that would enable your company to be more competitive than a unionized company due to the fact that the wages and social benefits provided to the employees are lower? I don't see how competition would make construction costs skyrocket. We are always being told—without being given concrete evidence—that costs increase by 40% when unionized companies are competing amongst themselves, compared with cases where unionized and non-unionized businesses are in competition. If you provide the same services, what could explain that difference, if not social benefits, paid leave, employees' wages, professional training and so on? A number of representatives have told us that they provide the same conditions and wages, and I believe you. So where does the difference arise from? Why would your company be more competitive?

[David McDonald]

Unlike in the organized sector, we don't spend a lot of time tooting our horn and telling everybody we're the best, the most efficient, better trained, and this, that, and the other thing, but I would certainly say we are.

It goes back to my auto industry analysis. Forty years ago the CAW and the Big Three had a monopoly over car production in North America. Competition came into the market. All of a sudden other people were producing better cars, safer cars, cheaper cars. The CAW and the Big Three both got together and realized they had to compete, increase their standards, improve the quality of their work, and they have done so.

In the construction sector in Quebec that hasn't happened at all. It is happening in certain sectors in Ontario, such as in the road building, and sewer and water main sector, which is dominated by one union, the Laborers' International Union. That union in construction in Ontario is competitive. They don't have any of these monopoly contracts, or whatever else, and they compete quite fairly.

The biggest thing you would like to know, probably, is about wages. I managed a workforce of 200 open-shop people. On average our people made more than a unionized person, based upon the fact that an open-shop general contractor or subcontractor has to have more loyalty to his employees and guarantee them more hours. Otherwise, they will be lost. We can't call up a hiring hall and get more people.

The same thing when winter comes. If we lay them all off, they will go get some other job. They may like it somewhere else and they won't come back. So what we do is find work for them. We don't make as much money over the winter, but we keep a lot more of them. We create loyalty among them.

My policy was always basically to pay a few dollars less than the published union wage. The productivity I gained out of the loyalty of our crew made us unbeatable in terms of open competition against organized—

[The Chair, Conservative, Larry Miller]

Your time is up, Mr. Aubin.

Thank you, Mr. McDonald.

Mr. McGuinty, you have seven minutes.