Transport Committee on June 6th, 2013

[The Chair, Conservative, Larry Miller]

We'll call our meeting to order.

I know we're a few minutes early, but it's Thursday night, and everybody would like to get out of here as early as possible, I'm sure.

I'd like to thank our guests and welcome them here.

With no further ado, I'll turn it over to Mr. Dennis Perrin, please, for 10 minutes or less.

[Dennis Perrin, Director, Prairies, Christian Labour Association of Canada]

Thank you, Mr. Chair.

Good afternoon to the committee. It's a pleasure to speak to you today. I thank you for inviting me.

My name is Dennis Perrin, and I'm the prairies director for the Christian Labour Association of Canada, otherwise known as CLAC. My area of responsibility within CLAC lies in the provinces of Saskatchewan and Manitoba.

The committee has already heard a significant amount about CLAC from my colleague Brendan Kooy. I'll refrain from speaking to those points today. I am here to present CLAC's position and thoughts specifically on the closed tendering process that exists with some of Manitoba's large publicly funded infrastructure projects.

Specifically, I will refer to three examples of closed tendering: the Burntwood/Nelson agreement, the Bipole III agreement, and the east side road and floodway expansion agreement. The first two pertain to the construction of large hydroelectric dams in Manitoba. The latter pertains to the expansion of the Red River Floodway, along with the construction of an all-season road along the east side of Lake Winnipeg.

This infrastructure work represents a significant investment of tax dollars, including federal funding. Unfortunately, all three projects are subject to construction monopolies, and limit access for construction workers on the basis of union affiliation. The monopolies on these projects are completely voluntary. There is no binding obligation on the part of the province to award this work on the basis of union affiliation.

The east side road agreement compels all construction employees on the project to pay union dues to one of the approved building trades unions, regardless of what union affiliation the contractor and its employees previously had. The agreements relating to hydroelectric dam construction take it one drastic step further, and force potential employees to sign a union membership card and join one of the approved building trades unions as a condition of employment on that project. In addition, these employees must pay dues to, and be represented by, one of these building trades unions.

The committee has already heard from many witnesses about how closed tendering construction monopolies are unfair to workers and limit competition. Creating monopolies for certain unions has two major detrimental effects. One is the unfairness for construction workers who cannot access public infrastructure work because they have the wrong union affiliation. The other is the reduction of the bidding pool of potential contractors. This is precisely what is happening in the province of Manitoba.

It is unfair to construction workers in Manitoba to be told which union they must join in order to work on the publicly funded infrastructure projects that their tax dollars pay for. Furthermore, closed project labour agreements restrict competition. This means an increase in price, a smaller labour pool, and a reduced chance that projects will be done on time and on budget.

Proponents of these types of closed project labour agreements have typically argued that they provide greater labour stability on a project. Closed tendering in construction, folks, was yesterday's solution to industry challenges, and is no longer necessary today.

For example, the managed open site model is an alternative to closed tendering. This model has been frequently utilized on large-scale, multibillion-dollar construction projects, particularly in the province of Alberta. Instead of completely restricting access to work to one group of unions, the managed open site model allows access for workers and contractors affiliated with the building trade unions, alternative construction unions such as CLAC, and also the non-union sector.

Eliminating these types of preferential agreements in Manitoba and preferring alternatives along the lines of the managed open site model would increase worker choice, enhance competition, and ultimately benefit taxpayers.

Thank you very much for your time. I'd be happy to answer any questions the committee might have.

[The Chair, Conservative, Larry Miller]

Thank you.

I missed this at the first. By teleconference from Banff we have Mr. Robert Blakely from the building and construction trades department of AFL-CIO.

Mr. Blakely, can you hear us?

[Robert Blakely, Director, Canadian Affairs, Building and Construction Trades Department, AFL-CIO]

Yes.

[The Chair, Conservative, Larry Miller]

Okay.

With that I'll let you go ahead for 10 minutes, in case we incur technical problems. Go ahead for 10 minutes or less, please.

[Robert Blakely]

Thank you.

Throughout these entire hearings I'm the only representative from the organized sector that's been here so I might ask for a little of your indulgence. There are a number of things that have been stated in some of the previous hearings that may require either some correction, or for things to be put into some perspective.

The position of the building trades unions in respect of the whole business of tendering is that we want federal infrastructure money to go further. We pay taxes too. We support competition. It's how our contractors stay in business. We want publicly funded construction to give best value. Value-based procurement is where sophisticated construction purchasers generally tend to go. They're looking at a life-cycle cost.

In the United States the low-bid system that works for almost all the work results in one construction dollar in ten being spent on litigation. We're concerned about quality, schedule, and budget.

The simple fact is that low bid isn't always low cost. Getting the best value is what you should be striving for. You have heard that this reduces competition and makes it difficult to schedule and budget, but there is no empirical evidence of that whatsoever; apocryphal evidence, yes. It would be my respectful suggestion that it would be appropriate for you as a committee to get some people who are knowledgeable and perhaps not self-interested to try to work through these issues.

In Canada 50% of the construction industry is residential. Neither Mr. Oakey, nor the Christian Labour Association, nor I have much presence in it. So the comments that you heard about 71% of the industry being frozen out is simply a fib. We represent roughly 38% of the entire industry or about 70% of the industrial, commercial, and institutional marketplace.

In reading the transcripts, it would seem to me that some of the comments that are made about the evil union monopoly really relate to four municipalities in Ontario. You need to have some perspective on the issue in Ontario.

The municipality was certified by the carpenters in accordance with the Ontario Labour Relations Act for carpenters only. There are 28 other trade groups in Ontario. The City of Hamilton, by self-performing the work, became a construction employer so they get, by operation of law, the carpenters industrial agreement, which has a subcontracting clause in it, but only for carpentry work. The cities of Hamilton and Kitchener, or anywhere else, may have to tender their carpenter work to a union contractor, but it doesn't force them to do that for any other trade.

You need to have some perspective on the issue that contractors generally tend to be frozen out. The problem may well be that they can't qualify to get on the bid list, but that's an owner decision not a labour relations issue. On any institutional, commercial, or industrial job carpenters are somewhere between 15% and 18% of the work.

If you look at that and you look at how much labour actually goes into the contracts, a residential contract is 50/50, labour and material. Commercial and institutional is between 25% and 40% labour. Industrial is 20% to 30%. The carpenters are less than 6% of all of the work on a commercial job.

To suggest that somehow the fact that they have a collective agreement would cost a 40% cost overrun is ludicrous. Overruns happen all the time. They happen to Merit contractors, Christian Labour contractors, building trades contractors, straight non-union contractors. It's the result of bad estimates; unforeseen circumstances; the inability to get men, material or equipment; disorganization; weather; strikes and lockouts; difficulty in proceeding. Everyone has them.

You have heard a number of estimates as to the cost of the so-called closed tender. In Quebec, they say it's 2% less; Cardus says it's 2% more. If you have a house in Gatineau built by union labour, it costs less than a house in Ottawa. How could that be? The suggestion that is made that 30% or 40% of infrastructure cost is left on the table means that our workers would have to work for free and bring their own material.

There are a host of U.S.-sponsored studies that say project labour agreements are good or project labour agreements are bad. It depends on the sponsor. There is no empirical evidence here, and maybe we need some.

What this seems to be about is the four municipalities in Ontario. This is a tempest in a teapot. If you look at Stats Canada's numbers, they will tell you there are 20,000 general contractors in Canada and 108,000 trade contractors; 95% of which have 10 or less employees. We're not talking about Bob's Painting and Al's Plumbing. We're talking about the roughly 5,000 contractors who are somewhat bigger and are in business. A number of them do not bid any work. They do invitational work from owners they have worked with for generations. A number of them are industrial or pipeline workers, or something else.

The fact is that owners in a public or private business should have a fiduciary relationship in procurement to get best value. How they tender the work should be up to them. There is 91% of the work in Ontario that is done by open tender. Federally, almost all work is open tender—the ship building contract being somewhat different—with qualification and invitational tenders being used for the appropriate kind of work.

The truth is that as an owner you are required to manage risk. You need to use a technique that deals with the risk, how you assume it, who assumes it, and how you ameliorate it. If you're going to do a renovation in a washroom in a school, maybe it's a purchase order. If you're going to do an annex to the school, maybe it's open tender. If you are building a complex new research facility for a $200 million, maybe it's qualified tenders. If you're going to build a $2.6 billion airport—I know that's the airport authority—maybe it's an invitational tender. If it's very complex work, maybe it's sole source or maybe it's a project labour agreement.

You've heard how pernicious and evil project labour agreements are, but here are some facts you should consider. BC Hydro, the various privatized electrical utilities in Alberta, SaskPower, Manitoba Hydro, Ontario Power Generation, Bruce Power, New Brunswick Power, Nova Scotia Power, and Nalcor, all use project labour agreements, as do most of the highly sophisticated purchasers of construction in this country.

Those people aren't necessarily the pals of unions. Toyota, a non-union employer, uses project labour agreements for all of its construction and maintenance, and so does Syncrude Canada. Why? They have looked at value, the skill of the contractor, its ability to engineer, and its management, management systems, financial strength, workers who are in good supply, and workers who are available. It's getting the certainty of a no-strike, no-lockout clause, and a workforce that all works under the same terms and conditions of employment, so the workers don't go shopping from place to place on the site.

On handling cost escalation, the truth is that non-union companies do not have fixed wage rates. Not having fixed wage rates means that if they are having a pinch to get people, they have to pay more. Cost is not certain.

With regard to harmony in the hours of work and diversity, in our collective agreement with Nalcor, we put 20¢ an hour into a diversity fund. We're trying to train people and to work with employers and owners to achieve their goals.

You've heard a lot of hogwash about how in Manitoba contractors have been frozen out. The truth is that Kiewit, a contractor, has the work at Wasquatum and the work at Pointe du Bois using the Burntwood/Nelson agreement. That agreement provides for hiring in the following order: northern aboriginal people who live in the Churchill-Burntwood-Nelson area, northern union members, northern aboriginals not living in the preferred area, and then any other northerner not listed above.

At Wasquatum, 40% of the job were aboriginal workers. I'll send you the collective agreement. On the floodway, anyone could bid. They needed to meet the training obligations and pay the same wages. Part of the work was reserved for aboriginal contractors. Aboriginal content was one-third, and 20% on the bridges. We'll send you the collective agreement. At Voisey's Bay under the collective agreement, 40% of the workforce were aboriginal people. At Nalcor, Innu and Labradorians get to go to work before local members.

The truth is that buying in on the idea that low bid is the lowest cost is an illusion. It is a simplistic solution to a complex question. Low bid is a one-dimensional look at your project. Low bid, completely open tender without qualifications, means that all someone has to do is hand in one sheet of paper, or two if you're going to qualify the bid. It costs a lot of money to do the analysis to prepare a proper bid. t's a half to one per cent of the cost of the work.

If I can get the work by taking a flyer on it, why would anyone want to waste their money in bidding?

[The Chair, Conservative, Larry Miller]

Mr. Blakely—

[Robert Blakely]

Give me about another 30 seconds and I'll shut up.

How's that?

[The Chair, Conservative, Larry Miller]

That's fine.

[Robert Blakely]

There was a good study done in the year 2009 by a guy named Tom Bedford at the University of Toronto, which talks about analysis of low-bid award systems in public construction. I'll send you the article. He finds that clients who don't use pre-qualification of contractors for large projects are more likely to have higher cost escalations. Will the contractor complete? Did the contractor miss something?

If we want to have a litigation-based system, all we have to do is always insist on low tender. We support a pre-qualification system that takes into account the capability of a contractor, financial stability, and its ability to manage the work and get the work done.

I learned as a young officer that time spent in reconnaissance is seldom wasted. I would ask your committee to spend some time in reconnaissance and try to get some expert help on what you ought to do in this particular area.

Thank you for your kind attention.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We will now move to Mr. Harvey Miller, for 10 minutes.

[Harvey Miller, Executive Director, Merit Contractors Association]

I'd like to thank the committee for the invitation to participate in this important study to ensure Canadians are receiving maximum value for their tax dollars.

Merit Contractors Association of Manitoba is the voice of open-shop construction in our province. Our members are primarily engaged in commercial, industrial, and institutional construction projects. Similar to most other Canadian jurisdictions, approximately 70% of Manitoba construction is performed by open-shop companies and their workers.

Our presentation will focus on the need for open tendering on all contracts that involve federal funding. It is our firm belief that all infrastructure projects funded by taxpayers' dollars should be open to all qualified contractors to bid, with no preconditions to join a union or pay union dues.

Open shop fundamentally means freedom of choice and fairness in the workplace. It's a term that describes a workplace where membership or non-membership in a union is not a condition of employment. In the construction sector, it specifically refers to a situation whereby owners, developers, and general contractors do not consider the union status of a contractor's employees when awarding a project.

Despite the fact that most contractors and workers in the construction arena in Canada are open shop, far too many jurisdictions across Canada continue to practise closed tendering policies. In Manitoba our provincial government has instituted the practice of open tendering on closed projects. If it sounds like semantics, it is. The result is the same as other closed tender projects: reduced competition, increased costs, and the violation of workers' charter rights.

It is this differentiation we would like to bring to the committee's attention, as there are those who would suggest that Manitoba Hydro's floodway project, east side road project, Manitoba Hydro generation projects, and the Bipole III transmission line projects are open. They are not. All these projects combined for approximately $24 billion of construction are technically available to all contractors, however, they are subject to traditional building trades unions collective agreements and in reality, the provisions in these agreements essentially close the project to open-shop contractors.

I'll provide a couple of examples for the committee to consider. The Burntwood/Nelson Agreement for hydro development projects, section 12.2.1, “Union Security and Check off”, states:

...all employees shall, as a condition of employment and/or continuing employment, be members or obtain membership in the appropriate Union of the Council, and maintain such membership in good standing.

For the hydro transmission line collective agreement, article 9.2, “Hiring Procedure, Union Security and Check-Off”:

The Contractor shall advise persons who are not members of the Unions at the time of being hired that they shall be required, as a condition of employment, to secure membership in the appropriate Union and maintain such membership in good standing.

So a company need not be union to bid the work, but employees must be union to do the work. It's closed and it's wasteful. Open-shop companies do not bid and when the competition is removed, costs are driven up. In addition, agreements that force workers to join a union against their will deny freedom of choice, and the imposition of mandatory union dues on those workers are violations of the Canadian Charter of Rights and Freedoms.

Our association, along with five individual workers incensed by these agreements, filed a statement of claim in the Manitoba Court of Queen's Bench on July 9, 2012. The claim states that the requirement to secure and maintain union membership as a condition of employment, as contained in the Burntwood/Nelson Agreement and the transmission line collective agreement infringes on sections 2(b) and 2(d) of the Canadian Charter of Rights and Freedoms, the sections on freedom of expression and freedom of association.

The Manitoba floodway and east side road project management agreement, in article 12, “Union Security”, 12.2:

All Employees employed by Contractors who are not members...shall not be required to join the Union but shall be required to pay an amount equal to the amount normally required to be paid by a Union member in respect of [Manitoba Building Construction Trades Council] assessments and applicable Union dues....

Although a segment of the competition was forced out of the bidding due to the union provisions in the floodway and east side road agreements, general contractors bidding on the project found that in some instances there was a sole-source bid and profoundly higher costs.

Open-shop contractors forced to deduct union dues from their non-union employees were obligated to increase employees' pay to offset those costs and fees required by the workers. Other companies did not bid simply because their employees requested that they not bid. Rather than improving labour relations, the removal of workers' choice was seen by workers as driving a wedge between them and their employers. While there is no apparent value to open-shop employees, these costs all contributed to higher costs for the project, money that would have been better spent on Manitoba's infrastructure needs.

More appalling to many of our contractors and their employees is that open-shop companies are paying dues that are subsequently used to take jobs away from open-shop construction. The IBEW December 2011 newsletter contains the following:

This past Summer, we were very aggressive working with our contractors streamlining our Market Recovery Program to go after some large scale projects.... Our largest non-union competitors have been forced to scale back their workforce and transfer employees to other shops as a result of targeting jobs....

In a fair and just construction climate, all contractors should be treated equally. If owners believe that a project management agreement is warranted, the conditions of employment should not be seen to violate the charter rights of workers.

Our ask is simple. When government funds infrastructure, all qualified contractors should be allowed to bid on those projects and tender documents must be written to respect the rights of open-shop, single-company employee associations, any alternative unions, and the traditional building trades unions.

Thank you. I look forward to answering questions.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll move to questions.

Ms. Chow, go ahead for seven minutes.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Is Mr. Blakely still on the phone?

[Robert Blakely]

Yes, ma'am, I am.

[Olivia Chow, NDP, Trinity—Spadina, ON]

One of the issues this committee is dealing with is that this is really not a huge issue, because the majority of the contractors have 5,000 workers or less.

[Robert Blakely]

Ninety-five percent of Canada's contractors employ fewer than 10 people.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Right. So if we look at Toronto, for example, in the city of Toronto are most of the construction trade workers unionized whether they are carpenters or electricians?

[Robert Blakely]

I would say in the city of Toronto probably 85% of construction is done by the unions, whether the workers are unionized through LIUNA Local 183, or they are in the residential sector, or they are doing industrial work or commercial or institutional work.

[Olivia Chow, NDP, Trinity—Spadina, ON]

I'm not talking about residential. I'm talking about—

[Robert Blakely]

No, no. I'm talking about the whole schmear.

[Olivia Chow, NDP, Trinity—Spadina, ON]

For the institution—

[Robert Blakely]

Unionized contractors do almost all of the institutional stuff.

[Olivia Chow, NDP, Trinity—Spadina, ON]

So whether there is an open bid or a non-open bid, it's not a big issue, because the majority of the workers are part of a union? I'm trying to get to—

[Robert Blakely]

The answer to that is yes. There are a couple of large contractors in the Toronto area who have a relationship with the Christian Labour Association. They manage to find work too, and they seem to manage to get bigger, so the market seems to be able to tolerate all—