Good afternoon and thank you for the opportunity to appear here today.
My name is Domenic Mattina and I am the current president and owner of Mattina Mechanical Limited, a second-generation open-shop mechanical contracting firm in the industrial, commercial, and institutional sectors based out of Hamilton, Ontario.
I am also the current chairman of the Merit Canada board of directors. Merit Canada is the national voice for Canada's eight provincial open-shop construction associations. For us the term “open shop” simply describes a workplace where membership or non-membership in a union is not a condition of employment.
Merit Canada has two priorities for its 2015 budget, neither of which costs a dime. Both issues—open tendering and union job targeting funds—are market-distorting measures that impose severe competitive challenges for the non-unionized construction sector.
I want to address a key point. Merit Canada does not view unionized contractors as adversaries but rather as competitors. However, for that competition to be fair, there has to be a level playing field, and that simply does not exist with these two issues.
Let me start with open tendering, a system in which construction contracts are awarded on the basis of corporate merit. Unfortunately in too many jurisdictions, not all Canadians are allowed to bid on federally funded projects. Instead, access is restricted to specific unionized contractors affiliated with the building trades. As a result, approximately seven out of 10 Canadian construction workers in the open shop sector are excluded from employment on such projects. To make things even less competitive, specific unions, over other unions, also have privileged access to these contracts, thereby further shrinking the competitive pool. It is easy to predict what will happen when 70% or more of the competition is shut out: quality will go down and costs will go up. These costs are very real.
The City of Montreal found that closed tendering inflated project costs anywhere from 30% to 85%. For Hamilton, it was 40%. A Cardus study suggests that Ontarians are paying 20% to 30% more for construction projects subject to closed tendering.
Obviously there is a fiscal argument to be made regarding open tendering, but there is also the issue of fairness. Our members and their employees are barred from bidding on contracts paid for with their tax dollars because they do not belong to the right union. In fact, on the latter point, Cardus suggests that restrictions on competitive bidding serve as a petri dish for corruption in public procurement. It is, in short, an inherently flawed system with no basis in public policy.
Therefore, our primary recommendation for the 2015 budget is to implement open tendering for all projects that use federal funds.
Let me address our second priority, job targeting funds or JTFs. You may also have heard them referred to as market enhancement recovery funds or MERFs. In simple terms, these are superfunds managed by union bosses that are built through mandatory contributions from members of a union or their employer, which are then used to undermine the competitive bidding process. The funds are administered by a union local, and payments are made in response to employer applications to subsidize wages to be paid by that employer to workers for a contract or a job for which the employer may be competing against a non-unionized one. In effect these massive funds are used to cross-subsidize workers on jobs for which unionized employers have to compete against non-unionized ones.
Merit Canada believes their use raises a number of important public policy questions. First of all, is the practice a violation of the Competition Act? Second, should unionized employers and workers be given a leg up when bidding as a result of subsidized wages? Third, should job targeting funds be exempt both for the contributor and for the recipient? Fourth, should unionized workers and employers be forced to subsidize the salaries of other workers via mandatory contributions to these funds? Finally, are job targeting funds having an impact on public infrastructure costs?
Given these important public policy questions, we recommend that the government ask the commissioner of competition to review job targeting funds for compliance with the Competition Act, and ask Canada Revenue Agency whether contributions meet the requirements for a deduction under the Income Tax Act.
As mentioned at the outset, neither of these recommendations costs the government anything. However, both are critical to ensuring a fair and competitive construction marketplace, with the added bonus of open tendering potentially saving billions in infrastructure costs and creating more employment.
Thank you again for the opportunity to be here today. I'd be happy to answer any questions.