Government Operations Committee on Nov. 17th, 2009

[The Chair, Liberal, Yasmin Ratansi]

Committee members, this is meeting number 40 and it is televised. We are still studying the stimulus package and its impact on stakeholders.

We have before us, from the Building and Construction Trades Department, Mr. Christopher Smillie, accompanied by Larry Cann and Stephen Schumann.

I understand you have a presentation, Mr. Smillie. Is it a ten-minute one? Because the first hour we will devote to a discussion and in the second hour we are going through estimates.

[Christopher Smillie, Policy Analyst, Government and Regulatory Affairs, Building and Construction Trades Department, AFL-CIO, Canadian Office]

Yes, ma'am.

[The Chair, Liberal, Yasmin Ratansi]

So the first hour is yours. For ten minutes, Mr. Smillie, the floor is yours. Thank you.

[Christopher Smillie]

Thank you, Chair.

Good afternoon, Chair and members of the committee. Thank you for inviting me and my colleagues to share my thoughts on the economic stimulus package and the impacts on our organization and the construction industry as a whole.

I've noticed that there are not many other witnesses with me today. I've got these two, but it's going to be hard to hide at the back of the class today.

I have tried to put together a balanced view of what's going on in our industry for the committee. I did my best to bring you some relevant facts and figures that should assist the committee. I want to preface my comments today with a statement of support for the stimulus package and the value of the commitments to spend the government made to our industry.

The organization I represent is called the Canadian Building Trades. We represent about 550,000 organized construction workers from coast to coast to coast. Our members work in 15 different crafts across the country in over 50 specific trades, ranging from heavy equipment operators, to carpenters, to welders, to bricklayers, and everything in between. We build infrastructure, heavy industrial plants like oil refineries, nuclear plants, schools, hospitals, and homes.

In preparation for my remarks today, I found some important formal information and also first-hand research from our member organizations.

According to the labour force survey produced by Stats Can November 6, 2009, employment in our industry edged up slightly from record lows in October; however, it is still down 5.8% year over year. This equates to about 73,000 fewer jobs in our industry than this time last year. All of the regions in our country have been hit substantially, but particularly hard hit have been the regional economies of Alberta, Ontario, and British Columbia. Our trades have not been spared from the job losses and slowdowns. This is why the economic stimulus package is so essential. This package provides assurance to the private sector that it is okay to invest, it is okay to proceed with private construction projects in this uncertain time. If the various levels of governments are spending, theoretically it's okay for other projects to proceed.

Historically our industry is generally a late responder to economic events. We're usually the last into and the last out of recessions, but this time seems to be different for a good portion of our trades. I surveyed a number of our trades across the country to give this committee a first-hand account of business volumes for our civil trades. They are usually the first trades on the job site and would be the first to benefit from increased volumes of work.

As a short background, we measure business volumes in hours of work. So here is a bit of an overview of how some of the trades are doing. The information is real time in nature and will hopefully provide you with general trends when examining the stimulus package in greater detail. If the committee would like any of these numbers tabled officially in a more user-friendly manner, please let me know afterwards and I can arrange for that.

The International Union of Operating Engineers is the trade involved in clearing sites with heavy equipment. They operate the cranes you see in downtowns across the country and they do all the sewer and plant waterworks across Canada. As of October 2009, the operators are experiencing 13% unemployment among their 30,000 membership in construction. This is more than twice the unemployment rate in 2007 and 2008. Those who are working in 2009 are working fewer hours.

The carpenters--I have a fellow carpenter on the committee today--are one of the first responders in construction. They're on the work site first. They build the forms into which concrete is poured and in which the reinforcing steel placed by the iron workers is held in place. The carpenters build all the scaffolding that support all the other trades along the construction continuum. The business performance of the carpenters therefore is a good leading indicator or proxy as to how the other trades will perform in the future. Nationally, the carpenters are forecasting work volumes to increase slightly in 2009, hold steady in 2010-2011, and then fall off a cliff in 2012. There is little private construction work in the pipeline for them. What they are counting on for 2010-2011 is the stimulus money.

The carpenters' office in Toronto, for example, provided some numbers for the committee for trending purposes. They are as follows. In 2007, 15 million work-hours. This equates to full-time employment for about 7,500 members. In 2008, 16 million work-hours. This equates to full-time employment for about 8,000 members. In 2009, year to date, 9.3 million work-hours. This equates to full-time employment for 4,500 members.

The labourers in Laborers' International are first responders in our industry. They do much of the road work you see on your way home at night. They do most of the concrete finishing work for sidewalks and curbs, and they do much of the work for municipalities on sewers, water mains, and general labour on all construction sites.

At year end, LIUNA in Ontario is forecasting an approximate 35% reduction in work-hour totals. In 2007, LIUNA Ontario enjoyed 32 million work-hours and in 2008 about the same. Year to date, 2009, they're reporting approximately 19 million. With the end of the construction season closing in on us, there's a long way to go to get back to normal levels.

Now, if I may, I'd like to share with you some of the numbers I've found in two of the industrial trades. Those trades are involved mainly in the delivery of services in the institutional, commercial, and industrial applications. The IBEW, or the electrical workers, is headquartered in Toronto and represents electricians in Ontario. They're involved in high-rise electrical work, industrial electrical, power line, and some residential electrical work.

The electrical workers are experiencing a year over year decline in work-hours. From the numbers they provided to me for this committee, it appears there's a 19% decline in volume. Specifically, in 2008 this office witnessed about 14 million work-hours and are on pace to finish 2009 with approximately 11 million.

The final example I'd like to share with you from our trades is the experience from the UA, or the plumbers and pipefitters. The UA is involved in plumbing, pipefitting, steamfitting, and welding in commercial and heavy industrial applications. A small portion of their work is in the residential sector, namely in the GTA. The UA office in Toronto is on track to deliver approximately 28% fewer work-hours for 2009. Last year their members worked approximately eight million work-hours and this year they will do about six million.

So what does this all mean? It's a lot of numbers, and the compilation is important. From this raw data evidence, the importance of the stimulus spending trumps a number of other industry priorities in the short term. The construction season for the outdoor skilled trades is coming to an end shortly, so essentially the spring of 2010 will be the make-or-break period for them. If there are stimulus projects to replace private industry projects, there will be a softer landing for Canadian construction. If there are no stimulus projects to work on, it will be a different story and we will witness further significant declines in employment.

The Construction Sector Council, which is part of the sector council program with HRSDC, did some recent forecasts where they assumed 30% of the infrastructure money has actually flowed and hit the street. This has led to the creation of approximately 34,000 jobs. This also assumes that approximately $4 billion has been spent by consumers on items eligible for the home renovation tax credit, and the 2010 contribution has been made for the not-for-profit housing sector by the government.

So if we assume all these things, the Construction Sector Council says, 34,000 jobs have been created. As we learn from StatsCan in a labour force survey, we've lost 73,000. So even if this 30% of the money has hit the street, we're still in the hole about 39,000 trade jobs due to the recession. Without the stimulus package, who knows where the job numbers would be. The hours for my trade as I reported to you would certainly be lower and the work picture more dire.

I spoke with a number of my employer partners, and they indicated to me their design and engineering departments are starting to build momentum. However, they are not at or near capacity. The lag time to translate these engineering volumes into actual shovels in the ground is at least six to ten months for non-complex projects. When contractors bid on a job, they have to be able to prove capacity to do the work, and the scope of what else is in the pipeline matters.

Recent information and analysis released by reconstruction data proposes our industry will be passing through what economists frequently call a U-recovery. The scenario depicts gradual and slow pickup, not the V-shape, rapid, robust, and solid recovery we all want. New construction starts in residential are forecast to be down, new starts in commercial are about 50% of where we were, and industrial projects are waiting to see where the Canadian and U.S. dollars are going to land.

I want to quickly provide you with some ancillary information from the United States. Recovery.gov is an excellent resource for the construction industry and citizens alike. This website was initiated by the Obama administration to show transparency and progress in reporting to the general public. All stimulus projects are coded, labelled, and tracked for all to see. For example, if someone wants to get information on stimulus money in Cincinnati or Phoenix, you're able to see what contracts are stimulus contracts, who's the responsible state authority, who bid on the job, who won the job, who the subcontractors are who are working on the jobs, where the job sites are, and so on. Most importantly, this site outlines the amount of direct employment created by the project.

This is a tangible deliverable that the government can deliver to its citizens. This assists us in planning for the actual execution of the work.

In preparation for my remarks today, I read through the testimony of the Parliamentary Budget Officer and his officials, which was delivered to the committee on October 27. It seems that he and his staff are having difficulty tracking the progress of the money coming from the government. The Recovery.gov experience is a valuable example of how transparency could be an effective tool to promote the good work that's going on in the Government of Canada and at municipal and provincial levels.

In addition, I echo the concern of Brock Carlton, from the Federation of Canadian Municipalities, when he says his membership is concerned that the ISF fund has very restrictive and time-sensitive requirements. In construction, if a job has a number of variants, change partway through the planning stage--like another lane added to a highway or difficulty with soil conditions and bridgework, for example--could delay the completion of a project.

The economic stimulus package is probably the single most important piece of government involvement in our industry in 20 years. Our industry has a lot at stake and so does Canada. We have 1.6 million Canadians in our industry and, according to the Construction Sector Council, we represent 12% of GDP. Ten years ago, we had less than one million people engaged. This means that if there isn't the volume of work that will carry around the current capacity of people, the system will adjust.

[The Chair, Liberal, Yasmin Ratansi]

Excuse me, Mr. Smillie. You've gone past our ten minutes.

[Christopher Smillie]

Thank you.

It makes sense to bridge construction through the next period of normal activity in 2013. We respectfully submit that our industry matters and we ask this committee to take the spending commitments in the stimulus package seriously. We're supporters of the plan and we want to be part of the action.

I look forward to your questions today. In case I can't answer them all, I brought some colleagues of mine from the various organizations to assist.

Thanks very much.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

We'll go to the first round of questions.

For eight minutes, Ms. Hall Findlay.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you very much, Madam Chair.

Thank you very much, all three of you, for being here with us today. As somebody who has actually worked in construction and has been somewhat involved with the building trades in the past, I offer you a particularly warm welcome. It's great to have you here to talk about your version of events, given the stimulus package.

I want to ask a couple of questions. I'm looking at page 6 of your presentation, where you talk about the job numbers, the employment numbers. You say, “According to the Construction Sector Council recent forecasts, where they assumed 30% of infrastructure money announced has actually hit the street...”. My first comment is that even that's speculative, and your numbers are speculative, and you acknowledge that we're still very much in the hole even if those numbers are right and even if the Construction Sector Council's assumption is correct.

[Christopher Smillie]

That's correct.

[Martha Hall Findlay, Liberal, Willowdale, ON]

One of the challenges we have had in opposition is that we have been asking for information on what has actually been spent. Here, the assumption is that 30% of infrastructure money has actually hit the street. We've been asking repeatedly for job creation numbers, and to no avail.

One of my concerns is that the most recent information from the representatives of municipal organizations across the country has been that of approximately 3,000 projects that have been announced, barely a third have in fact been started. So if only a third of the projects announced have actually been started, they certainly haven't been finished.

If that's the case, if only 30% of the projects have only been started, there's no possible way that a full 30% of the amount of money can have actually hit the street. I would question the assumption of the Construction Sector Council--it's nothing against them--just because, admittedly, we're having trouble getting that information.

Based on that alone, do you have any comment, given your employment numbers and that speculation and if I'm telling you based on our information that there's no way 30% could have hit the street? Could you just comment on that?

[Christopher Smillie]

It's difficult to comment because there's no way to tell, when a project is in the development stage, if it's a stimulus project or not. There currently isn't a way to check and see, albeit you can call the various construction companies involved in the bid process to ask them if this is a stimulus project or not.

I can't really say much more than that, other than perhaps it behooves this committee to come up with some sort of a way to report that to Canadians. I really can't comment more than that. It's difficult when there is no tracking mechanism out there similar to the one in the U.S. It's tough for regular people to go in and check and see what's happening.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I'm smiling only because you perhaps unwittingly have reinforced something we have been saying for months and months and months, and it is reassuring for us. It's frustrating, but it's reassuring for us to hear from people who are actively involved in what should be the results of job creation from a stimulus effort and who are having exactly the same concerns.

I must say that your references to recovery.gov, in the United States, say the same thing. We've been saying this for months. The example from the United States is extraordinary, and if I can just quote you: “...this recovery.gov experience would be a valuable example of how transparency could be an effective tool” and this would be a good example for the Canadian government to use. I hope my colleagues on the government side of this committee room are listening.

I'm turning to what is page 8 of your presentation. It's a little bit along the same lines, but you talk very helpfully about the time of projects. You are speaking here about the lag time translating engineering volumes into actual shovels in the ground being at least six to ten months for non-complex projects, sometimes more depending on the job. That is another concern we have raised in the context of the 2011 deadline for projects—and it is a concern we've also heard from municipalities. We've lost a construction season. With those two-thirds projects that have not yet been started, there is a concern that the municipality—as they have been told so far—is going to be on the hook for the entire cost if a project is not completed by 2011, given exactly this problem of lag times and the time for any kind of project to be completed. Can you comment also on that? If you put yourself in the position of a municipality that has a project not yet started, knowing that you will be on the full hook for the cost if it's not finished by 2011, would you be inclined to question now whether you should even start this project come next spring?

I know it's unfair to put you in their position, but you know something of the construction business, of course, so....

[Christopher Smillie]

I appreciate the question, but I think members around the committee already sort of know the answer. The likelihood of a project proceeding if one of the partners says “Well, we're not proceeding any more” is pretty unlikely. I don't want to be overly critical in my comments, so really that's all I could add to that.

Really, if you have three business partners involved in a project and one says “Sorry, we're not proceeding any more”, it's tough to move forward. I'm not blaming anyone. The rules of the game are the rules of the game, but that's sort of my take on it.

[Martha Hall Findlay, Liberal, Willowdale, ON]

To be clear, I don't think anybody is saying at this point that any one of the three partners is saying they're not going to play, but we are here, as opposition, absolutely expressing concern that that might be the effect of the requirement that a project be completed by 2011: municipalities may choose not to start projects.

Maybe I can open it up with the similar concerns I have, the comments on recovery.gov, the example we've seen in the States, and recommendations for this government if you would like to do that. Do you have any comments on my questions about lag times for projects and the ability of municipalities to start? Mr. Cann, Mr. Schumann, I'd love to hear your comments too, if you care to provide some.

[The Chair, Liberal, Yasmin Ratansi]

You have 30 seconds, please, and then your wrap-up.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Okay. Thank you.

[Larry Cann, As an Individual]

My main comment, again, is that I lived through the 1990s, with the huge recession we had then. What came out of that was the problem we've got today with the shortage of manpower.

When there's a shortage, the problem is that the people you have already have to go to work and you don't bring new apprentices in and new young people into the markets. That's one of my real concerns. The concept of the moneys and the recovery is good, but everybody needs to understand the importance of the long term. The demographics of people my age being about to retire and young people not getting into the markets, and your lag times, and all the things you have to deal with, they all have an effect on the opportunities for our young people to get into things and in turn make skilled tradespeople for the future. So that's very important.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you for that addition.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

Madame Bourgeois, eight minutes.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, Madam Chair.

Good afternoon gentlemen. From the outset I would like to say that I have enormous respect for people in the construction sector because they depend on supply and demand and they also depend on temperature, events, and the economic climate. I am therefore very sensitive to what people in your sector are going through.

I'd like you to answer this question by yes or no: do you represent those who are working in Quebec. Yes? Fine.

Furthermore, you have placed a considerable amount of hope in the stimulus plan. Mr. Smillie, from what I understood of your comments, you are hoping that the government will continue with its stimulus package and that this will lead to results in 2010. Am I correct?

[Christopher Smillie]

Really, with some of the pull-back we had in private construction over the last 15 months, the stimulus package is the major business piece for our trades over the next 18 to 24 months. Because of the economic crisis, with the credit crunch, a lot of the construction companies were unable to secure financing for large projects. For example, in the oil sands in Alberta many oil companies had to pull back on projects due to lack of financing. What you'll see is a shift from employees working on large industrial projects to working on civil projects, such as sewers, water mains, roads, and institutions. So it's this shift that we're hoping for.

The last thing you want to have is a large supply of manpower or people power, so to speak, and no work for them to do. So right now we're going through a process where we're shifting focus away from large industrial projects that won't happen, back towards infrastructure and civil jobs.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

The stimulus plan does not just deal with infrastructure projects: funds are also being allocated to research and development. The Economic Development Agency of Canada is investing among other things in support for businesses.

You seem to be saying that the number of jobs created in infrastructure has not been very high. Do you think that the money invested in your sector by the Economic Development Agency has nonetheless led to results in research and development? Have your businesses been assisted? Was the level of that assistance sufficient? Has it led to job creation?

[Christopher Smillie]

I think, rather than research and development—I can't quite comment on that—our trades have been supported by an extension in employment insurance benefits. Indirectly, our folks would benefit from training provided through these EI funds. If we want to call that research and development and add training, our folks have benefited and will benefit from that.

On the research and development portion, the only piece I could comment on would be carbon capture, storage, and sequestration. There is money that has gone to large companies to do research on CCS technology, and eventually, when it gets to implementing these large industrial apparatuses, our members will benefit.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

On the issue of approving municipal infrastructure projects, the government launched its recovery plan quite quickly, and municipalities, especially the smaller ones, are having difficulty submitting their projects in time. Bigger municipalities have more engineering services at their disposal and often plan many projects in advance, which smaller municipalities can't do.

You state in your brief that six to nine months can go by before a project finds itself on paper. Have municipalities had to hurry in order to be able to submit their projects? If that's the case, could one say that the security of construction workers is at stake?

[Christopher Smillie]

I am aware that the municipalities went through a process where they identified projects that they could grab from the hopper and use for infrastructure moneys.

In terms of the process, I can't really comment too much on the process because our folks were further down the line. We don't get the work until the job is fully bid.

I can't really comment on the security of these job sites. At the end of the day our folks are the skilled-trade folks who go to work and build these things. We're not involved in the decision-making process for which projects will proceed or not.

The municipalities are in a hard spot.