Transport Committee on May 23rd, 2013

[Michael Harris]

Yes, and I think it's important to note, too, that we talk about percentages, but as a percentage in terms of real dollars for taxpayers, the City of Hamilton projects that it increased their costs by $10 million annually. That's a significant amount of money that could be used to fund other important infrastructure projects.

[The Chair, Conservative, Larry Miller]

Your time has expired, Mr. McGuinty.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you very much, Mr. Chair. I appreciate it.

[The Chair, Conservative, Larry Miller]

Mr. Poilievre, you have seven minutes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

One of you spoke of federal public tendering that is in some way closed. Can you explain that further?

[David McDonald]

Starting in the nineties, unionized general contractors wanted to look for a way that they could compete in an open market against open-shop contractors.

So what they did—I believe it was in 1989—was write into their collective agreements a construction management clause. It sets out the provisions whereby if they do not form a contractual relationship with a subcontractor, they do not have to abide by the restrictions of that subcontract. The owner, therefore, is bound to the contract.

Basically, with a construction management contract, you hire the services of a construction manager, who is a general contractor, to manage the project for you. He'll prepare all the packages. You might have a separate architect and engineer to draw up the drawings, or sometimes the general contractor will do that. But they will manage the whole process for you, on essentially a contingency basis—so much for your trailer, so much for your secretary, so much for your site supervisor or whatever else. They'll basically manage the whole project for you.

They'll put out the tenders for the subcontractors who will perform all the work on the job, but when the contract is written, the contract is with the government. There may be 20 subcontracts in this package. The direct contractual relationship is between the subcontractor and the government, or the owner.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

So you're saying it's the general project manager who imposes union-only provisions on the subcontractor, which the government then must honour. Is that it?

[David McDonald]

What I'm saying is that this is what they do, but the government does not have to honour them. All they have to do is tell them, “We want construction management here, and we want open competition on all your jobs. We are not bound by the agreements, and you can't force them on us.”

I've worked in exactly that circumstance with our company—

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Can you talk about project labour management agreements?

[David McDonald]

I can tell you a lot of bad stories.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Well, I don't need a lot of bad stories. Just give me one example of where this approach has been taken.

[David McDonald]

The Red River floodway.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

How was this set up, how did it work, and what was the consequence?

[David McDonald]

Basically, the government made a contract, essentially a collective agreement, with the building trades of the area whereby it set the terms and conditions for all employment—wage rates, pension benefits, and all that. But in addition, only members of the building trades could work on the project, even though in Manitoba union density is even lower than here.

So it excluded 85% of the construction workforce of the province from working on the job, but it also excluded all the open-shop contractors who might have wanted to do the job.

Basically, it's eliminating the competition and giving the work to your friends.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Do you have any documentation to share, supporting your claims in this example?

[David McDonald]

I don't have it now, but I could get you something, certainly.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay.

One of the opposition members asked if it's possible that closed tendering could reduce the price of infrastructure.

Is there any way that banning large numbers of competitors from submitting a bid could lower the cost?

[Michael Harris]

No. I don't see how, if there are only two coffee shops in town, the price of coffee is going to come down.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

By the logic of closed tendering, the solution would be to eliminate one of them. Then you'd have one coffee shop in town.

[David McDonald]

This is part of what the labour movement in the States, in particular, often says is the potential benefit of a project labour agreement. They say, well, since our rates are the normal rates anyway, or whatever else, we'll give you a deal on our rates.

Actually, the labourers' union tried to get a project labour agreement with Windsor county back a few years for all the road work for the new bridge. They offered to give the county 50¢ an hour, which they could use for any fund they wanted or whatever else in return for getting a monopoly over all the work. The county turned them down.

Often a project labour agreement will be sold based on saying there will be a no-strike clause in the agreement, or they'll give you better overtime rates or something like that. But in the bigger perspective, whatever they give, they're taking away again.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

All parties here have the right to submit witnesses for testimony. We've had a number of hearings and I haven't heard anybody defend this practice of banning competition.

Is there anybody you're aware of who would be prepared to defend it publicly? There are those who support it privately, and have benefited richly from it, but is there any organization that would be prepared to actually defend this practice?

[David McDonald]

I'm assuming that the building trades would.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

I don't know if anyone has put them forward as a witness, but I haven't heard anything from them.

[Michael Harris]

I think it's fair to note that the monopoly in Hamilton is a union monopoly. Projects would still be tendered, but only by companies organized by the carpenters' union.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Right.