Thank you, Mr. Chair.
The National Citizens Coalition is a supporter-based organization founded in 1967 and counts tens of thousands of supporters in its ranks. Our organization is founded upon the principle of more freedom through less government. We advocate on issues of reducing waste in the public sector for the more efficient delivery of services to Canadians.
We applaud the Standing Committee on Transport, Infrastructure and Communities for taking on an important study on how competition can make infrastructure dollars go further. Indeed, basic economics teaches that competition reduces price, while it increases quality. As competition relates to the construction industry, it should be the objective of any legislator to optimize price for the taxpayer with the quality of work. Indeed, Canada's construction industry makes up 7.1% of the Canadian workforce and accounts for 6% of its GDP.
The 2009 budget saw the economic investment of approximately 2% of Canada's GDP in stimulus projects, many of which were construction-related. With the latest budget, the finance minister has set Canada's infrastructure trajectory for the next decade, establishing long-term spending in Canada's construction industry.
Of course, many of these projects and much of the funding will be realized at the provincial and municipal levels. If so, many federal dollars are to be allocated to infrastructure projects. If they are, it is in the best interests of the taxpayer to attain the best price for these projects. With the construction of roads, bridges, hospitals, and schools, a fixed budget means that fewer projects will be completed, that is to say, fewer schools, fewer hospitals, bridges, and roads constructed when the costs are not optimized.
It is our view that closed construction procurement has the effect of inflating infrastructure costs. When projects are put to tender to a limited or restricted labour pool, competition is reduced, limiting bidding to a favoured few.
Canada's unionized labour rate, as of 2011, was just over 31%. Closed tendering or limited bidding on contracts to contractors with collective agreements closes out nearly seven out of 10 Canadians. These Canadians also contribute taxes towards these infrastructure projects and are just as entitled to work. Indeed, many infrastructure projects are touted as make-work projects. However, this work is often only accessible to a fraction of the workforce. Further, according to Cardus, 26% of Ontario residents live in jurisdictions that are bound by construction labour monopolies.
Union status is not a guarantor of quality. Construction companies are already bound by jurisdictional regulations and bonding requirements, let alone the fact that reputational effects that follow shoddy work can result in fewer contracts in the future.
In a 2001 study of a closed-shop construction tendering process in the New York area, Ernst & Young found that, “There is no quantitative evidence that suggests a difference in the quality of work performed by union or open shop contractors.”
It is our view that the federal government, if it is to spend billions on infrastructure development, should place conditions upon infrastructure spending that are transferred to the provinces and municipalities. Opening up the tendering process makes the infrastructure dollar go farther. Closed tendered bidding processes are, at the worse end of the spectrum, a kickback scheme for organized labour in return for electing union-pandering governments. At the very worst, it's the sort of corruption that is currently being investigated by the Charbonneau commission in Quebec.
I was recently made aware of perhaps the most egregious example of Ontario's backward process for tendering contracts. Two workers in Waterloo signed union cards on some particularly tranquil Sunday, but because they represented over 55% of the workforce at work sites in the city at that particular moment, Waterloo became a closed-shop zone, binding the city to the collective agreement of that particular union.
Take the labour woes of the City of Hamilton. Because of restrictive labour agreements in that city, construction budgets are out of control, adding up to 40% in extra costs to those projects. For example, in the industrial, commercial, institutional, residential, and heavy engineering sectors, the City of Hamilton estimates an annual inflated cost between $4 and $10 million.
Even workers in other unions are shut out of closed tendering systems. The favoured few are set up and are able to bid higher on projects, shutting out the vast majority of the labour pool in both union and non-union shops. In a 2007 City of Hamilton report, only 17 out of 260 large construction firms were affiliated with the United Brotherhood of Carpenters and Joiners of America, which is the city bargaining unit. The city estimated that its closed bid association with the union would cost it hundreds of millions of dollars and harm the economic development of the city.
In 2012, Hamilton does not fare much better, with $147 million under the labour monopoly, according to the “Cardus Construction Competitiveness Monitor”. When that number is projected province-wide under restricted labour markets, it amounts to $747 million that is not accessible to seven out of 10 Canadian workers who have chosen not to join a union.
Almost everyone's understanding of economics suggests that reduced competition leads to higher costs and lower quality. We've seen Canadian and American examples where labour monopolies lead to fewer projects completed, with highly inflated budgets. The federal government is responsible for moving billions to the provinces under the building Canada fund. We recommend that these funds be allocated to projects that do not impose a restrictive closed bidding process. By imposing an open tendering process attached to infrastructure dollars, we can ensure that those dollars go further and that there is greater transparency in the process, to avoid collusion and corruption in monopolistic construction schemes.
Thank you very much.
