Industry Perspectives Op-Ed: Not credible? Not so fast

This op-ed is the first of two parts by Ian DeWaard, Christian Labour Association of Canada provincial director, exploring the impact of the non-construction employer status and in particular an Ontario Construction Secretariat report entitled “Just Not Credible.”

Labour monopolies in municipalities are an unfortunate consequence of a loophole in the Ontario Labour Relations Act—not the result of a planned or specific public policy aim.

The effects of these monopolies include a limited number of bidders on city projects, increased construction costs, work inefficiencies, decreased productivity, and a more limited pool of skilled labourers in a time of a skilled labour shortage.

Bill 66 has given Toronto, Hamilton, Sault Ste. Marie, and the Region of Waterloo the chance to be rid of union monopolies by granting these entities “non-construction employer” status. By doing nothing, these municipalities will achieve the same status as all of the other 440 municipalities in the province, thereby ending the subcontracting restrictions that limit competitive, fair, and open tendering practices.

This is not an anti-union initiative but a fair solution that gives equal consideration to all trained, qualified, skilled workers.

A recent paper by the Ontario Construction Secretariat (OCS), entitled “Just Not Credible,” sets out to provide reasoned justification for the continuation of the labour law peculiarity that has created these monopolies. In doing so, the OCS demonstrates just how eager the benefactors of restricted tendering are to preserve their privileged position.

No one that has a monopoly position has ever ceded their position eagerly. The many unsubstantiated claims and unfounded assertions within the OCS paper serve to make clear just how much is at stake for these affected construction craft unions.

There are three main points the OCS argues to maintain their monopoly: cost, safety, and access to a robust and diverse labour pool.

Savings from Competition — Closed versus Open Tendering

On cost, the OCS argues that the effect of competition will be restricted to reduced wages, and that any savings would be inconsequential at best and at worst would result in a significant downward driver on worker salaries. What they fail to contend with is the simple supply and demand economics of construction tendering and the impact of reduced competition.
The OCS paper ignores or discredits numerous studies, and instead gives credibility to a dated Toronto city staff report that only analyzed the wage differential between prevailing union rates and the city’s published fair wage policy wage rates. The OCS gives no credence to the body of work that demonstrates how increased competition drives better pricing without an impact on wages.

A look at fresh data on four recent ICI jobs in Toronto shows that the city currently receives only one to two compliant bids on major projects, and that the bid range is as much as 22 to 33 per cent from contractors using the same labour costs and similar labour pools. Therefore, we stand by arms-length and expert research that claims that even with fair wage policies, the city can achieve eight to 25 per cent cost savings on its ICI construction budget.

Further, it shows that the City of Toronto appears to have a recent problem with a lack of bidders on projects, which is forcing the city to pay significantly more for projects than could be achieved with an increased number of bidders. These bidders would also represent a variety of labour models (traditional craft-based union, alternative union, and nonunion), rather than a single, traditional craft model.

What are the productivity benefits the city will see with different labour models? For starters, let’s look at how work is organized. A CLAC general contractor is not subject to nine or 12 or 16 different trade agreements, but instead works with its employees under one, multi-trade agreement. As a result, a CLAC contractor doesn’t receive a grievance when the skilled labourer installs a concrete form, or when the operating engineer unplugs the electrician’s extension cord.

This kind of collaboration significantly alters the organization of work and results in a more efficient and more co-operative labour force. The kinds of labour turf fights that occur when multiple craft unions are vying to protect their work (known as jurisdictional disputes) are costly in staff and legal time due to litigation. These jurisdictional costs far outweigh any additional staff time required to administer and enforce fair wages in an openly competitive bidding environment.

Additional efficiencies are available to CLAC contractors (and others) because they can ask their employees to work 40 or 44 hours in a week, depending on the collective agreement the contractor has with its workers.

We cannot accurately forecast what the savings will be from an increased number of bidders that draw on distinct types of labour pools. However, according to research by the think-tank Cardus, the cumulative savings of open tendering range from eight to 25 per cent. With over $600 million in ICI projects tendered annually by the city, this amounts to annual capital cost reduction of $48-150 million dollars per year.

The second part of this column will appear in the Daily Commercial News tomorrow.