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Procurement Perspectives: Value for money: Bill 66 and union versus non-union

Stephen Bauld
Procurement Perspectives: Value for money: Bill 66 and union versus non-union

Over the years, the question of owners using union or non-union contractors has become quite a heated debate.

The main issue was the conversation around the mandate of using union contractors or having a completely open tendering system.

Bill 66, introduced Dec. 6, will now open the door on the procurement process for all contractors to bid. The contentious argument was always related to the cost of labour, some articles claiming that a higher cost ranging from two per cent to 40 per cent, is paid as a premium by using union contractors.

In the past, when union contractors bid against non-union contractors, union contractors still won a fair percentage of contracts.

Should this theory that union contractors are 40 per cent or even two per cent higher in cost be true, they would never win any tenders in an open competition.

This is based on the premise that tenders are solely awarded on price, provided they are submitting a compliant bid.

The price component of a RFP is even lower as many other non-price considerations are factored into the award process.

Over the past 30 years I have investigated, and written several articles, as well as papers related to both sides of this ongoing controversy.

My research has suggested that it would be difficult to come to a definitive conclusion at this time as to how this new Bill 66 will affect the government procurement process.

On one hand, I have said that when you restrict bids, the price goes up.

I have also said that if too many contractors pick up bids (over seven for example), it is less likely that those contractors will take the time to compete with such a large pool of bidders.

I have not seen any undisputed, factual, information that the cost of using union contractors on large construction projects borders on a 40 per cent premium.

It has been my observation that the main reason for over-priced projects can be directly attributed to the procurement process, not labour rates.

Government transferring all the risk to the contractors is one of the biggest problems.

Also, take into consideration incomplete information at the time of tender by owners, which creates change orders that could very well be 40 per cent more than expected when the project is completed.

Labour is often not the greatest cost to construction projects and therefore can’t be totally blamed for these alleged large price swings between union and non-union contractors.

Quite often when a government agency receives 10 bids the contractor that is the lowest on a tender usually makes a mistake.

As a result, the project can come off the rails quickly in every aspect, from costs to schedule. This new Bill 66 will have to make sure major construction projects are all prequalified. This will ensure that the contractors bidding will be capable of actually doing the work.

It would be wise to conduct a comprehensive study as to the prices bid at time of closing with both union and non-union contractors, and then document the facts over time on several large projects to see how the two compare, looking for the actual total cost, all in, after the project was completed.

This would be a reasonable measure as to how union and non-union stack up against each other.

Even better, take two of the exact same projects, for example water treatment plants, finish them both and then study every aspect of the job — completion time, change orders, contractor performance, health and safety, total cost and the like.

Only then will you truly be able to compare performance and price.

I will continue to investigate Bill 66 during the coming year and bring you more detailed information as the facts unfold.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.

Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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