A new report by Cardus shows since the passage of Bill 66 two years ago, the Region of Waterloo, Ont. has saved an average of 14 per cent in municipal construction project costs and has experienced nearly double the number of bidders on projects.
The report, Bouncing Back Through Diversity: The Effects of Bill 66 on Construction Competition in the Region of Waterloo, also found the average number of bidders for the region’s construction projects grew by 50 per cent to reach 5.5 bidders per contract since the bill passed.
Cardus did a study in 2014 looking at the impact of closed tendering in the Greater Kitchener Waterloo Area. The most recent study looks at the bids “prior to the five years of closed tendering, the five years of closed tendering and two years later.”
All in the report notes there’s been $24 million in savings.
“It’s admittedly a small sample size, 26 projects, but I think you’ve got enough of an indication. What you are seeing is that the open tendering has resulted in almost a doubling in the number of bids. You’re seeing tighter ranges in terms of the various bid prices which are being put forward,” explained Ray Pennings, executive vice-president of Cardus.
Change in legislation leads to more open procurement process
In July 2019, Bill 66, the Restoring Ontario’s Competitiveness Act, passed in the legislature.
As part of the legislation, the Labour Relations Act, 1995 was amended to recognize the cities of Toronto, Hamilton, Sault Ste. Marie and the Region of Waterloo, as well as school boards, hospitals, colleges and universities that were previously considered “construction employers” as “non-construction employers.”
The change meant public sector entities were no longer bound by collective agreements and could open bidding on construction contracts to all qualified firms, regardless of their workers affiliations with certain unions.
City of Toronto council chose to opt out and remain a construction employer.
“It’s not surprising to anybody, given the research that led up to Bill 66, that there could be anywhere from 15 to 25 per cent cost savings on opening up tendering and allowing more companies to bid,” said Karen Renkema, vice-president, Ontario, with the Progressive Contractors Association of Canada.
“It really does confirm that the greater the competition, the greater the savings, but more importantly the more fair it is for companies and workers and local taxpayers.
“One very interesting thing in the report and even if you go through some of the bidders lists anecdotally, is that what you are seeing is a lot more activity from generally local bidders,” she added.
To put the report’s findings in concrete terms, Pennings said, the estimated $24 million in savings is equal to the combined cost of the Galt Wastewater Treatment Plant upgrades in the region.
While studies have not been done, Pennings said other municipalities who adopted open tendering are likely experiencing the same savings.
“We’ve seen similar results in Hamilton and Sault Ste. Marie, which also adopted fair and open contract bidding on their infrastructure projects,” he said. “Among Ontario cities, Toronto is the outlier in continuing to restrict bids to a small group of contractors.”
Fairness remains critical as province recovers
Renkema said the province’s economic recovery from the COVID-19 pandemic needs to be inclusive and that continued focus should be placed on fair and open procurement processes.
“It’s important that moving forward the conversation about construction kickstarting local economies that we ensure that we continue to let all workers and all companies be able to compete on these projects,” said Renkema.
“Any type of restrictions on these projects, what you are doing is you’re really just encouraging a few very large contractors to be able to work on these projects to the detriment of the majority of the construction industry in Ontario. Our recovery needs to be multi-faceted in that it ensures multiple companies are going to have the opportunity to thrive in the future, not just those that their workers have chosen a certain union.”
Proposed Community Benefits Agreements that the Region of Waterloo and other municipalities are considering could also restrict bidding, she added.
“The way they are constructed can restrict the ability for certain companies to be able to tender and bid work…and further restrict who can bid on work and then further decrease bidders lists and therefore further increase costs to taxpayers.”
The Carpenters’ District Council of Ontario and the Provincial Building and Construction Trades Council of Ontario did not provide a comment as of deadline.
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