The Ontario Construction Secretariat (OCS) is back at it—trying to defend its special, protected corner of Toronto’s municipal construction market from small competitors.
Sadly, the OCS appears to want to keep governments from seeing a simple reality: fewer bidders on construction projects means higher prices.
Over its 25 years, Cardus has always been clear and open about its research methodology. We use standard social scientific methods in our research, be it on municipal construction bidding practices or any other subject we study. This is why we are open about the limits of our research, which the OCS trumpets as though it is some kind of weakness. It’s the opposite actually. It’s a sign of academic rigour and reliability.
When Cardus estimated possible savings of 21 per cent in project costs if Toronto opened its industrial-commercial-institutional (ICI) construction to all qualified bidders, we relied on the actual lived experience of a neighbouring city: Hamilton.
In 2019, city officials there reported that opening their projects to all qualified bidders led to potential cost-savings ranging from nine to 32 per cent of the project cost, with average savings of 21 per cent. The OCS finds that estimate hard to swallow, yet it has no problem pushing the myth that having less competition among project bidders has little effect on prices. One doesn’t need to be an economist to know that no market in the world works this way. No amount of foot-stomping by the OCS will change that.
Is it really so difficult to believe fair and open competition among all qualified construction bidders could lead to an average potential cost-saving of 21 per cent in Toronto? A study from Montreal suggests that city has overpaid up to 30 per cent for its construction contracts because of restrictions on bidders. Another from the University of Texas suggested projects receiving eight bids resulted in prices up to 25 per cent lower than projects receiving only two. If anything, a 21 per cent savings in Toronto seems to be on the conservative side.
The OCS also tries to throw irrelevant factors into the mix to bolster its weak argument.
Chief among them is its claim that by hiring “a union contractor” Toronto is tapping into the best workforce. Who said anything about not hiring union contractors? Cardus has been pro-union from the beginning and remains so today.
The issue isn’t about hiring union or non-union contractors. It’s about allowing all qualified contractors (even those that aren’t represented by OCS) to bid fairly and openly and not shutting out some contractors based on arbitrary, outdated criteria.
OCS also throws Toronto’s “fair wage policy” and safety standards into the mix. Toronto can impose whichever wage policy and safety standards it wants on its projects. Opening contracts to all qualified bidders would not change those policies. If anything, Toronto’s fair wage policy and safety standards are proof the city can ensure proper working conditions without tipping the scales in favour of select unions. In raising these issues, the OCS is simply trying to take attention away from the fact that some construction companies are getting special access to city contracts.
Cost savings are important, but they aren’t at the heart of the issue of Toronto’s restricted contract bidding regime that favours the companies represented by OCS. This is actually all about fairness for workers and business owners that don’t have special access to Toronto’s construction contracts.
Many construction companies and the thousands of workers they employ have been shut out of billions of dollars worth of work in their own city because of arbitrary and outdated municipal restrictions. This unjust situation continues today.
It is fundamentally unfair to block a company from bidding because its workforce is affiliated with the “wrong” union, or no union at all. Even if the cost savings of open and fair competition were zero, restricted contract bidding would still be wrong.
Renze Nauta is program director for work and economics at Cardus, a non-partisan, public policy think-tank. Send Industry Perspectives Op-Ed comments and column ideas to editor@dailycommercialnews.com.
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