Canada’s competition commissioner is straight up about one of the biggest problems plaguing Canada’s economic competitiveness.
As Matthew Boswell notes, “There are regulatory barriers to competition throughout our economy.”
Those barriers, or government policies, are contributing to a massive hike in the cost of building public infrastructure projects, and it’s happening across Canada.
Rising material, labour costs and supply chain issues are only part of the reason why building everything from new schools to recreation centres is a lot more expensive. Right now, Toronto is a classic example of how elected officials steadfastly stand in the way of competition, even when it means their constituents could get stuck with a hefty property tax hike.
Back in 1978, certain construction unions and their affiliated contractors gained a monopoly on City of Toronto construction projects. This meant only contractors signatory to certain building trades unions could build things like Toronto Community Housing and police stations.
Fast forward to now and nothing has changed. The arrangement has resulted in less competition, and fewer bids, driving the cost of public construction way up.
According to the Cardus think-tank, Toronto pays at least $347 million too much every year for city construction projects, because it refuses to open up its tendering and procurement process and allow more qualified bidders.
It’s hard for Toronto council to justify this costly, anti-competitive procurement practise when it’s staring at a potential property tax hike of 10.5 per cent. Toronto is the only city in Ontario that won’t allow open competition on its public projects. It chooses to ignore the proven cost savings of open tendering in other municipalities, while facing a massive budget shortfall of $1.8 billion.
The B.C. government is equally unapologetic and overt. In 2018, it granted select building trades unions a monopoly on the construction of several major public projects. Only companies with workers that belong to these unions are allowed to bid on these projects. Under this labour arrangement costs have soared, including construction of the Cowichan District Hospital, which is 63 per cent over budget. That’s a $559 million overrun that taxpayers must bear.
It’s more of the same at The Ottawa Hospital, with construction of its new $2.8 billion civic campus, which is funded by public tax dollars. The hospital entered into an exclusive labour agreement with select unions which shuts many local contractors and thousands of Ottawa area construction workers out of the expansion project, because they are either non-union, or chose to belong to other unions.
According to a report by the Montreal Economic Institute, this exclusive arrangement will escalate project costs by anywhere from $168 to $525 million above original estimates. This is public funding that could go towards so many other public priorities, but is instead being needlessly wasted.
The federal government plays union favourites too. Under its new Green Energy Tax plan, companies working to achieve cleaner energy targets won’t qualify for the full tax credit unless they implement the wage and benefit rates of a few select favoured unions. This preferential treatment and construction market interference will inevitably drive up the cost of building new clean energy projects, with taxpayers once again on the hook.
The reality is that our elected officials pander to certain unions, entering into arrangements that cost taxpayers billions. It’s the kind of blatant, unscrupulous behaviour that drives up the cost of public infrastructure projects that Canadians rely on and has a domino effect into the privately funded construction space. When community housing, energy projects and hospitals cost more, fewer get built.
As competition commissioner Boswell laments the lack of competition in Canada, he recognizes where the change must start.
“It seems to me that politicians are understanding that Canadians are demanding drastic change to competition in our economy and that message is being heard.”
The question now is, what are elected officials willing to do about it?
Paul de Jong is president and CEO of the Progressive Contractors Association of Canada. Send Industry Perspectives Op-Ed comments and column ideas to firstname.lastname@example.org.