Mr. Terrance Oakey (President, Merit Canada):
Good afternoon. Thank you to the committee for the invitation to participate in this study.
Today I'll focus on the need for open tendering of all contracts that involve federal funds. Only through a system of open tendering can you ensure competition and respect for taxpayer dollars.
I will return to that point shortly, but first, it is important to understand more about Merit Canada and the role our members play in the construction industry.
Merit Canada is the national voice of eight provincial open shop construction associations. Open shop companies and workers build more than 70% of the industrial, commercial, institutional, and residential construction projects across Canada. Of the 1.26 million Canadians working in construction, 900,000 are in the open shop sector.
Despite mischaracterizations by some, the term “open shop” simply describes a workplace where membership or non-membership in a union is not a condition of employment. In the construction sector, it specifically refers to a situation where owners, developers, or general contractors do not consider the union status of a contractor's employees when awarding a project. For our members, the term means freedom of choice and fairness in the workplace.
The fact that 70% of construction in Canada is carried out by open shop companies demonstrates the importance of our sector. It also demonstrates the need for those companies to be involved in bidding on public sector contracts, since they form such a large part of the competitive pool in construction.
Instead, far too many jurisdictions across Canada continue to practise closed tendering. There, bidding on public sector contracts is restricted to specific unionized contractors as detailed in collective bargaining agreements.
Our message is very simple: when government funds infrastructure, all qualified contractors should be allowed to bid on those projects.
A degree in economics is not needed to understand what happens when you shut out 70% of the construction industry from competing on public infrastructure. Costs go up and quality goes down. Some U.S. studies suggest that closed tendering rules increase the cost of construction by between 12% and 18%.
Federal procurement rules would never allow union-only schemes for projects that it exclusively funds, yet far too many jurisdictions have rules that limit competition.
For example, the federal government recently contributed $28 million in stimulus funding to a project in the city of Hamilton. Of the approximately 260 qualified contractors, only 17 had workers registered with the union that the city rules require. The other 243 contractors, or 94% of the available workforce—some of your constituents—were not even allowed to bid or work on this project.
We believe this is unfair, and it only serves to increase the costs and keep some of your very constituents from working on public infrastructure projects.
Federal funds are collected from all taxpayers. It is unjust that companies that pay federal taxes and workers who pay federal taxes are precluded from bidding on contracts paid for with their own tax dollars simply because they are not part of the right union. Everyone should have the same opportunity to work.
At a time of massive fiscal deficits across all levels of government, continued support for closed tendering is untenable. Open tendering is about fairness for taxpayers and workers.
I'll give you a couple of other examples.
The closed tendering provisions in Montreal, according to a 2004 City of Montreal report, inflated the initial price tag of projects 30% to 40%. Sewer and aqueduct projects in that city were 85.5% more expensive. When the federal government agrees to cost share a $300-million project, you are potentially spending $85 million more than required just because of union-only contracting.
This is partly to blame for the crumbling infrastructure across our country. Our money is just being wasted. There are a lot of new roads, bridges, and public transit that are simply not being built.
There are a couple of other things that happen, which you may not be aware of, when the federal government funds these types of projects. They are not actually funding infrastructure, but in some cases, political causes.
For example, the building and construction trades collective agreements require employers—the same ones who had the exclusive right to bid on the project—to fund their Canadian political action fund.
IBEW collective agreements allow for workers to be taken off the job site to engage in “other organizational activities”.
PSAC, the federal public sector union, has in their collective agreement, for work that involves construction, a requirement that employers pay into the “social justice fund”.
Others require payment into a sports and entertainment fund, and some others a “promotion fund”.
Is this really a good use of scarce infrastructure dollars? Can cities really claim poverty when signing contracts that require them to divert money that should be going to build schools to pay for a sports and entertainment fund of a union?
To sum up, open tendering is a partial solution for the massive fiscal problems facing every level of government offering a more competitive bidding process that will lower project costs. Closed tendering is anti-competitive, is inefficient, and is indefensible from a public policy point of view. It is time to end this practice for any project receiving federal funds.
If you would like more information, I invite you to visit our website, opportunitytowork.ca. Thank you again for the invitation to appear.
I'll turn it over to my colleague, Walter Pamic, who has some other comments.
Mr. Walter Pamic (Representative, Power-Tek Electrical Services Inc., Merit Canada):
Good afternoon, and thank you for inviting me to be here today.
It's my pleasure to have the opportunity to speak to you. I'm a local Ottawa electrical contractor and small business owner. There are many schemes that we have to contend with in the construction industry. Free and open tendering is a very important one that shuts us out of being able to bid on projects.
Just this weekend I was reading The Ottawa Citizen and I saw that there was a tender for the Ottawa International Airport. If you read the fine print it says, “subject to local union affiliations”.
I find it rather disgusting that my tax dollars go into projects that I cannot bid on for no other reason than my employees choose to be union-free. About 70% of the construction workforce in the entire country of Canada is union-free, so it really shuts out a tremendous amount of companies very similar to mine.
The Ottawa Conference Centre is another classic example. It was a union-only project and shut us out. Perhaps there was no other reason than the fact that again my employees refuse to belong to a union. I shouldn't say they refuse to. They have the option to do so, if they so wish; they just choose not to.
We have stabilization funds that are utilized against us. These are funds that unions collect from their employees in order to use those funds to bid against us.
We have ratios. I'm not sure if you're aware that my company employs approximately 30 electricians and 10 apprentices. We are required to have three electricians for every apprentice that we wish to hire.
As an example, if my company was in Manitoba, where they have a 2:1 ratio, I could actually have 60 apprentices for my 30 electricians. We bring into the mix the Working Families coalition, an organization which I would say has been very strongly opposed to free and open tendering, and which likes to have many of these restrictions put in place. We realize this is more of a provincial issue than a federal one, but it's just one more issue that makes it very difficult for organizations and/or companies like mine to bid on these types of projects.
Mr. Jocelyn Dumais (President, Linden Concrete Forming):
My name is Jocelyn Dumais, and I am a construction contractor in the Ottawa area. I live in Quebec.
October 19, 2001 is a little-known date on which the Supreme Court of Canada ruled in the Advance Cutting & Coring case, stating that the freedom to belong to a union also meant the freedom not to belong to one.
I am familiar with the case because I am the one who led the charge from start to finish. And oddly enough, today my company cannot bid on certain federal government contracts. It would seem that the federal government either does not respect or does not understand the decision issued by 8 out of the 9 justices on the Supreme Court of Canada: no one can be forced to associate.
In 2013, I am still excluded from certain construction projects because the federal government does not respect that decision. Something is wrong. It is important to note that we challenged the constitutionality of Quebec's act respecting labour relations in the construction industry. Pursuant to that act, all workers in Quebec must belong to a union.
As I said, the decision was rendered on October 19, 2001, but still today, between 20 and 40 people a week are brought up on charges before the Gatineau courts. Why? Because they worked or dared to work without the necessary papers—and this document proves it. I have been documenting the phenomenon for a year. It happens every week.
Mr. Coderre might notice that the number of people appearing at the Montreal courthouse exceeds 20 or 40. The cost of the justice system might be more reasonable if time wasn't wasted on convicting people because they dared to work. We talk about bringing foreigners here to work, but we're imposing $200, $500 and $800 fines on people who are already working here, simply because they are not unionized. That's a common occurrence.
Last week, I believe, Mr. Coulombe was defending Quebec's system, saying that everything was fine. I have no choice but to object. There are too many injustices in this industry. I say yes to freedom of association, yes to the freedom to organize, but that should also mean I have the right to bid on the contracts of my federal government without being forced to belong to a union.
Some large companies have reached agreements with unions. They have no choice: the agreements are signed. Take the company PCL for example. It signed an agreement with a number of central labour bodies and is under obligation to hire unionized contractors. The federal government should object to that and award contracts to non-unionized shops or ones that do not force their members to belong to a union.
There's a cost attached to this. Workers receive benefits that could be provided in other ways. The cost for each employee is about 20%. We sent our armed forces overseas to fight for freedom, but what about here, in Canada? We are forcing people to unionize, and when they don't want to, it's off to court with them and, in some cases, jail.
Is that what passes for justice in Canada? Is that why I spent 10 years fighting? In 2001, the justices on the Supreme Court of Canada sided with me, but in 2013, a decision was apparently made to disregard that ruling and to keep doing the same thing. That's not justice. What I want is the right, like any other unionized contractor, to work on federal construction projects, because those are Canadians' and my tax dollars at work. I want all of my employees to be able to benefit from them. And that isn't the case now.
Mr. Robert Aubin (Trois-Rivières, NDP):
Thank you, Madam Chair.
Thank you to our witnesses for being with us this afternoon.
I want to point out, for everyone's benefit, including my own, that our study pertains to how competition can make infrastructure dollars go further, in other words, how the federal government can get more bang for its infrastructure buck.
My first question is for Mr. Oakey.
In your presentation, you talked about cases in which contracts were awarded as part of closed tendering processes. You said the practice resulted in increased costs and lower quality work. I can appreciate wanting to benefit from a bidding process that is open to everyone. I am not sure whether there was a direct relationship between the two events, but you cited cases where the cost of infrastructure work had risen considerably, if not astronomically, such as in Montreal.
Are we really establishing a link between the tendering process and the financial goal of projects? Have we not ruled out the possibility that misappropriation might have something to do with the topic we're discussing this afternoon, that being competition?
Mr. Terrance Oakey:
I think, absolutely, in the city of Montreal it's a matter of public record now that there's been misappropriation, but if you take a city like Hamilton, where there's closed tendering for all city work, there was a recent waste-water project that was being tendered, and they hired outside consultants to develop a budget for the project. The outside consultants, engineers, and others in the industry decided they should budget around $29 million for the project. Then, of course, closed tendering happened, where only unionized contractors were able to bid, and the low bid on that project was $53 million. It was about 83% over budget for no other reason. No one else could describe it. It was just that there was only one union that could do the work and that's what they were charging.
They could have charged $104 million. I don't know why they only charged $53 million. There was no competition from outside to even make it $53 million. Given that it was an 83% increase, I think that this was probably what they felt maybe was reasonable—I don't know—but there are many, many projects. In the City of Hamilton alone, their staff report has suggested that their closed-tendering rules over the next 10 years would cost the city an additional $1.1 billion.
So there's a clear link, and that's why the City of Hamilton, Kitchener-Waterloo, some other cities, are fighting certification, because once that happens and once the city's certified, they have to use that union for all their work. They know there are huge cost implications, and it means one of two things: either you cut policing, cut the amount of roads you build, cut the amount of hospitals you build, or you raise taxes.
Hon. Denis Coderre (Bourassa, Lib.):
Thank you, Madam Chair.
Good afternoon, gentlemen.
Mr. Oakey, I have a little problem. I'm from Montreal, and the way you're talking is like you're making a link between unions and collusion. I have a problem with that.
I'm a radical centrist, so I'm not biased.
I'm trying to understand here, if you have collusion with five companies which among themselves say, “Okay, this is your time and this is your time”, that there will be a hike, because at the end of the day it's not only based on the bid, it's also based on the future extras.
Explain to me, or correct me if I'm wrong, why you say that because it's a closed bid—and I'll come back to that—and you need to have the unions, that it will have a direct impact on the price itself.
Mr. Mark Adler:
I hear this all the time when I'm out canvassing or when I'm at events. People come over to me.
It's mainly the municipal taxes, property taxes, that are forcing people to dig deeper into their pockets every single year. They're paying more and they're getting less in return.
I remember we used to have garbage pick-up twice a week in Toronto, and on a third day we'd have recycling picked up. I remember being able to go to the skating rink at my community centre and not having to pay to use the ice. I thought this was all covered in my taxes. Now there are all these user fees that have been attached to a number of the services we thought were being covered in our taxes.
Municipal governments, and Mr. Poilievre made reference to this, are always coming to us and asking for additional funds. We have now indexed, according to inflation, the money that we are guaranteeing to them through the gas tax and GST. There's a whole pot of money out there. If only fairness was injected into the system, if only the right to work was made available to whoever wanted to work, we could save a lot of money, and we could have an infrastructure we could be proud of instead of one that's crumbling, without having to force our taxpayers to pay more and more in tax at the municipal level.
Is that true?
Mr. Mark Adler:
A number of my constituents have major concerns about some of the activities of some of the unions recently.
Going back to when the check-off system was put in place by Chief Justice Rand, which is why it's now called the Rand formula, that money was to be checked off from union membership, to be used for collective bargaining purposes to advance the interests of the worker. It has now become a cash cow for a lot of unions that engage in activities that really have absolutely nothing to do with the collective bargaining process.
One recent example is the Canadian Union of Postal Workers. This caused a huge outrage in my riding. They sent a couple of people to what they call Palestine and said that the Israeli government was engaging in gross human rights abuses, and that Canada was complicit in this, and Canada, by virtue of supporting Israel, was committing war crimes.
This is the kind of thing they're using hard-earned money for, and workers who worked tirelessly have to pay into this.
I see you make reference to it here: the social justice fund, sports and entertainment fund, promotion fund. If I don't believe in the cause that my union is promoting.... A lot of the workers who came to see me, many of them postal workers, said that this is an absolute outrage and there's no recourse, but they have to pay this.
Could you comment on the activities of unions, and union dues going beyond what they were intended for?
Mr. Andrew Cash:
In my riding of Davenport in Toronto I have a lot of members of Local 183 LiUNA, Local 506 LiUNA, and Carpenters' Local 27. In my riding my neighbours on both sides are retired construction workers and they are in good health and happy. They can afford the homes they're living in, which in Toronto is quite a feat, as you may be aware.
In both those instances these are men that immigrated to Canada with very little education. One of the first things they did was to get a job where they were ultimately able to join a union. They were actually nurtured by the union. Their families were nurtured by the union. They actually integrated into the city and, in fact, made my city the great city that it is.
When I go door-to-door, I'll maybe knock on a door and there'll be an elderly man there who is in rough shape, the house is falling apart, and when I talk to him and ask him where he worked and whether he had been a member of a union, I can tell you almost 10 times out of 10, if that elderly gentleman is struggling or if his wife is struggling, that man did not have a unionized job when he was younger. His work was not in a unionized shop.
The point I'm trying to get to here is that while you say on the one hand you're into an even playing field and you're not trying to change anything about unions, you only want to be able to bid on their jobs at the same time you're trashing the Rand formula, as your friends in the Conservative caucus over here are, you're missing an essential point, which is that through their union, these workers contribute enormously to the communities in which they live.
You talk about these open-tender bids as though they're some kind of panacea for all that's ailing the economy. Meanwhile, today we see that the Conservative government has somehow lost and can't find $3.1 billion. So I think it's really rich to say that somehow all these problems have to do with unions.
In my riding in Toronto I have a lot of union members, many different kinds of union members. I have janitors who are facing privatization and the loss of their job security and the loss of their pensions. This kind of insecurity creates an unquantifiable amount of stress on people, and the expense that we'll incur down the road for workers who aren't properly protected is not factored into your bottom line, I can tell you that.
Mr. Ed Holder (London West, CPC):
Thank you, Mr. Chair.
I share Mr. Coderre's thoughts. It's unfortunate that certain replacements on the committee haven't really raised the level of debate.
One thing struck me when I heard the questions Mr. Coderre talked about. I want to make a point: collusion is collusion; bad behaviour is bad behaviour. If it's bad, you call it out. I don't care who does it. I don't care where it comes from. I don't care whether it comes from people who are associated with closed shops or people who are associated with open shops. Bad behaviour is bad behaviour and you call it out. I don't think that is the issue here. I don't think it's a matter of union is bad and non-union is good. That is not the intention of this study. I want it to be clear that from my perspective, that has to be said.
I want to get back to what the topic is actually supposed to be about, which is a study on how competition can make infrastructure dollars go further.
I'll start with you, Mr. Oakey. You mentioned in your testimony—I apologize, it was either you or Mr. Pamic, and you'll correct me—that some 900,000 out of 1,260,000 Canadian workers are in the open-shop sector. That's roughly 72%. I'm trying to understand the percentage. Have you done any study to know whether the open shops get about 72% of the overall work in Canada? Do you have any sense of where your percentage falls in terms of the work done?
Ms. Olivia Chow:
There are two ways that the federal government transfers money. One, as you know, is through the gas tax, which is basically an agreement. It's a direct transfer from the federal government to the provincial and municipal governments. In that instance, the funding is more predictable, but the federal government takes a completely hands-off approach. Whatever the municipality wants to spend it on, it's up to them whichever way. The other approach is the Building Canada fund and the P3 fund and the provincial-federal agreement fund. In these ones the federal government has some say over the agreement with the provincial government or it would be as a grant-based project.
I see what you are trying to say. You're saying that the federal government should, in the way it spends its infrastructure funds, make sure that the bidding process is open, but that wouldn't apply to the gas tax fund. It really wouldn't apply to the direct transfer, right?
In your mind, do you think that the federal government should put on more conditions when there's an agreement with the municipalities that there should be some conditions? Condition one could be that you have to generate apprenticeship spots, for example. Your suggestion could be another one.
In your mind, how do you go about coming to a place where you want to be? Right now, in terms of the old funding, the existing funding, there's not a whole lot left. In fact, there's a bit of a cut. It's about a $2-billion cut. We used to get $5 billion. It's now down to $3 billion, so we're actually losing about $2 billion a year of existing funds. That's through the Building Canada grants program. Are you specifically talking about the Building Canada program? That program is the old program, not the new one. The new one doesn't really wrap up until three or four years from now. So I can't see how, even if we want to, we would apply conditions.
Mr. Lawrence Toet:
Even when you do an expansion, you want to see some continuity, so there shouldn't be interference to that level.
I understand where you're coming from, having been a business guy myself in the past. There are times when I believe strongly that relationship is also part of it. It's not 100%, but it should be part of the equation and not strictly a lowest price aspect.
I have one more question for you.
Mr. Moist, from CUPE, was here last week and he actually supported the idea of unbundling large contracts on infrastructure projects to allow for companies of all sizes to be able to compete, which I was very happy to hear.
Would you agree with this also, that an unbundling aspect to some of these large umbrella-type contracts would be helpful to keep pricing down and allow everybody to participate? Mr. Moist used the example of a gentleman in Alberta who had the ability to build schools. He could build a school, but he couldn't build the six schools they put under an umbrella-type contract. Would you also be in favour of what Mr. Moist was advocating?
Mr. Jocelyn Dumais:
There are union contractors who go under and there are non-union contractors who go under.
What matters is the quality of the work.
I always go back to the same example. Say you have ten workers: five of them are unionized and five aren't. At the end of the day, you'll have five good workers, regardless. What's important is to check the quality of the work, given that the cost goes up every time.
When we receive a plan before working on a construction site, I throw it in my truck. It's merely a reference plan. After the first day, it won't be any good; it won't be completed. So subcontractors are asked to do the verification and to make sure it works, because it's very common for the wiring done by an electrician to conflict with the piping installed by the plumber. Professionals do those jobs, whether they are unionized or not, but without someone to check the quality of the work, you won't get the result you want.
Whether or not you belong to a union has nothing to do with the quality of the work done. But it does affect the cost. It's totally false to say that a non-unionized worker won't do as good of a job.
Mr. Jocelyn Dumais:
When you have unionized workers, overtime enters the equation, usually after eight hours of work, and that raises costs. A non-unionized worker will be more flexible in that regard.
In addition, unionized workers are separated by class. The carpenter has to do his job, the labourer has to do his job, the painter has to do his job, and so forth. As Walter explained earlier, a non-unionized worker could use a hammer or paint brush during the construction project. In fact, that happens when bridges are built. A unionized stripping shovel operator isn't allowed to pick up a shovel to clean his bucket, but a non-unionized shop would allow him to do that.
A non-unionized worker can choose to work 10 hours a day, and it doesn't necessarily have to mean overtime. He can make that choice. So there's a pretty significant cost attached to that.
Then you have the benefits. Benefits represent about $2 an hour that you have to pay the union. If the total approximate number of hours to be worked on the bridge, be it in Windsor or Montreal, is 10,000, there's a hefty price tag attached to that.
That's the information I am going by.