The 2014 Federal Budget made important investments in Canada's infrastructure, something for which the Harper Government deserves great praise. There are staggering infrastructure demands across Canada, so any new investments in this critical aspect of our economy are welcome.
However, the Government could get a lot more bang for its infrastructure buck if it required open tendering for all projects using federal money. Instead, far too many jurisdictions continue to practice closed tendering, in which specific unionized contractors affiliated with the building trades unions are given privileged access to public sector contracts.
This arcane and indefensible practice means that right off the top, seven out of 10 construction workers in Canada are excluded from employment on these projects because they do not belong to a union. To make things even less competitive, specific unions have privileged access to these contracts over other unions, thereby further limiting competition.
It does not take a degree in economics to know what happens when 70 per cent of any industry is barred from competing: quality goes down and costs go up. A study conducted by the City of Montreal found closed tendering inflated project costs anywhere from 30-85 per cent more.
The House of Commons Transport Committee looked at open tendering as part of a study it conducted last spring into How Competition Can Make Infrastructure Dollars Go Further. At the time Merit Canada recommended that Ottawa take a leadership role, ensure that projects that use any federal funds be tendered openly, and apply such a policy to all infrastructure agreements, Crown corporations and any other federal mechanisms used to fund infrastructure.
Ultimately, the debate around open tendering comes down to respect for the taxpaying public. According to a Cardus study, construction projects in the City of Toronto worth approximately $591 million were subject to restrictions due to construction labour monopolies and Toronto Councillor Karen Stintz has put the price of restrictive union rules at $100 million a year.
Some of the examples of what happens under a closed system would be hilarious if not for the disrespect shown to taxpayers. Consider plans to build a simple brick public washroom in Kitchener, for which the lowest bid came in at $564,744 -- 40 per cent more than budgeted and 150 per cent more than the average cost to build a house in the City (and consider the public washroom would be built on free land!).
In another case, the City of Waterloo was forced to appeal to the Ontario Labour Board in its effort to open a public tender for a $140 million sewage treatment plant to 27 contractors rather than only two.
It is time to abolish closed tendering policies and Budget 2014 presents an opportunity for the Federal Government to lead the way in doing so. Open tendering allows for real competition, and that is the only way to ensure respect for taxpayers and the optimal utilization of infrastructure dollars.