Competition for Public Contracts is Good for Taxpayers

January 17, 2017
Cardus

COMPETITION FOR PUBLIC CONTRACTS IS GOOD FOR TAXPAYERS
Research shows Ontario cities can save hundreds of millions of dollars with open bidding for contracts.

January 17, 2017

HAMILTON – Several Ontario cities are missing out on hundreds of millions of dollars in savings by restricting bids on municipal contracts – especially in construction – to a select group of unionized bidders. Brian Dijkema, Work & Economics program director at public policy think tank Cardus, and Dr. Morley Gunderson, CIBC Chair in Youth Employment at the University of Toronto where he is also a professor at the Centre for Industrial Relations and Human Resources, performed an extensive examination of research on the effects of restricted tendering in government contracts in construction in Ontario. In their new policy paper, Restrictive Tendering: Protection for Whom?, Dijkema and Gunderson found that open competition for municipal contracts would lead to three major benefits:

  • Taxpayers would save anywhere from 8% to 25% on project costs.
  • Pressure to hire the best would leave the construction industry less prone to discriminate against women, Indigenous people, new immigrants, and others.
  • The construction industry would have less incentive to spend time and money lobbying to sustain laws and regulations that deter new entrants to the market.

“Municipal governments are needlessly throwing hundreds of millions of dollars away because they restrict bidding to a select few unionized companies,” says Dijkema. “If Toronto alone modernized its bidding rules, it would have a ripple effect across the entire province.”

The move to open Toronto’s construction procurement would continue the trend of bringing competition to public service provision, of which Toronto’s waste collection is the most recent.

“Mayor Tory has publicly decried the negative effects of monopolies and has acted to bring competition to waste collection, saving residents tens of millions of dollars” adds Dijkema. “If he did the same for Toronto’s construction he could save hundreds of millions of dollars.”

Other cities which find their infrastructure budgets constrained by restricted bidding include Hamilton, Sault Ste. Marie, and the Region of Waterloo. Download the full report here.

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About Cardus

Cardus is a think tank dedicated to the renewal of North American social architecture. It conducts independent and original research, produces several periodicals, and regularly stages events with Senior Fellows and interested constituents across Canada and the U.S. To learn more, visit: www.cardus.ca and follow us on Twitter @cardusca.

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Daniel Proussalidis
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ABOUT CARDUS

Cardus is a non-partisan, not-for-profit public policy think tank focused on the following areas: education, family, work & economics, social cities, end-of-life care, and religious freedom. It conducts independent and original research, produces several periodicals, and regularly stages events with Senior Fellows and interested constituents across Canada and the U.S.