Now that the Ontario election is over, Queen’s Park needs to act decisively to find as many means as possible to stem the flow of red ink from Ontario's books.
And while there will no doubt be heated discussion about where to find these savings—whether through cuts or attrition—there is one major policy change that is hiding in plain sight that could save anywhere from $190-million to $283-million per year.
This policy change wouldn't require new investment. In fact, it requires the government to do almost nothing except bring its procurement practices in line with those of almost every other province and developed country.
Actually, it's even simpler than that: Ontario’s government and its major cities can save money just by bringing construction procurement in line with what its own laws, guidelines and practices already require.
Despite such requirements, cities such as Toronto, Hamilton, Sault Ste. Marie—and now the Region of Waterloo—take construction-project bids only from a limited pool of contractors who are affiliated with a particular union. In other words, workers and contractors can be shut out of bidding on hundreds of millions of dollars' worth of work because they exercised their basic freedom to associate with someone other than the particular union that holds the monopoly.
In 2012, the Hamiton-based Cardus think tank discovered that over $900-million dollars per year was tied up by such monopolies. The unions that benefit from the monopoly suggest that the cost increase is a modest 2%, while other estimates suggest it is an order of magnitude higher.
Cardus’s forthcoming paper, Evaluating Closed Tendering in Construction Markets: the Need for Fairness and Fiscal Responsibility, covers a wide range of empirical studies on competition in government construction procurement. These suggest that Ontarians are paying 20% to 30% more for construction projects that are subject to closed tendering. That means that every time a water treatment plant is built in Hamilton, Toronto, Sault Ste. Marie, every time carpentry work gets done in the Region of Waterloo, taxpayers are paying 20% to 30% too much.
There is absolutely no justifiable reason for this. As we note in our paper, it is universally acknowledged that public procurement is intended to serve "the good of the general public, as contrasted with the particular individuals or firms involved in a decision."
In fact, the importance of competition is so universally accepted as the best way to attain value for the public that Ontario’s law, and all of its procurement guidelines, supposedly require it. Take the Ontario Municipal Act: "Municipalities shall not confer on any person the exclusive right of carrying on any business, trade or occupation." Or, take Ontario’s Broader Public Sector Procurement Directive, which also mandates open, competitive bidding.
The reason that directives and laws like these are in place in all OECD countries is that there is a consensus that competition creates the best value for the government, and minimizes the possibility of corruption. As we note in our paper, the structural framework for bidding on major municipal projects in Ontario is analogous to those that, in Quebec, led to the culture of corruption traced in the Charbonneau Commission’s interim report.
Premier Kathleen Wynne has set an ambitious goal for her government: to balance Ontario’s budget without making cuts. Allowing Ontario municipalities, school boards, and other public entities to fall in line with what is already mandated by the province will help her accomplish that.