Ontario is faced with huge deficits and a debt that will hamper the province’s long-term economic prospects. In the face of this dire situation, Ontario’s government is turning over stones to find savings for the provincial budget. While many will focus on the need to make cuts in order to achieve this goal, there is a way to achieve significant savings in Ontario hiding in plain sight: opening up public construction procurement to competitive bidding.
In 2012 Cardus released its Construction Competitiveness Monitor. That paper notes that the pool of eligible bidders on construction projects in three major Ontario municipalities (Toronto, Hamilton, Sault Ste. Marie) was shrunk significantly by a little known piece of Ontario labour law: the “construction employer” provision of the Ontario Labour Relations Act. We noted that these restrictions affected almost three quarters of a billion dollars of work per year. Since that paper was written, another major municipality (the Region of Waterloo) is in danger—indeed is all but assured—of having its pool of bidders shrunk. The combined effect of this has left Ontario’s citizens with an environment where over three quarters of potential bidders are simply forbidden from bidding on public works worth just under a billion dollars per year.
At the time the monitor was confined to surveying the estimates of the cost-impact of these restrictions. These estimates ranged from 2% to 40%.
This iteration of the Cardus Construction Competitiveness Monitor offers an analysis of the restrictions from the perspective of one of Canada’s leading procurement experts. It asks the following questions: Does union affiliation serve as an objective basis for shrinking the pool of bidders in public procurement? Does it serve the public interest? What are the implications of shrinking the pool of bidders on public construction projects?
A survey of the legislative framework and theory behind public procurement, as well as an analysis of empirical studies, show that limiting public procurement by union affiliation does not promote the public interest. In fact, the vast preponderance of evidence and practice suggests that restricting public bidding in this way is not only far outside of the norm, but can have significant and deleterious consequences for the public interest. Studies show that likely cost increases are on the higher end of the estimates offered by Cardus in our original publication in 2012 (most studies suggest the increases are in the 20-30% range). Perhaps more importantly, such restrictions serve as a petri dish for corruption in public procurement.
The results of this paper should cause politicians, regardless of their partisan affiliation, to find cause to remove the “construction employer status” obstacle from public bodies’ bidding practices. The result will be a more open, fair, and transparent bidding environment in Ontario—and one which will help the government achieve its difficult objective of balancing the budget.
When it comes to public procurement, there is one simple truth: public procurement is intended to serve the public interest. And while many might contest the term “public interest,” its definition is equally simple: “the good of the general public, as contrasted with the particular individuals or firms involved in a decision.”1
And yet there are cases where government or industry—intentionally or otherwise—creates sets of criteria that restrict the number of bidders, and/or create structures which make the bidding process less transparent. Yet how do we evaluate such restrictions? And what should we know about the immediate and long-term effects of such a precedent that would help us make that decision?
Debates on important public issues—especially complicated public issues like closed tendering—often suffer from a lack of clarity over the terms of the debate. In the hurly-burly of public debate, in legislatures and in the press, the content of a debate can be obscured, exaggerated, or simply misunderstood.
The purpose of this paper is to clarify these terms around the issue of construction tendering and procurement practices on projects owned by municipalities and other public bodies. The paper will evaluate such practices according to the standards of the industry most directly affected by closed tendering: public procurement. By evaluating common procurement practices and providing a clear set of criteria by which we can evaluate the impact on the public interest in instances where tendering is restricted, we can move the debate beyond the partisan divide and help public officials clearly see the impact on the public interest of one particular restriction, that of closed bidding based on the union affiliation of a company’s workers.
BASIC TENETS OF PUBLIC PROCUREMENT: FAIR, OPEN, AND TRANSPARENT
Openness, fairness, and transparency are the basic principles of public procurement. These are the three watchdogs that guard the public purse. They are enshrined in the policies, legislation, and agreements that guide procurement for public bodies at all levels of government in Canada. Furthermore, these principles permeate Canadian jurisprudence, or judge-made law, on public procurement. Our courts impose legal obligations on public bodies to conduct fair competitions in which all bidders are treated equally in the assessment of bids, and relevant information is disclosed equally to all bidders.