MAXIMIZING TAXPAYER DOLLARS ON PUBLIC INFRASTRUCTURE PROJECTS AND DEFENDING THE RIGHTS OF BC COMPANIES AND WORKERS (2022)
To maximize the benefits of taxpayer dollars spent on public infrastructure projects and ensure that all qualified BC companies and employees can work on and benefit from these projects, an open and fair tendering must be the process by which governments implement public projects.
Background
In July 2018, the BC Government announced a new approach to “Community Benefit Agreements” (CBA) that employ prescriptive approaches to public infrastructure projects. This CBA approach unfairly restricts BC companies and employees from competing for and working on public infrastructure. Commercial agreements that deliver community benefits are the norm in the industry, but they should be constructed in ways that are inclusive and competitive rather than exclusive and anticompetitive. The current CBA approach that BC has taken has been demonstrated to drive up costs of public infrastructure, burdening taxpayers.
There is significant evidence demonstrating that restrictive tendering, such as those Project Labour Agreements (PLAs) and CBAs that have been adopted in BC, can result in a 20% to 30% cost increase for bids on public infrastructure projects.[1] These agreements are now in place for major construction projects, including the Pattullo Bridge replacement, the Massey Tunnel replacement, and the Broadway Subway line. By implementing these agreements, the BC government prevented most construction industry workers from participating in these projects while driving up the costs to taxpayers. For example, in 2019 the government admitted that the projected costs for the Kicking Horse Canyon Project had increased by over $150 million dollars, and a significant portion of this overrun is due to the attached CBA.[2]
An important element is understanding how restrictive PLAs/CBAs force businesses to adopt foreign business models, decreasing efficiencies and stifling innovation. The most recent example, and one that has been used a model for future projects in BC, is the Vancouver Island Highway Project (VIHP). The VIHP used restrictive PLAs. Two separate government crown corporations were set up to manage the project: (1) VIHP would manage and the contracts for engineering, procurement, and construction of the project, while (2) Highways Contractors Ltd (HCL) was created to be the ‘employer’ of the workers and would supply all contracts with their labour. HCL entered into a collective agreement with British Columbia Highway and related Construction Council – essentially the unions who were part of the BTU. Anyone who wanted to work on the VIHP would have to join the BTUs and would be allocated by HCL. Any companies who bid for work on VIHP would have to accept BTU terms and work arrangements.
For instance, in the BTU model, each ‘craft’ (electrician, plumber, etc.) is a separate jurisdiction with exclusive right to perform various tasks, i.e. only pipefitters can carry pipe. These jurisdictional barriers create significant inefficiencies. Moreover, many companies work in ‘wall-to-wall’ or ‘all employee’ bargaining arrangements that do not have these artificial boundaries and only restrict what tasks and worker can do based on safety. So, electricians in wall-to-wall companies don’t have to wait for a labourer to move that lumber on the floor before they can start work. This is one of many innovations non-BTU companies have been able to adopt that increase efficiencies, productivity and make them more competitive. By forcing these companies to work under BTU arrangements, they are forced to not use their existing business model. To say that ‘all companies can bid on these projects, but they cannot bring their business model’ is to essentially restrict them from bidding in the first place.
THE CHAMBER RECOMMENDS
That the Provincial Government:
- Maintain or reinstate a fair and open tendering process for all Public Infrastructure projects.
[1] https://www.cardus.ca/research/workandeconomics/publications/4290/hiding-in-plain-sight-evaluating-closed-tendering-in-construction-markets/
[2] https://vancouversun.com/opinion/columnists/vaughn-palmer-fudging-highway-cost-overruns-by-applying-curious-math-to-cbas-impact