SHAW: The exorbitant costs of public construction projects in Ontario

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MARIA LILY SHAW

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Rising prices for building materials combined with supply chain disruptions over the past two years have contributed to skyrocketing costs for public construction projects.

Torontonians, for example, have seen a 17.6% increase in the cost of constructing institutional buildings such as schools since the start of 2019.

As if that weren’t enough, there are quirks in Ontario’s legal framework governing public construction projects that add even more fuel to the fire, hitting taxpayers in the province particularly hard. Specifically, it is the blind spots of Bill 66 that contribute to the needless increase in the overall cost of public construction projects.

A groundbreaking law, Bill 66 allowed municipalities, among other public entities, to expand competition in the public tendering process by allowing all qualified contractors to bid on public projects, regardless of their union membership.

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This has made a significant difference in the Region of Waterloo and the City of Hamilton, for example, where tendering was previously restricted. In the first year or two after Bill 66 was passed, both regions reported a significant drop in the cost of public projects, saving millions of dollars. What a relief for Ontario taxpayers!

Yet, while Bill 66 was a step in the right direction, significant challenges remain that prevent the realization of the full potential of this legislation and unnecessarily increase project costs. Contractors and workers across the province are still being denied the opportunity to build public projects, for two reasons.

First, there is the use of restrictive Project Working Agreements (PLAs). A good example is the construction of the new Civic Campus at The Ottawa Hospital, which will end up costing taxpayers between $168 million and $525 million more by 2028 due to the APL, according to our calculations.

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Indeed, when public institutions choose to enter into a restrictive PLA, they can offer exclusivity to a single syndicate and its affiliated contractors to bid on the project in question, limiting the number of potential bids – exactly the practice that the Bill 66 was supposed to ban it.

Second, public entities subject to Bill 66 were free to opt out permanently within three months of its passage, which the City of Toronto did, thus maintaining restrictive tendering despite the well-known benefits of competition. in construction, to which Waterloo and Hamilton can attest.

In doing so, Toronto gave up saving up to $381 million in 2019, a heavy bill for Ontario families.

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To top it off, there is a severe labor shortage that could seriously hamper the economic recovery of Ontario’s construction sector. All hope is not lost, but policymakers need to make changes to the current plan if they want to flatten the trend of rising public construction costs.

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Concretely, three courses of action must be taken:

— Infrastructure Ontario, the government agency responsible for supporting public infrastructure activities, should establish a clear regulatory framework that prohibits public entities from entering into restrictive ECAs.

— The City of Toronto should pass its own legislation allowing all qualified contractors to bid on public projects, regardless of union affiliation.

— To increase the number of skilled workers in response to increased demand, it is essential that the certification process for skilled trades programs be modulated and made more flexible by recognizing the skills acquired by apprentices at each stage of their development, rather than a fixed number of hours of training.

While not all factors are within their control, politicians should follow these recommendations to do what they can to contain the unnecessarily high costs of public construction projects and give hard-working Ontario taxpayers a break.

— Maria Lily Shaw is an economist at the MEI, a Montreal-based public policy think tank

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