A Missed Opportunity for Cost Savings – Open Tendering in Toronto
With much of the City's attention focused on the Raptors' NBA Championship, a very important vote flew under the radar at the June meeting of City Council.
City Council had a unique opportunity to exempt Toronto from the nine, exclusive collective agreements that have dominated our Industrial (ICI) sector for decades. The Province's Bill 66 included a clause permitting closed-tendering cities to become "non-construction employers," meaning that they could accept bids from any qualified contractors, as opposed to only awarding contracts to contractors using the nine designated trade union subcontractors.
Open tendering would encourage competition in the City's procurement process. With a $2.2 billion State of Good Repair backlog, Toronto cannot afford to miss out on this opportunity for significant cost savings. City staff estimated that on the low-end, cost savings could amount to $12 to 48 million yearly. Other experts have predicted savings in the hundreds of millions due to the increasingly competitive bids the City would receive on its construction tenders.
According to the report from the City Manager, cost savings could result from:
Firms that are currently permitted to perform City work competing more aggressively for City work;
Firms competing for City work having a broader pool of subcontractors to draw from;
Legal cost savings – the City is typically party to 30 grievances annually when a union alleges that a contractor has violated one or more collective agreements which the City is bound by;
Firms bound to other unions now being permitted to perform City work, and;
Non-union firms also being able to compete for City work.
To quote directly from City staff's supplementary report: "…it is important to understand that the greater the number of collective agreements that the general contractor must comply with and the greater the number of subcontractors the general contractor is required to utilize, the greater the impact such compliance costs may be for the general contractor which the contractor will pass onto the City." (11)
City staff also found that the significant limitations imposed by certain collective agreements have led to lengthy delays in the delivery of municipal ICI projects. For example, some trade unions abide by 4-day or 36-hour work weeks. This restriction can cause major delays as other trades cannot proceed until the work is completed.
The current restrictions have made it very difficult for the City to enter into Public-Private Partnerships (P3s) and other agreements with the private sector. Staff found that the City would gain significant "maneuverability" as a non-construction employer when entering into Section 37 agreements, leases, joint venture, philanthropy, donation, and commercial agreements that result in construction work being performed.
Unfortunately, City Council ultimately decided to support special interest groups at the expense of the Toronto taxpayer. Council's vote disregarded two comprehensive reports from City staff recommending that Toronto opt-in to the Province's Bill 66 to become a non-construction employer open to all union and non-union bidders.
Without any consultation or objective review process, City Council instead voted in favour of an individual Councillor's motion to add a single union to the exclusive list of subcontractors eligible to work on the City's ICI projects.
City Council's decision on the matter was short-sighted and disappointing. The City of Toronto has missed a rare opportunity to achieve significant cost savings, accelerate construction timelines, and encourage innovation. Hamilton and Sault Ste. Marie recently voted to opt-in to Bill 66 - Toronto is now the only municipality in Canada to have a closed-tendering process for ICI projects.
Various news outlets recently reported that a coalition of "open-shop" contractors will be pursuing legal action against the City's decision.
Vote for the City to remain an exclusive, construction employer:
