Atcon deal invites trouble
Published Monday June 29th, 2009
Has New Brunswick created an uneven playing field for contractors?
A little background is in order on why that question is being asked by so many who earn their pay from the construction industry.
The industry consists of fiercely independent entrepreneurs, unique business people who take great pride in their independence. Contractors don't like to rely on "fear or favour" to get work, particularly when it comes to public sector work. Private owners buying construction services often invite bids just from their friends. They have that right, because they are spending their own money. That is not the case for work done using taxpayer dollars.
Years ago, infrastructure work for the province was handed out just as is done in the private sector. Having a reasonable price was important in getting a job, but it was not as important as "who you knew" and if the party you donated to was in power.
When contractors start out in business they are often in favour of a "local preference policy" but as they grow larger and need to move around our province or go to other provinces to get work, they find if their jurisdiction offers a preference they face revenge for that policy when they bid in another jurisdiction.
At the local level, everyone has read or heard of some municipal councillor wanting to award a contract to some local firm, arguing the local contractor's price was just a wee bit higher than a bid from a firm from outside. The problem with favouring a contractor like this is that it invites retaliation.
Local contractors have a natural advantage over a firm coming into an area from outside. They do not have the equipment and manpower mobilization costs borne by an outside firm. Their workforce also does not need subsidization for meals and housing, as does the outside firm's.
The road building industry, as a major employer group, asked government for a level playing field on which to conduct business and do away with the patronage-based system in place. They were listened to. Fortunately, our New Brunswick government has worked with the construction industry to improve access and fairness for all qualified bidders.
In the 1960s, it was Louis Robichaud's government that introduced the innovative and then-controversial practice of having bids on government tenders opened publicly.
Richard Hatfield's government later introduced the Public Purchasing Act with the stated aim of improving access for New Brunswick businesses, so they could compete fairly to supply the goods and service needs of our government.
I point out those two government moves to show that governments of both stripes have historically promoted a level field on which contractors can compete fairly.
The Canadian Construction Association's task force on inter-provincial barriers discovered these barriers were costing Canadian taxpayers in excess of $6 billion a year. Still more costly were the numerous municipal barriers within Canada. It is a fact of life that protectionism begets protectionism and adds to the cost of construction.
We read just recently that Boeing and Airbus are saying Bombardier's attempt to classify their new C series plane as a Category 1 plane, allowing for lower export financing, is simply another attempt to unbalance the competitive playing field. We also read that CUPE wants tougher Buy Canadian Rules to counter the new Buy American rules of our neighbours.
Well folks, we already have "Buy Canadian" rules in addition to "Buy Regionally" (the Atlantic Accord), "Buy Provincial" and numerous other "Buy Local" rules which invite retaliation.
Protectionism is often a reaction by one government to policies of a competing government. Remember the famous "free trade" softwood lumber dispute between Canada and the U.S.A., triggered by lower than fair market pricing for wood cut on some Crown land? Ontario still wants to know what percentage of American steel is going into a construction project. Why, if we truly have free trade? Policies like this are why the Americans' latest trade protection does not exclude Canada! In the construction industry, there are many programs, small and not so small, inviting retaliation. Programs that restrict out-of-province workers are seen as barriers that favour local firms.
Subsidies, grants and loan guarantees common in the manufacturing sector have been totally foreign to contractors. That was until the $50 million provincial government loan guarantee for a New Brunswick headquartered construction company that employs much of its workforce outside New Brunswick.
Favouring one company over another is sure to invite retaliation from other provinces to protect their contractors. It destroys the principle of a level playing field where everyone has a chance to play the game fairly.
With increased infrastructure spending, Premier Shawn Graham's government and Prime Minister Stephen Harper's governments have been positive forces for change for our province's construction industry.
This month something changed, though. The construction industry has been set back 50 years by the unprecedented loan guarantees to just one construction firm, while other N.B. construction firms struggle to work their way through today's tight market conditions. Those of us who have been around for awhile expect retaliation that will hurt the industry for years to come.
Sandy Robertson is a former president of the Road Builders Association of New Brunswick, who formerly chaired the Canadian Construction Association's Task Force on Inter-Provincial Barriers.
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