Kitchener-Waterloo

Waterloo region's construction bidding process 'unfair' and 'uneconomic': Report

A new report from the public policy think tank Cardus says the region's construction contracting policy is not good for taxpayers and leaves "most of the local construction industry out in the cold."

Study finds region's restrictive tendering policies fail to protect public interest

A new report from the public policy think tank Cardus says the Region of Waterloo's construction tendering process is unfair. (Melanie Ferrier/CBC)

A new study finds the Region of Waterloo's process to accept bids for construction projects "unfair, uneconomic and uncompetitive."

The report, released Thursday morning, is called No Longer the Best: The Effects of Restrictive Tendering on the Region of Waterloo and was released by Cardus, a public policy think tank dedicated to the renewal of North American social architecture.

Researchers looked at $351.3 million worth of regional construction contacts between 2009 and 2017, and found a decision by the region in July 2014 to restrict construction bids to just firms affiliated with the Carpenters' Union "had several negative effects." 

The study found almost 84 per cent of construction firms were shut out of contract work, which in turn caused the average number of bidders to be cut in half, and contract prices went up.

'Created a coercive oligopoly'

"The Region of Waterloo has created a coercive oligopoly that disproportionately benefits a small group of construction firms, which are able to increase their profits at taxpayers' expense," Brian Dijkema, the work and economics program director at Cardus, said in a release about the report.

Prior to July 2014, the region bolstered an open and competitive construction market, where any firm could bid on municipal construction projects. Cardus analyzed the bids related to 30 projects from 2009 to 2014, the "competitive regime," and the 22 projects from 2014 to 2017, when the region became restricted.

Imagine $315 million of work and if you're adding anywhere from 8 to 25 percent because of restrictions ... that means real dollars for taxpayers.- Brian Dijkema, the work and economics program director at Cardus

The report found in the competitive environment only one project was won by a firm affiliated with the Carpenters' Union, and in that project they were the only bidder. The report said that suggests with the new closed market that jobs aren't being done by the most qualified groups. 

"Firms that used to be middling performers in the competitive market now have exclusive rights over all of the region's work," the report said.

Drop in bidders, increase in price

The analysis also found a significant number of projects during the competitive regime had no bids from Carpenters' Union firms. The report said out of 30 projects, 11 had zero bids from the firms the region is now restricted to.

The average number of bidders took a significant drop as well, falling from 8.14 bids per project in the open market, to only 3.68 bids in the closed market. 

Dijkema told CBC Kitchener-Waterloo's The Morning Show host Craig Norris the market went from 91 different firms that bid to only 15.

This has put a strong upward pressure on prices.

"Data shows when you go into lower numbers of bidders you're actually increasing price, and that increase in price is anywhere between 8 to 25 per cent," Dijkema said Thursday morning.

"Imagine $315 million of work and if you're adding anywhere from 8 to 25 percent because of restrictions ... that means real dollars for taxpayers."

Dijkema said the title of the report really says it all. 

"The Region of Waterloo used to be among the best, but because of restrictive tendering it is no longer," he said.

Region officials said they plan to respond to the report after they have a chance to read it Thursday.

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