By Renze Nauta
In the wake of the civic election, Ottawa residents got some distressing civic news – or make that Civic news.
The cost of the new Civic campus of The Ottawa Hospital was originally given as $2.8 billion, but that appears to have been a significant misdiagnosis. The province now says it’ll cost five times as much.
The question is now how will it be paid for, and how did we get here? The palpitation-worthy cost estimate is being blamed on supply chain issues, municipal fees, and even the fact that a finalized budget has still yet to be released.
There are also deliberate choices made by the project’s leaders that have increased the cost. Last year, Cardus warned that the Project Labour Agreement (PLA) in place on the Civic campus project would lead to cost overruns.
A PLA is an agreement between a construction project’s owner (in this case, the government) and one or more labour unions that sets the employment terms for work on that project. The problem is that a PLA can restrict bidding for the project to companies whose workers are affiliated with a particular kind of labour union. PLAs can artificially reduce the pool of eligible contractors and workers. They can narrow the labour pool and shut out local businesses whose workers aren’t affiliated with the “right” union.
That seems to be what happened here. The hospital signed a PLA with the Unionized Building and Construction Trades of Eastern Ontario and Western Quebec, limiting participation in the project to workers affiliated with specified unions. Sure enough, the government received only one (joint) bid to build the hospital.
There is evidence from elsewhere in Ontario that broader competition can produce substantial savings. Previous Cardus studies have shown that restricting competition for construction procurement, as The Ottawa Hospital has done, increases project costs by 14 per cent.
Not surprisingly, when governments open up competition to all construction firms regardless of their union affiliation, they find substantial savings. When the Region of Waterloo opened up its bidding, the average number of bids rose from 3.68 to 5.54.
After the province allowed open tendering in 2019, following an initial study by Cardus, Hamilton city staff crunched the numbers and estimated the savings at an average of 21 per cent on the projects examined.
When examining Toronto, we found that the city could have saved as much as $347 million in one year on its infrastructure spending had it adopted open tendering, allowing a greater number of qualified bidders to work on city projects. An analysis by the Montreal Economic Institute returned similar results. Toronto remains the only Ontario municipality to reject open tendering.
Let’s be clear about something else: unions can provide a lot of benefit for their members. The Civic campus redevelopment cannot happen without unionized labour. However, it is deeply unwise for governments to artificially place restrictions on which personnel can work on these projects, based solely on their union status, especially at a time when infrastructure and healthcare budgets are severely strained.
And it is not only unwise — it is also unjust to shut out local taxpaying businesses, business owners, and other unapproved unions, especially those who invest locally, from public infrastructure projects on the basis of their lack of affiliation with a particular union.
The province is expecting the people and businesses of Ottawa to raise 10 per cent of the project cost. Before the city, or any others, invest more money in this desperately needed facility, there needs to be a re-examination of common sense ways to reduce the cost. For future projects, as we recommended in our 2025 report Watch Your Step, governments should ensure government-supported projects are open to all eligible and qualified firms.
Renze Nauta is Director of the Work and Economics Program at Cardus. Before joining Cardus, Renze was policy director for two federal Leaders of the Opposition and held various roles in the Prime Minister’s Office. He is based in Ottawa.
