The Candice Malcolm Show - Canada’s infrastructure projects are riddled with fraud and corruption

00:00:00.000 Hi, welcome to the Candice Malcolm Show. I think most Canadians who worry about out-of-control

00:00:11.080 government spending focus on big-ticket items, things like corporate welfare, new unaffordable

00:00:17.160 entitlement programs, or probably how the Canadian government sends money overseas to

00:00:22.560 corrupt international institutions like the World Health Organization or the United Nations.

00:00:26.420 And we also send money to corrupt and authoritarian governments through our bilateral aid programs.

00:00:32.380 But I think most Canadians would probably be surprised by the amount of corruption, fraud,

00:00:37.460 and lack of competition that sometimes happens right here in Canada in our own governments,

00:00:42.480 both federally and locally, specifically when it comes to things like infrastructure projects.

00:00:48.440 So our next guest today knows a thing or two about this waste, and I'm very pleased to be joined

00:00:53.980 by Walter Panik. Walter is the former chair of Merit Ontario, and he's a local contractor

00:00:59.860 in Ottawa. Walter, thanks so much for joining the Candice Malcolm Show.

00:01:03.440 Thank you, Candice. The pleasure is all mine to be here with you and to shed some light on this issue.

00:01:08.100 Yeah, thank you. So I was reading a little bit about this sort of issue with what you call

00:01:12.360 closed tendering or open tendering when it comes to government contracts. So I hope you can just give

00:01:17.360 a very brief introduction to what it is you're talking about when we're looking into government

00:01:22.420 contracts and how they are awarded. Certainly, I'll just give you a little brief overview,

00:01:28.300 Candice. Anytime, so being in Ottawa, you know, the federal government is one of the biggest buyers

00:01:33.580 of construction services in our nation's capital, just given how many employees they have here and how

00:01:39.440 much space they occupy. Anytime that they are doing any sort of retrofit, and we're primarily electrical

00:01:45.540 contractors and also general contractors. So if they need an electrical contracting job done,

00:01:51.120 a new electrical panel put in, they would post on Merck's, which is their government contracting or

00:01:57.120 procurement website, that they're looking for these services. And there's no, as long as you comply

00:02:02.200 and are capable of doing the work, then you're able to submit a bid for this work.

00:02:09.140 What we're seeing happening right now on Parliament Hill is well over $2 billion worth of construction work

00:02:15.320 where the federal government has abdicated its contracting authority to a third party, and this

00:02:20.600 third party is not able to meet the government's requirements of fair and open tendering. In fact,

00:02:26.840 one of the contractors selected for this parliamentary precinct project is signatory to many union agreements.

00:02:35.400 Therefore, you must belong to one of the unions that they are signatory to,

00:02:39.400 in order to be able to submit a quote, let alone do work on this project. So a company like mine,

00:02:47.000 we employ 50, 60 people. I've been in business for over 20, I got 1996, so 20 some years in business

00:02:55.640 right now. I have a great crew, very competent individuals. I've done many projects similar to

00:03:00.120 what's happening down on the Hill. We're not allowed to even submit a bid and that precludes about 70% of us

00:03:06.120 that are union-free or open shop that will not be allowed to put forward a tender because of this.

00:03:13.800 So just because you're not part of some club that the government created, they said that you have to

00:03:17.960 be part of a specific union in order to qualify for contracts. You're not even allowed to apply

00:03:25.160 to participate in these projects, to work on these projects?

00:03:27.720 100%. So in this example, one of the contractors, Ellis Dawn, is signatory to the International

00:03:33.880 Brotherhood of Electrical Workers. Therefore, your company must be signatory to the IBW in order to

00:03:39.960 submit work. In Ontario, this is pretty true across the country with the exception of Quebec where

00:03:45.960 everything is unionized, but about 70% of all work done in this country is done by open shop contractors

00:03:51.640 like myself. 30% by groups that are signatory to different union agreements. So 70% of us are locked

00:03:58.760 out of tendering this project because our employees choose to bargain directly with us.

00:04:05.080 They're satisfied, you know, they're compensated well, they're flexible work hours, great working

00:04:10.840 conditions. There's no need for them to actually to go out and to seek a third party to represent them

00:04:16.680 whatsoever. They're very, very happy in the way that work is working out for them right now. So hence,

00:04:23.320 we're not allowed to bid. And so, I mean, this, this almost sounds like a discriminatory, discriminatory

00:04:29.320 practice to me, just because your workers choose that they don't need to be represented by a specific

00:04:34.360 union. The government doesn't let them get involved. What other, what other consequences

00:04:39.400 they have? The Carta study I read, uh, basically said that this created, uh, that these regulations,

00:04:45.160 restrictions on bidding serve as a petri dish for corruption in public procurement. We've read of

00:04:51.080 other instances of fraud. What, what are, what are the kind of, uh, consequences of these rules?

00:04:56.280 Well, I mean, first of all, we've, we've seen all sorts of, uh, tremendous cost overruns. The city of

00:05:01.480 Hamilton building a wastewater treatment facility, they were, uh, they were unionized, uh, quite some

00:05:07.480 time ago by, I think it was the carpenters or laborers union, uh, in Hamilton. Hence, everybody

00:05:12.600 must be signatory, uh, to that union in order to do work on those sites. Their costs were 30 to 40%

00:05:19.000 over budget because of the limited amount of contractors that were then eligible to a tender.

00:05:24.760 You know, it doesn't take a brain surgeon, Candace, to realize if you're out trying to get the best

00:05:28.520 price you could possibly get, the more people you invite, the wider the range of your pricing is

00:05:33.400 going to be. You take the lowest compliance bid at that point. If you're locking out seven out of

00:05:39.640 10 contractors from being able to bid, then definitely you are not going to be receiving the

00:05:44.120 best value for your money. So what is the government's rationale behind this? I mean,

00:05:49.560 it seems like a pretty obvious, uh, thing that, that, that, that this is, again, I think it's

00:05:53.720 discriminatory. Uh, these are laws that have been placed for a long time, not just federally, but

00:05:58.200 provincially in Ontario, in Quebec. What, what is the justification for the government behind these

00:06:04.200 restrictive rules? I don't think the government realized that when they, uh, when they abdicated their

00:06:09.000 authority to this, uh, to this, uh, um, these two companies, which are PCLL is gone, uh, to do this

00:06:15.400 work. They're the only ones that we've actually put a tender forward. I don't think that they realized

00:06:19.480 that, uh, they couldn't comply with their own tendering regulations, which are very simply on

00:06:24.600 the government's whole buy and sell, uh, a website. It tells you that their objective is to acquire good

00:06:30.360 services and construction in a manner that is, that facilitates, uh, access to all contractors,

00:06:35.800 encourages competition, treats suppliers fairly, and results in the best value for Canada.

00:06:41.640 I would suggest to you that none of those four, uh, subjects will occur, uh, given their

00:06:46.920 tendering practices right now. Well, certainly not, uh, getting good value for money or having a fair

00:06:53.000 process. I mentioned earlier how this leads to corruption and fraud. I think probably the best

00:06:57.320 known example of that was what happened in Montreal. I think everyone's heard of the

00:07:01.720 Charbonneau Commission that looked into, uh, some of the deals that happened in the city of

00:07:05.640 Montreal and sort of gave a bunch of recommendations. What, what, what happened there? And how is that

00:07:10.360 related to these, uh, closed tendering contracts? Well, you know, I think this is a very, uh,

00:07:15.160 the Schreiberau, I mean, I followed that relatively closely too. And I still remember the, uh,

00:07:19.240 McLean's magazine picture of the Bonhomme with a suitcase full of money, you know, and, and it was

00:07:24.040 ironic. I mean, as they say, the roads in Quebec are paved with gold because it costs more to pave a

00:07:29.160 kilometer of road in Quebec than anywhere else in this, uh, uh, in this country. Uh, it's very

00:07:34.200 similar candidates when you limit competition, then you, you limit the amount of people that are

00:07:39.240 bidding. Uh, it encourages, uh, collusion. It can, it encourages, uh, many different bad bidding

00:07:44.760 practices, but it definitely does not get you the best value for your money. Well, I think, yeah,

00:07:50.680 I think we're seeing that all over. I mean, one example that stood out to me in that Cardis report was,

00:07:55.400 this is in Kitchener, Ontario. There was a, um, basically Kitchener was looking to build a simple

00:08:02.600 brick public washroom. Um, and the lowest bid that they got because they had these restrictions

00:08:08.120 that blocked out 40% of people who could, uh, or more than 40% of people who could potentially bid on

00:08:14.680 these 70%. Okay. Yeah. So the lowest bid to just build a simple public brick washroom was $564,000.

00:08:22.840 And that didn't even include the land. That was just the construction costs, which again,

00:08:26.200 you don't have to be super familiar with construction and cost of things. Wow. I mean,

00:08:31.640 that's the cost of building a house, not, not a bathroom. For sure. You could build a four bedroom

00:08:36.200 home in Ottawa for that kind of money, let alone a little single person washroom. Right.

00:08:41.240 That's just a very classy example, Candace, of what you see happening when you restrict

00:08:44.680 competition in any industry whatsoever. You know, I live in Ottawa. I'm not sure where you are,

00:08:50.120 wherever you're in Toronto or not, but I pass apart buildings every single day. I live right

00:08:54.920 downtown and I look at them and, and you know, they're an iconic building. They belong to every

00:08:59.160 single Canadian. They belong to you, uh, to me, to our employees, to every single person

00:09:05.400 that is a, that is a citizen. And every single person should have the right and the ability

00:09:09.400 to tender freely any work that comes out of any of these, uh, new projects that come forward. And the

00:09:14.600 reality is that is not happening. And yet our taxes fund this construction, Candace.

00:09:19.960 So glad we take our money to fund these projects. It just won't take our labor.

00:09:24.600 Right. I mean, one of the things I wonder is, you know, do we have a ballpark idea of how much

00:09:29.160 this is costing Canadians? Because we often hear, you know, when it comes to these infrastructure

00:09:32.920 projects, we have to take out large amounts of debt. I mean, that was Justin Trudeau's full

00:09:37.720 pitch and proposition to Canadians back in 2015, that they're going to take on some debt,

00:09:41.960 build some infrastructure. You know, we hear a lot of times about raising taxes and doing

00:09:46.680 other kinds of schemes to fund infrastructure projects, but how much would Canadian taxpayers

00:09:51.720 save and how much more could we get for a buck if we actually, you know, follow the recommendations

00:09:56.280 of Merrick Canada and opened up tender to all Canadian companies?

00:09:59.960 Well, you know, Candace, if you look at that Cardist study and you look at the cost of overruns,

00:10:03.480 anywhere from 20 to 40%, on a billion dollars, that's 200 to 400 million dollars,

00:10:08.520 you know, of infrastructure money that could be going towards other projects,

00:10:13.400 you know, instead of what's happening right now with these overruns.

00:10:18.120 That's wild.

00:10:18.760 They're definitely not getting their value for their money.

00:10:22.520 Well, yeah, we're all not getting our value and imagine how much fewer we would be in debt,

00:10:27.720 how smaller our debt would be if we took some of these recommendations. And then there's also an impact

00:10:32.840 on companies, because like you said, seven out of 10 construction workers are excluded from employment.

00:10:39.640 I think one of your campaigns said that the way that the government has these bidding contracts

00:10:45.480 basically could lead to thousands of construction workers losing their jobs because they just don't

00:10:49.880 have enough work because of the unfair laws that the government had. So what is it that you're proposing

00:10:56.520 and what can Canadians do to fight back against these unfair laws?

00:10:59.960 Well, I think Canadians can, first of all, I mean, this is a matter of fairness, Candice,

00:11:03.400 and this is what I really don't like about this, right? I mean, every company should have the right

00:11:07.640 to tend to this work and to basically stand on their merits, right? They're going to qualify or

00:11:13.400 they're not going to qualify. If they don't qualify, there's a specific reason. But if they do,

00:11:17.240 if they're competent, they can do the work, they can finance the work, there shouldn't be an issue.

00:11:21.240 Every single person that can should be allowed to work on these projects. You know, we're going through,

00:11:27.400 you know, we see what's happened and how COVID has ravaged our economy. You know, we have many

00:11:32.520 people that are at home right now not working because sites have been closed up. They have

00:11:36.120 many companies that have closed their doors until COVID is over and the quarantine period is over

00:11:41.800 and they can get it back to work. So we're all going to be fighting for work. It's going to take a

00:11:47.400 while for things to ramp up. And the sad reality is that we will not be able to tender this work

00:11:53.000 on Parliament Hill, which we should be able to. On top of this, there's also, I read recently,

00:11:58.600 there's over a billion dollars worth of work coming to the West Memorial building, I believe,

00:12:03.480 and the Supreme Court of Canada building. So again, you know, we need to stop this because

00:12:09.400 this just keep perpetuating itself and we will not be getting the best value possible.

00:12:14.040 So what other recourses do you and your, you know, your company and your workers,

00:12:19.640 what do you have? How can you fight back against the government for imposing these really restrictive

00:12:25.080 rules that do hurt your business and they're unfair to all Canadians?

00:12:29.160 Yeah, this is the top part. You know, Candace, we have provincial labor legislation messing, 0.99

00:12:34.760 meshing with a federal project. We've had a legal opinion done by a well-respected local

00:12:42.600 law firm. And they believe that we should be looking at, and our best chance is a charter,

00:12:49.320 a charter challenge actually. And basically it's, they're stating that the mandatory requirement

00:12:55.960 for a union affiliation in order to present a bid for this request for proposal is a violation of the

00:13:02.120 freedoms of non-association under section 2D of the charter. So we're looking at that a lot closer.

00:13:10.200 And, you know, we're going to fight. This is not just a local fight. This is a fight

00:13:14.600 that will take us right across this country, Candace, because the federal government has

00:13:17.960 buildings from coast to coast to coast. And I believe that every competent company should be

00:13:23.640 able to put forward a bid, regardless where in this, you know, this beautiful country of ours,

00:13:29.000 we actually live. It should be open, should be transparent. Every single company should be able to bid.

00:13:33.720 So, Walter, one of the questions I had was about the differences in laws between the previous

00:13:39.480 conservative government federally under Stephen Harper and the current government of Justin Trudeau.

00:13:43.720 Has Justin Trudeau made this problem worse? Is it the same? Has he been better? What's your diagnosis here?

00:13:50.440 I think he's made it a lot worse, Candace. If you remember back during the Harper years, he had brought

00:13:57.000 forward Bill C-377. It was Rusky Bear that brought it forward. It had to do with union financial

00:14:02.680 disclosure. And any expenditure over $5,000 was going to have to be actionistic. You remember unions

00:14:09.800 do not pay any taxes. So on all the dues that they collect, any revenues they have through training

00:14:14.200 halls, et cetera, they pay absolutely no taxes. Estimates are that's in the range of $2.5 to $4

00:14:20.280 billion worth of income that's not being taxed by the federal government, which could result in about

00:14:26.120 $800 million in revenues for this government if they wanted to go there. Stephen Harper had brought

00:14:31.880 in 377. It had passed in the Senate. I still remember that day very, very well. And the building

00:14:39.160 trades had gone to Trudeau just in the 2015 election and had thrown all their weight and support

00:14:44.840 behind Trudeau. And guess what he did? 377 is no longer around. He got rid of that nice piece of 1.00

00:14:50.680 legislation. So there's a very close relationship. And sorry, well, to that piece of legislation,

00:14:55.960 it required unions to pay taxes. And was it to do with transparency as well? Or what was it?

00:15:01.400 No, it didn't require them to pay taxes. But I think this was a potential first step.

00:15:05.880 I see unions don't pay any taxes on any of the revenues that they bring in, right? And I mentioned

00:15:10.920 it's about $2.5 to $4 billion worth of revenues that they bring in. They were going to have to

00:15:15.400 disclose every transaction that was over $5,000 in value. So if they were taking a trip to a convention

00:15:21.320 in Vegas, they'd have to disclose that. Instead of a line item on their balance sheet that would show

00:15:27.720 travel expenses, for example, or on their income statement that showed travel expenses,

00:15:31.720 it would all have to be broken down individually instead of one lump sum of a million dollars or

00:15:36.920 whatever it is. And they did not want to do that. I don't know why. We can only make assumptions as

00:15:45.000 to why people would not want you to see where their money is actually being spent. But I think that they

00:15:51.240 realized that there's so much happening. Union dues are supposed to be used for collective bargaining

00:15:56.520 purposes, and that's why they're not taxed. But collective bargaining for most unions happens once every

00:16:00.920 three years over a two, three, four month window or so, right? So the rest of the time, you know,

00:16:06.360 those funds are being used to operate halls, to lobby the government, to ensure that union-only

00:16:11.560 work happens on projects like Park Hill, and none of that money is taxed. So I think they saw the

00:16:17.000 writing on the wall, which is why they didn't want this legislation to be around anymore.

00:16:21.160 So Harper had demanded that they have more transparency with the money that they were getting

00:16:27.320 a break on from the tax perspective. And then what did Trudeau do? So these unions backed Trudeau

00:16:31.560 in the 2015 election, and then what happened after that?

00:16:34.760 Right. The bill ended up, they never moved forward with the bill. It never came into legislation,

00:16:41.080 and it basically just died with the new government. They decided not to do anything with it.

00:16:45.240 And I thought it was, listen, financial accountability is huge, Candace, for every single person.

00:16:50.600 You know, and for taxpayers as a whole, to ensure that we are getting the best value for our money.

00:16:57.560 And if the money's not being spent where it's supposed to be spent, then maybe there is a

00:17:02.280 reason to tax it.

00:17:03.960 And what was Trudeau's sort of explanation of justification? Why wasn't he pressed on, you know,

00:17:09.880 forcing more accountability? Because I recall when Justin Trudeau was first elected,

00:17:13.720 his whole thing was that he wanted to make government more accountable, and that he wanted to

00:17:18.440 change the way things were done in Ottawa. But this seems like reverting back to the old corrupt

00:17:22.840 ways of the Liberals of the past.

00:17:24.840 Well, people don't have very long memories, Candace, right? You know, those that were

00:17:29.960 involved in this fight to bring financial disclosure to the forefront for unions believe that it's a

00:17:37.080 good thing to do. And why is he not being pressed? You're the press. You can press them.

00:17:43.480 Well, we at Trudeau try, Walter.

00:17:47.320 You may not get part of that six or eight hundred million dollar fund that he's got set up if you

00:17:51.240 press it too hard, Candace.

00:17:53.000 Well, I don't think we were going to get that anyway, Walter. But it's certainly disappointing to

00:17:58.040 see the sort of lack of accountability and transparency there from a guy who literally

00:18:04.360 campaigned on that kind of stuff.

00:18:05.720 Well, for sure, you know, and to me, this is the underdog. This is, you know, we just don't have

00:18:12.680 the resources that these big labor organizations have, Candace, right? So they've done extremely well,

00:18:19.240 and they lobby hard, and they try to do the best for their members at the expense of 70% of the

00:18:26.120 other people in that same industry. And that's what I don't think is fair. Set up rules that everyone

00:18:31.080 can abide by, that are fair, that are transparent, and then may the best person win. May the best

00:18:36.120 company win. May the lowest compliant tender win. What they're doing right now is they're picking the

00:18:41.240 winners and the losers. And right now they've considered 70% of us to be losers that they don't

00:18:46.120 want to deal with. So, yeah, I wish this was a bigger issue that was on every Canadian's mind,

00:18:53.960 and it should be, Candace, because it's about getting value for our tax dollars, and it's about

00:18:59.320 fairness. And we all want to, you know, believe that we live in a fair and just world, but there's

00:19:03.800 still a lot of work to be done, and that's why we're pushing this issue.

00:19:07.400 Well, that sounds like a very noble challenge, and hopefully you take that because I think that we

00:19:13.080 should uphold our charter rights, and we should be very serious about those. And it seems to me like

00:19:18.680 a case that, you know, not only infringes your ability to have access to work, but also, again,

00:19:24.760 it leads to all kinds of consequences like we see with corruption and fraud. Well, Walter,

00:19:29.880 thank you so much for joining us on the Candace Malcolm Show and breaking down this issue. Again,

00:19:33.720 it's almost obscure when you first hear about it, but then the more you learn, the more,

00:19:37.480 you know, it just seems like really a common sense problem the government has because they operate

00:19:42.600 kind of behind closed doors and people don't know a lot about it. So thanks for joining us,

00:19:46.600 and best of luck to you with these projects. Thank you very much. It's been a pleasure talking to you.

The Candice Malcolm Show - May 11, 2020

Canada’s infrastructure projects are riddled with fraud and corruption

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