Canada’s infrastructure projects are riddled with fraud and corruption
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Summary
In this episode, Candice is joined by Walter Panik, the former Chair of Merit Ontario, and a local contractor in Ottawa, to discuss government contracts and the lack of competition in public procurement. Candice and Walter discuss how government contracts are awarded, who is allowed to bid on them, and why unions are not allowed to get involved.
Transcript
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Hi, welcome to the Candice Malcolm Show. I think most Canadians who worry about out-of-control
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government spending focus on big-ticket items, things like corporate welfare, new unaffordable
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entitlement programs, or probably how the Canadian government sends money overseas to
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corrupt international institutions like the World Health Organization or the United Nations.
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And we also send money to corrupt and authoritarian governments through our bilateral aid programs.
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But I think most Canadians would probably be surprised by the amount of corruption, fraud,
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and lack of competition that sometimes happens right here in Canada in our own governments,
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both federally and locally, specifically when it comes to things like infrastructure projects.
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So our next guest today knows a thing or two about this waste, and I'm very pleased to be joined
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by Walter Panik. Walter is the former chair of Merit Ontario, and he's a local contractor
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in Ottawa. Walter, thanks so much for joining the Candice Malcolm Show.
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Thank you, Candice. The pleasure is all mine to be here with you and to shed some light on this issue.
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Yeah, thank you. So I was reading a little bit about this sort of issue with what you call
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closed tendering or open tendering when it comes to government contracts. So I hope you can just give
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a very brief introduction to what it is you're talking about when we're looking into government
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contracts and how they are awarded. Certainly, I'll just give you a little brief overview,
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Candice. Anytime, so being in Ottawa, you know, the federal government is one of the biggest buyers
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of construction services in our nation's capital, just given how many employees they have here and how
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much space they occupy. Anytime that they are doing any sort of retrofit, and we're primarily electrical
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contractors and also general contractors. So if they need an electrical contracting job done,
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a new electrical panel put in, they would post on Merck's, which is their government contracting or
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procurement website, that they're looking for these services. And there's no, as long as you comply
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and are capable of doing the work, then you're able to submit a bid for this work.
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What we're seeing happening right now on Parliament Hill is well over $2 billion worth of construction work
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where the federal government has abdicated its contracting authority to a third party, and this
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third party is not able to meet the government's requirements of fair and open tendering. In fact,
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one of the contractors selected for this parliamentary precinct project is signatory to many union agreements.
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Therefore, you must belong to one of the unions that they are signatory to,
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in order to be able to submit a quote, let alone do work on this project. So a company like mine,
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we employ 50, 60 people. I've been in business for over 20, I got 1996, so 20 some years in business
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right now. I have a great crew, very competent individuals. I've done many projects similar to
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what's happening down on the Hill. We're not allowed to even submit a bid and that precludes about 70% of us
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that are union-free or open shop that will not be allowed to put forward a tender because of this.
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So just because you're not part of some club that the government created, they said that you have to
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be part of a specific union in order to qualify for contracts. You're not even allowed to apply
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to participate in these projects, to work on these projects?
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100%. So in this example, one of the contractors, Ellis Dawn, is signatory to the International
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Brotherhood of Electrical Workers. Therefore, your company must be signatory to the IBW in order to
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submit work. In Ontario, this is pretty true across the country with the exception of Quebec where
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everything is unionized, but about 70% of all work done in this country is done by open shop contractors
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like myself. 30% by groups that are signatory to different union agreements. So 70% of us are locked
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out of tendering this project because our employees choose to bargain directly with us.
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They're satisfied, you know, they're compensated well, they're flexible work hours, great working
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conditions. There's no need for them to actually to go out and to seek a third party to represent them
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whatsoever. They're very, very happy in the way that work is working out for them right now. So hence,
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we're not allowed to bid. And so, I mean, this, this almost sounds like a discriminatory, discriminatory
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practice to me, just because your workers choose that they don't need to be represented by a specific
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union. The government doesn't let them get involved. What other, what other consequences
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they have? The Carta study I read, uh, basically said that this created, uh, that these regulations,
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restrictions on bidding serve as a petri dish for corruption in public procurement. We've read of
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other instances of fraud. What, what are, what are the kind of, uh, consequences of these rules?
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Well, I mean, first of all, we've, we've seen all sorts of, uh, tremendous cost overruns. The city of
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Hamilton building a wastewater treatment facility, they were, uh, they were unionized, uh, quite some
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time ago by, I think it was the carpenters or laborers union, uh, in Hamilton. Hence, everybody
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must be signatory, uh, to that union in order to do work on those sites. Their costs were 30 to 40%
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over budget because of the limited amount of contractors that were then eligible to a tender.
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You know, it doesn't take a brain surgeon, Candace, to realize if you're out trying to get the best
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price you could possibly get, the more people you invite, the wider the range of your pricing is
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going to be. You take the lowest compliance bid at that point. If you're locking out seven out of
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10 contractors from being able to bid, then definitely you are not going to be receiving the
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best value for your money. So what is the government's rationale behind this? I mean,
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it seems like a pretty obvious, uh, thing that, that, that, that this is, again, I think it's
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discriminatory. Uh, these are laws that have been placed for a long time, not just federally, but
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provincially in Ontario, in Quebec. What, what is the justification for the government behind these
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restrictive rules? I don't think the government realized that when they, uh, when they abdicated their
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authority to this, uh, to this, uh, um, these two companies, which are PCLL is gone, uh, to do this
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work. They're the only ones that we've actually put a tender forward. I don't think that they realized
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that, uh, they couldn't comply with their own tendering regulations, which are very simply on
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the government's whole buy and sell, uh, a website. It tells you that their objective is to acquire good
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services and construction in a manner that is, that facilitates, uh, access to all contractors,
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encourages competition, treats suppliers fairly, and results in the best value for Canada.
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I would suggest to you that none of those four, uh, subjects will occur, uh, given their
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tendering practices right now. Well, certainly not, uh, getting good value for money or having a fair
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process. I mentioned earlier how this leads to corruption and fraud. I think probably the best
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known example of that was what happened in Montreal. I think everyone's heard of the
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Charbonneau Commission that looked into, uh, some of the deals that happened in the city of
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Montreal and sort of gave a bunch of recommendations. What, what, what happened there? And how is that
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related to these, uh, closed tendering contracts? Well, you know, I think this is a very, uh,
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the Schreiberau, I mean, I followed that relatively closely too. And I still remember the, uh,
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McLean's magazine picture of the Bonhomme with a suitcase full of money, you know, and, and it was
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ironic. I mean, as they say, the roads in Quebec are paved with gold because it costs more to pave a
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kilometer of road in Quebec than anywhere else in this, uh, uh, in this country. Uh, it's very
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similar candidates when you limit competition, then you, you limit the amount of people that are
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bidding. Uh, it encourages, uh, collusion. It can, it encourages, uh, many different bad bidding
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practices, but it definitely does not get you the best value for your money. Well, I think, yeah,
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I think we're seeing that all over. I mean, one example that stood out to me in that Cardis report was,
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this is in Kitchener, Ontario. There was a, um, basically Kitchener was looking to build a simple
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brick public washroom. Um, and the lowest bid that they got because they had these restrictions
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that blocked out 40% of people who could, uh, or more than 40% of people who could potentially bid on
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these 70%. Okay. Yeah. So the lowest bid to just build a simple public brick washroom was $564,000.
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And that didn't even include the land. That was just the construction costs, which again,
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you don't have to be super familiar with construction and cost of things. Wow. I mean,
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that's the cost of building a house, not, not a bathroom. For sure. You could build a four bedroom
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home in Ottawa for that kind of money, let alone a little single person washroom. Right.
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That's just a very classy example, Candace, of what you see happening when you restrict
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competition in any industry whatsoever. You know, I live in Ottawa. I'm not sure where you are,
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wherever you're in Toronto or not, but I pass apart buildings every single day. I live right
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downtown and I look at them and, and you know, they're an iconic building. They belong to every
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single Canadian. They belong to you, uh, to me, to our employees, to every single person
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that is a, that is a citizen. And every single person should have the right and the ability
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to tender freely any work that comes out of any of these, uh, new projects that come forward. And the
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reality is that is not happening. And yet our taxes fund this construction, Candace.
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So glad we take our money to fund these projects. It just won't take our labor.
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Right. I mean, one of the things I wonder is, you know, do we have a ballpark idea of how much
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this is costing Canadians? Because we often hear, you know, when it comes to these infrastructure
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projects, we have to take out large amounts of debt. I mean, that was Justin Trudeau's full
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pitch and proposition to Canadians back in 2015, that they're going to take on some debt,
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build some infrastructure. You know, we hear a lot of times about raising taxes and doing
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other kinds of schemes to fund infrastructure projects, but how much would Canadian taxpayers
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save and how much more could we get for a buck if we actually, you know, follow the recommendations
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of Merrick Canada and opened up tender to all Canadian companies?
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Well, you know, Candace, if you look at that Cardist study and you look at the cost of overruns,
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anywhere from 20 to 40%, on a billion dollars, that's 200 to 400 million dollars,
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you know, of infrastructure money that could be going towards other projects,
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you know, instead of what's happening right now with these overruns.
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They're definitely not getting their value for their money.
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Well, yeah, we're all not getting our value and imagine how much fewer we would be in debt,
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how smaller our debt would be if we took some of these recommendations. And then there's also an impact
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on companies, because like you said, seven out of 10 construction workers are excluded from employment.
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I think one of your campaigns said that the way that the government has these bidding contracts
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basically could lead to thousands of construction workers losing their jobs because they just don't
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have enough work because of the unfair laws that the government had. So what is it that you're proposing
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and what can Canadians do to fight back against these unfair laws?
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Well, I think Canadians can, first of all, I mean, this is a matter of fairness, Candice,
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and this is what I really don't like about this, right? I mean, every company should have the right
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to tend to this work and to basically stand on their merits, right? They're going to qualify or
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they're not going to qualify. If they don't qualify, there's a specific reason. But if they do,
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if they're competent, they can do the work, they can finance the work, there shouldn't be an issue.
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Every single person that can should be allowed to work on these projects. You know, we're going through,
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you know, we see what's happened and how COVID has ravaged our economy. You know, we have many
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people that are at home right now not working because sites have been closed up. They have
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many companies that have closed their doors until COVID is over and the quarantine period is over
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and they can get it back to work. So we're all going to be fighting for work. It's going to take a
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while for things to ramp up. And the sad reality is that we will not be able to tender this work
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on Parliament Hill, which we should be able to. On top of this, there's also, I read recently,
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there's over a billion dollars worth of work coming to the West Memorial building, I believe,
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and the Supreme Court of Canada building. So again, you know, we need to stop this because
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this just keep perpetuating itself and we will not be getting the best value possible.
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So what other recourses do you and your, you know, your company and your workers,
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what do you have? How can you fight back against the government for imposing these really restrictive
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rules that do hurt your business and they're unfair to all Canadians?
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Yeah, this is the top part. You know, Candace, we have provincial labor legislation messing,
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meshing with a federal project. We've had a legal opinion done by a well-respected local
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law firm. And they believe that we should be looking at, and our best chance is a charter,
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a charter challenge actually. And basically it's, they're stating that the mandatory requirement
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for a union affiliation in order to present a bid for this request for proposal is a violation of the
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freedoms of non-association under section 2D of the charter. So we're looking at that a lot closer.
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And, you know, we're going to fight. This is not just a local fight. This is a fight
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that will take us right across this country, Candace, because the federal government has
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buildings from coast to coast to coast. And I believe that every competent company should be
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able to put forward a bid, regardless where in this, you know, this beautiful country of ours,
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we actually live. It should be open, should be transparent. Every single company should be able to bid.
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So, Walter, one of the questions I had was about the differences in laws between the previous
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conservative government federally under Stephen Harper and the current government of Justin Trudeau.
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Has Justin Trudeau made this problem worse? Is it the same? Has he been better? What's your diagnosis here?
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I think he's made it a lot worse, Candace. If you remember back during the Harper years, he had brought
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forward Bill C-377. It was Rusky Bear that brought it forward. It had to do with union financial
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disclosure. And any expenditure over $5,000 was going to have to be actionistic. You remember unions
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do not pay any taxes. So on all the dues that they collect, any revenues they have through training
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halls, et cetera, they pay absolutely no taxes. Estimates are that's in the range of $2.5 to $4
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billion worth of income that's not being taxed by the federal government, which could result in about
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$800 million in revenues for this government if they wanted to go there. Stephen Harper had brought
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in 377. It had passed in the Senate. I still remember that day very, very well. And the building
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trades had gone to Trudeau just in the 2015 election and had thrown all their weight and support
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behind Trudeau. And guess what he did? 377 is no longer around. He got rid of that nice piece of
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legislation. So there's a very close relationship. And sorry, well, to that piece of legislation,
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it required unions to pay taxes. And was it to do with transparency as well? Or what was it?
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No, it didn't require them to pay taxes. But I think this was a potential first step.
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I see unions don't pay any taxes on any of the revenues that they bring in, right? And I mentioned
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it's about $2.5 to $4 billion worth of revenues that they bring in. They were going to have to
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disclose every transaction that was over $5,000 in value. So if they were taking a trip to a convention
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in Vegas, they'd have to disclose that. Instead of a line item on their balance sheet that would show
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travel expenses, for example, or on their income statement that showed travel expenses,
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it would all have to be broken down individually instead of one lump sum of a million dollars or
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whatever it is. And they did not want to do that. I don't know why. We can only make assumptions as
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to why people would not want you to see where their money is actually being spent. But I think that they
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realized that there's so much happening. Union dues are supposed to be used for collective bargaining
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purposes, and that's why they're not taxed. But collective bargaining for most unions happens once every
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three years over a two, three, four month window or so, right? So the rest of the time, you know,
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those funds are being used to operate halls, to lobby the government, to ensure that union-only
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work happens on projects like Park Hill, and none of that money is taxed. So I think they saw the
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writing on the wall, which is why they didn't want this legislation to be around anymore.
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So Harper had demanded that they have more transparency with the money that they were getting
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a break on from the tax perspective. And then what did Trudeau do? So these unions backed Trudeau
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in the 2015 election, and then what happened after that?
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Right. The bill ended up, they never moved forward with the bill. It never came into legislation,
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and it basically just died with the new government. They decided not to do anything with it.
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And I thought it was, listen, financial accountability is huge, Candace, for every single person.
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You know, and for taxpayers as a whole, to ensure that we are getting the best value for our money.
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And if the money's not being spent where it's supposed to be spent, then maybe there is a
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And what was Trudeau's sort of explanation of justification? Why wasn't he pressed on, you know,
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forcing more accountability? Because I recall when Justin Trudeau was first elected,
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his whole thing was that he wanted to make government more accountable, and that he wanted to
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change the way things were done in Ottawa. But this seems like reverting back to the old corrupt
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Well, people don't have very long memories, Candace, right? You know, those that were
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involved in this fight to bring financial disclosure to the forefront for unions believe that it's a
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good thing to do. And why is he not being pressed? You're the press. You can press them.
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You may not get part of that six or eight hundred million dollar fund that he's got set up if you
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Well, I don't think we were going to get that anyway, Walter. But it's certainly disappointing to
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see the sort of lack of accountability and transparency there from a guy who literally
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Well, for sure, you know, and to me, this is the underdog. This is, you know, we just don't have
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the resources that these big labor organizations have, Candace, right? So they've done extremely well,
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and they lobby hard, and they try to do the best for their members at the expense of 70% of the
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other people in that same industry. And that's what I don't think is fair. Set up rules that everyone
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can abide by, that are fair, that are transparent, and then may the best person win. May the best
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company win. May the lowest compliant tender win. What they're doing right now is they're picking the
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winners and the losers. And right now they've considered 70% of us to be losers that they don't
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want to deal with. So, yeah, I wish this was a bigger issue that was on every Canadian's mind,
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and it should be, Candace, because it's about getting value for our tax dollars, and it's about
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fairness. And we all want to, you know, believe that we live in a fair and just world, but there's
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still a lot of work to be done, and that's why we're pushing this issue.
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Well, that sounds like a very noble challenge, and hopefully you take that because I think that we
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should uphold our charter rights, and we should be very serious about those. And it seems to me like
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a case that, you know, not only infringes your ability to have access to work, but also, again,
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it leads to all kinds of consequences like we see with corruption and fraud. Well, Walter,
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thank you so much for joining us on the Candace Malcolm Show and breaking down this issue. Again,
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it's almost obscure when you first hear about it, but then the more you learn, the more,
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you know, it just seems like really a common sense problem the government has because they operate
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kind of behind closed doors and people don't know a lot about it. So thanks for joining us,
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and best of luck to you with these projects. Thank you very much. It's been a pleasure talking to you.