Budgets: We need to look beyond promises to implementation and hidden surprises

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By Clive Thurston

Special to Ontario Construction Report

The Ontario provincial government has just released its latest budget with a heavy emphasis on infrastructure and training. This is not the first time in the many budgets we have seen over the last decade that these two areas are focused upon and large amounts of money have been committed to make sure that projects, training and employment take place.

In this time of the pandemic it has never been more important for there to be investment by all levels of government in infrastructure programs and training that will lead to jobs, thereby helping our economy to survive and restore the economic viability of our province and our country.

But it is important that we not just focus on what the budget says, but on the reality of what happens during the budget year. In that regard the history of successive governments here in Ontario, whether liberal or conservative, has shown that large amounts of the budgeted funds are never spent.

What is more, during this time we are hearing about no increases in fees and taxes however there are increases tucked away in other federal and provincial ministries that are perhaps not as visible and they are going to negatively impact the construction industry.

Just last year the government failed to spend $2.7 billion of money that was committed in the previous budget for infrastructure. As stated, this is not unusual, liberal governments were equally guilty of under-spending the money.

While we are looking at projected spending of $142.9 billion over 10 years and $13.6 in the year 2020 – 2021 the reality is we cannot depend on that money being fully spent and invested appropriately. On the training file, we are looking at some $70 million in grants and spending for training and employers to help them to hire apprentices and other workers as well as $180 million on retraining, but once again the question needs to be asked will it actually be spent and spent wisely?

When budgets come out, it is great that we all line up to cheer them on and say what a great idea, but the history of government and how they spend and invest money is a different story. Their efforts, sadly, lack focus due to a lack of knowledgeable and experienced personnel. Investment is not based on industry needs but more on political agendas and bureaucratic needs.

I mentioned hidden taxes. The Ontario General Contractors Association (OGCA) in its recent newsletter laid out some of these increases. Canada Pension Plan (CPP) contributions in 2021 will increase from 5.25%  of payroll to 5.54%. Maximum pensionable earnings will increase from $58,700 to $61,600 a 4.9% increase. The maximum contribution will now be $3,166.45 an increase of $268 per employee. These are legislative federal increases which will continue through 2023 to fund pensions at a higher level.

The Employment Insurance maximum insurance ceiling will increase by 4% to a maximum employer contribution of $1,245.36 or an increase of $47.  Even though the WSIB announced a premium freeze for 2021 high wage employers including construction will experience a substantial jump of their insurable ceiling from $95,400 to $102,800. That is a 7.8% increase in premium costs.

Things are never quite what they seem or appear to be. Just because there is spending included in the budget it may not reflect the reality of that spending or that it will be spent appropriately. The system by which the money is to be spent and projects and training are to be realized has to work and currently there are severe challenges to that system that negatively impact the ability to get the best bang for the dollar.

All the stakeholders commenting on the budget mentioned the bottleneck in getting projects started and this has been a continuing problem for several years. The failure of the federal and provincial governments to get along and the lack of professional procurement practices, both federally and provincially, have combined to slow release of “shovel worthy” projects.

You will notice I did not say “shovel ready”. We went through that farce once before.  This is about projects that are worthy of the investment and that will have a long-term impact on our economy, our infrastructure and strengthen the industry so that we can provide jobs and training, as necessary.

The budget failed to address these issues and others, despite the industry clambering loudly for relief and help. Issues such as, the well-known fact that a report was commissioned some months ago and provided to the government suggesting recommendations to help clear up the regulatory and contractual challenges being faced by contractors in the province of Ontario.

One of those clear challenges is exclusionary/reprisal clauses. Even though Québec and Manitoba have banned such clauses the government of Ontario has continually failed to address this serious problem. Additional issues on permit approvals, soil issues and environmental approvals to mention a few, continue to hamper our industry’s ability to be effective.

These are some of the issues that impact our industry and there are others such as force majeure, tendering practices, fair and open bidding, and the failure to recognize the desperate need for more professional engineers and architects, these issues need to be addressed by the provincial government including, and most importantly, revisions and updates to the new Construction Act.

At the time that the Act was drafted and enacted the parties recognized it was not perfect – it would need work and it was designed to be improved. Many groups, including the Construction and Design Alliance of Ontario (CDAO) and the Ontario Construction Bar, have been making overtures to the government asking for immediate work be done to correct the weaknesses that have been found.

So why is all this important?  Because if projects are not procured properly, if the climate and environment under which projects are being tendered is not a healthy one, it will drive contractors away because of the increase in risk and costs. That will then result in projects being delayed or being cancelled.

We have seen political agendas tying projects to community benefits, green building, and energy efficiency, all of which are important and supported by the industry, provided they are implemented properly and fairly. But right now, without proper planning, these well-meaning requirements will restrict the ability of projects to move forward at a time when we need projects of all sizes, particularly at the municipal level.

All levels need support particularly municipalities, but at the same time those municipalities need to be reminded that if you want the best value for your dollar you must treat the constructor fairly and have good contracts.  Unfortunately, a few municipalities, including several large ones, are more determined than ever to transfer all risk to the general contractors and refuse to work in a collaborative and cooperative manner that would benefit taxpayers.

Ontario needs small, medium and large-sized projects, unfortunately there seems to be an attitude within government to view only one type of project system, 3P, as the solution. This does not solve the problem, 3P projects are only for exceptionally large projects and are not designed for the majority. To try and apply the 3P process to smaller projects is a mistake and one that we in the industry have been pointing out to government for many years.

The president of the OGCA and others presented to various government committees and talked of the need for small medium and large projects the response was – great we will bundle them altogether!  Bundling does not solve the problem, was anybody listening? We have been down this road before, and it has been proven to be the wrong road to take.

So, despite all the good news in this budget the reality is you must look at the details, and the environment under which the money will be released, if that environment and those details are not improved this is just another wish list that they would like to proceed with, but a year from now we will likely find that they did not achieve the budgeted results – again.

The industry has long sought a more collaborative and consultative relationship with the government on procurement.  For years we have brought forward good ideas and suggestions on how to improve procurement, at times some of these have been accepted and they have proven successful.  But as government staff retire and new staff comes on there is no corporate memory of the good things that were achieved. Leaving us to start all over again.

The industry is ready as ever to work with all levels of government to assist in proper and effective procurement that will deliver projects quickly, efficiently and affordably. This applies to training, we are fully committed to training, no one who reads the papers or follows online social media can fail to notice that contractors and trades are desperately searching for workers while offering all kinds of incentives and training. For this to work we must all come together at all levels to ensure that the right programs are put in place.

For that to be successful it is time for there to be a truly collaborative and cooperative approach to procurement, recruitment of new workers, training, infrastructure and all construction across the board.  The Provincial, Federal, and Municipal governments all need to take a leadership role in ensuring that that happens.

Clive Thurston is the former OGCA president.

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