Sole-sourcing could cost millions

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Premier Brian Pallister has repeatedly noted in public comments he and his government are smart shoppers, true to their Manitoba roots. But his government’s decision to sole-source two contracts for work on an access road to the planned Lake St. Martin outlet channel proves otherwise.

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Opinion

Hey there, time traveller!
This article was published 11/04/2018 (1637 days ago), so information in it may no longer be current.

Premier Brian Pallister has repeatedly noted in public comments he and his government are smart shoppers, true to their Manitoba roots. But his government’s decision to sole-source two contracts for work on an access road to the planned Lake St. Martin outlet channel proves otherwise.

An analysis conducted by our industry of the price the government got on the two construction contracts shows the real cost of sidestepping the time-tested process of open, competitive bidding.

Conclusion: the $11-million price for the access road work is as much as twice what the government — and, therefore, taxpayers — could have got, had it tendered the work on the open market.

BORIS MINKEVICH / WINNIPEG FREE PRESS files Infrastructure Minister Ron Schuler announced the Lake St. Martin construction project on March 6. Some claim that keeping contracts out of the open market is more expensive.

The Manitoba heavy construction industry was angered at the sole-sourcing of the access road work, in part because this industry is hurting from repeated cuts to the highways capital budget.

That budget was reduced again by $152 million in 2018, an unprecedented 30 per cent chop in one year. Since 2016, the government’s cuts to, and underspending of, this budget line has taken a total of $330 million out of construction work on Manitoba’s highways.

Moreover, our association and industry underpins its infrastructure-investment advocacy with principles, including transparency, innovation and economic growth, all in a manner consistent with the public’s best interest.

Paying up to twice the price that could have been secured on the open market for road-building construction is not prudent management of taxpayers’ hard-earned dollars, and is certainly not in the public’s best interest.

We warned the government not to sole-source the Lake St. Martin outlet contracts, because history has shown open-market competition drives prices down. The private sector is best placed to source their materials — equipment, fuels, aggregates, etc. — from suppliers. The private sector can best scope a job to know where costs can be trimmed and where they can’t.

Mess with the open market, and all of that falls away.

The analysis of the price the government got from the sole-sourced contacts illustrates this fact.

We compared seven contracts recently awarded by Manitoba Infrastructure, including the Lake St. Martin access road. No two contracts are identical, but the seven projects are alike in nature. But that’s where the similarity stops.

The contract for the access road to Gillam is perhaps closest in nature to Lake St. Martin. The $11.4-million project, located north of Thompson, is logistically tougher than Lake St. Martin; it will require excavation of solid rock and much more composite, and more than three times the tonnage of aggregates laid down.

In total, three times the volume of work will be done — for the same price.

None of this is the fault of the First Nations (or their private partners) which received the contracts: this issue falls directly at the doorstep of the provincial government, which decided to sidestep the open tender process.

We have given government our analyses of the “mess” it made.

Infrastructure Minister Ron Schuler says the Lake St. Martin contracts were sole-sourced — to two Indigenous entities, with private partners — in order to ensure those hardest hit by the 2011 flood receive the benefit of flood-prevention work in the Interlake.

Our industry has a solid record of working with local and Indigenous partners, as part of tender-bid requirements. In fact, all of the comparison contracts included Indigenous involvement.

We urged the government to fully discharge the Crown’s duty to consult with First Nations, even if that meant delaying the outlet project.

Lastly, we have implored the government not to repeat its mistake, to commit to no further sole-sourcing of contracts. To date, we have received no such commitment.

Most years, our contractors would be far too busy right now, gearing up for the construction season, to have had the time to compare contract awards such as this.

This year, heavy construction contractors are hoping to survive; equipment idles and employees await word they’ll be called back for work. Our members are looking at the fact skilled, experienced workers — many of whom they’ve employed for decades — will not be called back this year, or will have their hours severely reduced this construction season.

When fully 30 per cent of construction project budgets are accounted for by wages, the ripple effect through the economy is huge.

That’s what happens when the highways budget gets slashed to $350 million from $588 million, in three years.

No one wins when highways construction is pared back dramatically.

But it’s a pity that in this brutal market, taxpayers didn’t at least get the full benefit of tough competition.

Chris Lorenc is the president of the Manitoba Heavy Construction Association.

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