Lessons from the Charbonneau Commission

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Privatizing public services can have dangerous consequences

Most people will remember the explosive allegations exposed by Quebec’s public inquiry into corruption and collusion within Quebec’s construction industry. The Charbonneau Commission found that for years, supposedly reputable companies were awarded public road, wastewater, and other building contracts at highly inflated prices. These companies would then kick back a portion of the profits to the mafia, as well as to government officials and political parties that helped secure the contracts.

But what allowed these private companies to establish the intricate corruption schemes and highly inflated prices in the first place? Let’s take a look at some of the causes.

Austerity and outsourcing

Many of the witnesses agreed: years of austerity and cuts within the Transport Ministry created a situation where there was not sufficient internal expertise to properly monitor and inspect public tendering processes, especially in identifying a project’s needs in the design phase. The ministry was also unable to properly assess cost overruns and other invoices during the building phase.

Similarly, outsourced municipal work created conditions, which were ripe for corrupt companies to abuse the system. In Montreal alone, outside municipal workers from CUPE 301 were reduced from 12,000 in the 1970s to about 5,000 in the 2000s. Consequently, in some privatized areas like sidewalks, wastewater and paving, the lack of competition allowed mafia-linked companies to form cartels which then rigged the bidding processes and inflated prices by up to 30 per cent.

Public-private partnerships (P3s): a risky lack of transparency

The Commission focused much attention on the corruption scheme at the McGill University Health Centre (MUHC) P3 that implicated then-CEO Arthur Porter and SNC Lavalin. The report shows how the veil of secrecy surrounding P3s opened the door to corruption. MUHC managers were able to choose the members of the selection committees that oversaw the bidding, and both the managers and committee members were offered bribes to favor one bidder.

All of this could have been avoided if the province had decided to go the traditional route by financing the project publicly.

And if that wasn’t enough, Quebec think-tank IRIS released a paper in 2014 demonstrating that the province could save nearly $2 billion dollars by buying back the contract and bringing the hospital back into public hands.

What can we do about these problems with the system? The commission’s 1700-page final report, tabled in November of 2015, sets out 60 recommendations to help fight corruption and collusion, including hiring more internal expertise at both the provincial and municipal levels, more oversight and transparency in the public tendering process, and strengthening protections for whistleblowers.

“An often-suggested approach (…) to preventing collusion between stakeholders in the private sector and improving the estimation of construction costs is to strengthen the internal expertise of public sector offerors, particularly by allowing them to perform certain tasks themselves, using internal staff.” *

“Internal expertise is an effective defense against collusion.” *

*Source: Commission of Inquiry on the Awarding and Management of Public Contracts in the Construction Industry (Volume 3, pp. 134, 135)

Equality Statement

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Union solidarity is based on the principle that union members are equal and deserve mutual respect at all levels. Any behaviour that creates conflict prevents us from working together to strengthen our union.

As unionists, mutual respect, cooperation and understanding are our goals. We should neither condone nor tolerate behaviour that undermines the dignity or self-esteem of any individual or creates an intimidating, hostile or offensive environment.

Discriminatory speech or conduct which is racist, sexist, transphobic or homophobic hurts and thereby divides us. So too, does discrimination on the basis of ability, age, class, religion, language and ethnic origin.

Sometimes discrimination takes the form of harassment. Harassment means using real or perceived power to abuse, devalue or humiliate. Harassment should not be treated as a joke. The uneasiness and resentment that it creates are not feelings that help us grow as a union.

Discrimination and harassment focus on characteristics that make us different; and they reduce our capacity to work together on shared concerns such as decent wages, safe working conditions, and justice in the workplace, society and in our union.

CUPE’s policies and practices must reflect our commitment to equality. Members, staff and elected officers must be mindful that all persons deserve dignity, equality and respect.

Two-tier bargaining – how to recognize it and reject it

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We are committed to ensuring that the next generation of workers enjoys the benefits that CUPE members have already won. We cannot build solidarity between generations if we accept two-tier contracts. Our union opposes all moves toward two-tier wages, benefits or pensions. 
– Strategic Directions 2013-2015

Two-tiered collective bargaining (or “orphan clause” bargaining as it is known in Quebec) is a divisive practice through which employers try to get union members to agree to different scales of compensation. Collective agreements which include two tiers may mean that new hires receive lower wages, less job security, longer probationary periods, different pensions and benefits, or a combination of all four of these measures. These differences may be temporary or permanent, but either way two-tier bargaining is concession bargaining. Eventually all workers in the bargaining unit lose.

With two-tier provisions, some new hires may eventually achieve the same pay rates as more senior employees but it takes years to achieve parity. Sometimes the effects are permanent. In these cases, newer – and most often, younger workers, women workers, racialized workers and workers with disabilities – will never achieve the same collective agreement benefits.

Two-tiered clauses provide new hires with worse working conditions, wages and benefits than those negotiated for more senior colleagues in the same jobs, for no reason other than their date of hire. Two-tier bargaining is unfair to new hires and weakens  the union because it undermines union solidarity. Unions are built on the principle of fairness and there is nothing fair about people doing the same job for different wages. Eventually today’s new hires will be in the majority and they will have no interest in fighting for higher wages or protecting the benefits of those who agreed to give them second tier status.

Once a union accepts two-tier provisions, subsequent rounds of bargaining are often spent trying to remove those tiers or finding ways to compensate lower-tier workers, making overall gains even harder to achieve. Once successful in establishing a second tier, the employer will try to shift work to workers who cost less, away from workers who enjoy full pay and benefits.

Common two-tier offers

Pensions: Employers often try to replace defined benefit (DB) pensions with defined contribution (DC) plans for new hires. This split compromises the retirement security of both current and future members. DB plans that are closed to new members cost more as plan members get older and then employers typically come back looking for either increased contributions or reduced benefits (or both) from the members in the DB plan.

Job security: Weaker job security language for new hires is another two-tier tactic. Employers argue that it will not affect anyone who is already part of the union. But such proposals are designed to chip away at the size of the bargaining unit. Once the union is smaller, it is weaker and everyone’s job security is at greater risk. To protect all workers’ job security we need the energy and activism that new and young workers bring.

Job losses: Employers will claim that without two-tiers some workers may lose their jobs. But accepting two tier deals does not protect jobs. Consider the case of the United Auto Workers. They had 700,000 members at the Big Three (GM, Ford and Chrysler) in the US during the 1970s. In difficult bargaining in the 1980s and 1990s, the UAW accepted two-tier concessions in exchange for promises of job security. Today, they have only 110,000 members left at these companies. As Sam Gindin has argued in The Toronto Star, an autoworker hired at a Big Three company today will be working at a lower inflation-adjusted wage than he or she would have earned a half-century ago.

As governments try to implement austerity measures, pushing two-tier provisions is increasingly on the table in the Canadian public sector. Employers often say it is a question of resources, but it is not the case that governments cannot afford to offer the same wages and benefits that existing workers have. Since the 1990s, Canada has steadily lowered overall tax rates, but governments can make a different choice. By raising revenue through job creation, raising corporate taxes, closing loopholes and a variety of other measures, governments can offer good wages and benefits to workers.

When unions have agreed to two-tier clauses it has led to animosity between union leaders and members, and between members themselves. Two-tier contracts do not protect senior workers for long as employers seek further concessions and exploit the weakened union.

We must all fight for our jobs before we bargain by engaging the public in conversations about the importance of our work and building public support for our members. Another solution is to encourage worker-friendly governments to bring in legislation that prevents two-tier agreements. But the best solution is to make sure that all current union members – the people who decide whether to accept or reject a tiered collective agreement – understand the true cost of such agreements, both for new hires and for themselves.

GUIDELINES FOR BARGAINING

  • Work with CUPE staff to identify other ways of dealing with the cost issues. For instance, in certain circumstances locals might consider accepting slightly lower wage increases across the board rather than agree to different rates for new hires.
  • Educate members about the solidarity costs of tiers – members who vote to accept tier agreements cannot expect new workers to support the union in the same way in future rounds of bargaining, where things they value may be on the table.
  • Lobby and engage public sector employers and elected representatives about fairness, especially as it applies to public services and public service workers. It is because of good collective agreements that women working in the public sector now have a smaller gender wage gap.

Download a printable copy of this fact sheet.

Asking the right questions: A guide for municipalities considering P3s

creynolds issues, Own Your NL, Privatization, Report

In this guide, economist John Loxley takes a critical look at the case for and against using public-private partnerships (P3s) for municipal infrastructure.

His analysis goes beyond the claims made by P3 promoters to examine the costs and consequences of privatizing vital community assets. Through a series of questions, Dr. Loxley outlines the problems that accompany infrastructure and service privatization, and highlights the value of keeping vital assets and services public.

With growing financial and political pressure on municipalities to use P3s, this guide is a timely resource that answers key questions about financing and delivering infrastructure projects.

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With this guide, municipal councillors and civic officials will be able to ask the right questions before considering entering into a P3.

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