Ontario beefing up procurement rules to favour local construction bids

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Ontario is banking on changes to the way it awards construction contracts to make it harder for companies from outside the province to win government work, while forcing builders to help expand the work force.

Government and industry insiders concede that a new "local knowledge" requirement is effectively a way of giving the edge to domestic bidders without violating international trade agreements. Now, sources told The Globe and Mail, Kathleen Wynne's Liberals are working with the provincial agency Infrastructure Ontario to beef up that requirement – which was quietly introduced by former premier Dalton McGuinty shortly before he left office – and build off it with other conditions.

The additional measures, likely to be signalled in the government's Nov. 7 Fall Economic Statement and in a speech Ms. Wynne will deliver the same day to a conference on public-private partnerships, could include forcing larger companies that win major contracts to share a piece of the action with smaller ones, and demanding increased commitments to apprenticeships aimed at addressing youth unemployment.

The Liberals are hoping that the changes will help them present tens of billions of dollars in coming transportation projects, including a crosstown light-rail transit line in Toronto for which the procurement process is currently under way, as part of their job-creation agenda. Some sources suggest they're also seeking favour with trade unions, which tend to have better relationships with domestic companies than foreign ones.

Government officials are confident that "local knowledge" will be exempt from any limitations on provinces' ability to favour their own companies imposed by the new Comprehensive Economic and Trade Agreement with the European Union.

The government is still grappling, however, with concerns that moving too aggressively could drive up costs, because the changes could represent a significant shift in Infrastructure Ontario's operating model.

Established by Mr. McGuinty in 2006, the agency has received generally positive reviews for managing public-private partnerships with a focus on value for money, rather than other policy or political goals.

In recent years, that approach led to controversial decisions to award projects to foreign bidders, including for Hamilton's football stadium and Windsor's $1.4-billion parkway. The latter particularly rankled the province's construction sector, which has complained that the consortium, led by Spain's Tierra Armada S.A., hasn't met safety standards.

Under pressure from the Ontario General Contractors Association and organized-labour allies, Mr. McGuinty brought "local knowledge" into the process at the end of 2012. Bidders are now required to provide "narratives" about experience meeting those standards, navigating permit processes with municipalities and working with the province's labour force and suppliers. Those considerations are then cumulatively given 10-per-cent weight during requests for quotation (RFQs), the procurement stage that narrows competition down to a few finalists.

With the roughly $5-billion Toronto LRT line currently in the RFQ stage and held up as a test case, Ms. Wynne is now looking for ways to bolster the new criterion. Those could include making "local knowledge" a factor not just in RFQs but also in Requests for Proposals (RFPs), in which Infrastructure Ontario chooses from among the finalists. It is also possible that it could be made to count for more than 10 per cent in RFQs, RFPs or both.

The government also appears to be responding to criticism that "bundling" large quantities of work on the LRT and other projects into one procurement process prevents smaller Ontario companies from competing. Future projects could be broken up into multiple contracts, or winning bidders required to subcontract a minimum share of the work.

Meanwhile, the Liberals intend to seek new apprenticeship commitments, either by taking into account such plans when bids are being considered or by requiring whichever company gets the contract to allot a certain number of spaces.