As the Charbonneau Commission – tasked with unearthing corruption in the construction sector – enters its second week of inquiry today, Quebec’s construction industry continues to be a source of scandal. So far, nearly fifty firms have been embroiled in allegations of fraud, corruption, and collusion.
Lino Zambito, the former vice-president of the construction company Infrabec, told the Commission last week that around ten companies share municipal contracts for the city of Montreal.
According to Zambito, firms overcharge the city by setting their prices at an artificially high rate through a system of collusion. Similar schemes exist throughout the province, he said.
However, the Quebec construction industry often overcharges without resorting to collusion. In January, La Presse reported that the city of Laval had hired six firms to renovate three water-processing plants, costing $187 million. The city said that the project has gone 60 per cent over budget.
Documents obtained by The Daily and Le Délit reveal that one of the firms that won the Laval contract, Kingston-Byers Inc., is currently working on a $6.8 million project to reconstruct the pedestrian roof terraces of McGill’s McLennan and Redpath Libraries.
In 2010, the company reportedly demanded an additional $2 million from the city of Granby for a $13.6 million contract to complete a sports centre.
According to La Presse, the firm cited “changing circumstances” as reasoning for the additional invoice.
The office of Marlène Painchaud, a legal clerk for the city of Granby, told The Daily and Le Délit that the firm was now the subject of litigation.
On September 18, officers from the Unité permanente anticorruption Québec (UPAC) – known as the “hammer squad” – raided the offices of the McGill University Health Centre (MUHC). In a statement released on its website, MUHC administration said that UPAC was requesting “information related to the awarding of the contract for the Glen site public-private partnership.”
UPAC spokesperson Anne-Frédérick Laurence told The Daily and Le Délit that the documents obtained in the raid would be kept secret for the remainder of the investigation.
“All I can tell you is that a search was made and people were met [by the investigators],” she said in French.
While no arrest has been made, UPAC’s raid suggests wrongdoing or evidence that could warrant another investigation, according to financial crimes expert Michel Picard.
“A search warrant can only be obtained when there is evidence that something illegal has been done,” Picard told The Daily and Le Délit in French.
The MUHC is a $1.3 billion project being built under a public-private partnership (PPP) model, allowing private companies to have a stake in the construction and operation of public works.
Before construction, the PPP model was criticized by the president of the Ordre des architectes du Québec (OAQ), André Bourassa, who described the project as a “waste of time and money,” according to Le Devoir.
Hubert Forcier, spokesperson for the Confédération des Syndicats Nationaux (CSN) – one of the largest trade unions in Quebec – told The Daily and Le Délit in French, “When we go toward the private for budgetary reasons, we let go of public expertise.”
“We are no longer able to determine the monetary value of projects and see what is legal and what is not,” he added.
For these reasons, the CSN was “not surprised” by the UPAC raid.
Other governments have also expressed doubts over the supposed benefits of PPP schemes. A 2006 report commissioned by the New Zealand government read, “There is little reliable empirical evidence about the cost and benefits of PPPs,” and “the advantages of PPPs must be weighed against the contractual complexities and rigidities they entail.”
Proponents of PPP maintain that such partnerships are an efficient way of building infrastructure.
In an interview with The Daily and Le Délit, Roger Légaré, the General Director of the Institute for Public and Private Partnership, said in French, “Every project, whether it’s the 25 highway, the 30 [highway], or the Maison Symphonique, were done in time or before [the deadline] at a reduced cost.”
Lack of transparency
The government body Infra-structure Québec is responsible for planning, realizing, and following all major public infrastructure projects in the province over $40 million, including PPPs.
Once a project has been approved for construction, Infrastructure Québec chooses the type of project: traditional, construction management, PPP, or turnkey. When the private sector has a high stake in the project, such as is the case in the PPP and turnkey methods, Infrastructure Québec coordinates the selection of the private firm.
“There are disadvantages to each mode. [Infrastructure Québec] does not put any mode above another,” a spokesperson for Infrastructure Québec told The Daily and Le Délit.
The CSN denounced Infra-structure Québec last week over the lack of transparency in its decision making process.
“Even recently, Infrastructure Québec has refused to give us access to information allowing us to know the conditions for future maintenance of institutions, where it is easier to negotiate lucrative contracts to private interests,” a statement on its website said in French.
Moreover, “part of the contract between [Infrastructure Québec] and the private firms has not been rendered public,” Forcier said.
Despite the criticism, Infrastructure Québec stated that no link can be made between PPPs and corruption.
As for UPAC’s raid at the MUHC, Infrastructure Québec said that it would wait for the investigation before blaming the alleged economic corruption on the method of construction.
“It’s going to depend on what UPAC will find,” the spokesperson said.
The service industry
While most of the PPPs in Quebec are awarded to construction firms, other forms of PPPs exist in the service industry.
The Centre d’hébergement et de soins de longue durée (CHSLD) at St-Lambert sur le Golf is the first hospice to have been built and managed under a PPP scheme.
Luc Pearson, vice president of the Fédération de la santé et des services sociaux (FSSS) for the Quebec region of Montérégie, told The Daily and Le Délit in French that Infrastructure Québec focuses on the financial aspect and “does not account for the reality of the Quebec healthcare system and the shortage of labour.”
When Infrastructure Québec presented the CHSLD project under a PPP scheme, it forecasted savings of up to a $100 million.
Pearson said the FSSS commissioned a study on the scheme shortly after.
“The results showed that the savings are made on the backs of workers […] the $100 million in savings are made in decreased wages for employees,” he said.
The study results, compiled by a financial advisory firm, state that given the shortage of labour and the below-market wages, the PPP model could lead to a disruption in continuous care and a higher turnover rate.
Infrastructure Québec sees the competitive nature of the private sector industry as an advantage of the PPP model. But according to Pearson, competition has no place in the healthcare system.
“Health is not for sale. The private entrepreneur is there to make profits,” he said.
McGill could not be reached by press time.
(A French version of this article is available here)