The names have changed, but the players haven’t
‘Movement toward concentration’ in city contracts post-Charbonneau
Some companies have changed names. Others are under new management. A few have merged. But as a joint Montreal GazetteLa Presse investigation reveals, one thing that hasn’t much changed under the Coderre administration is that the majority of municipal engineering and infrastructure contracts remain in the hands of the same key industry players.
That’s one of the main findings of the two newspapers’ analysis of the companies doing the most business with the city of Montreal since Denis Coderre became mayor in 2013.
The analysis was done using data provided by Montreal’s finance department regarding payments made by the city to its suppliers between Jan. 1, 2013 and Oct. 2, 2017. The Montreal Gazette and La Presse received the information after trying for more than two months to glean the data from different sources, such as the city’s contract database, Vue sur les contrats, which proved to be a veritable obstacle course.
The concentration of contracts awarded to companies that on the surface will seem to be new players in the Montreal municipal contract market is clear. For example, while Louisbourg and Construction Garnier — two companies that made headlines during the Charbonneau Commission hearings that began in 2012 — are not among that list, they have not exactly disappeared.
Louisbourg, which had been part of construction magnate Tony Accurso’s empire, was sold — as were Gastier, Ciments Lavallée and some of the holdings of SimonBeaudry, all part of that empire — to Groupe Hexagone in the spring of 2013.
Just over a year later, Hexagone, facing major financial difficulties, was swallowed up by Transelec/Common Inc., which integrated the entity’s activities in Group TNT.
Today, the grouping of companies — including the subsidiary Neolect — all have the same proprietor, which ranks at the top of the list of companies that obtained city engineering and infrastructure contracts.
Combined, they obtained the lion’s share of the city’s payment to suppliers, with about $275 million in contracts over the past four years.
The French company Eurovia, owned by VINCI, is now preparing to buy Groupe TNT. The transaction is currently in the due diligence stage, and should be completed by the end of November. Eurovia already owns DJL, a company that the Charbonneau Commission reported had been part of an asphalt cartel in Montreal along with Sintra, Soter and Pavages Chenail, which also appear on the top contractors list.
Coming in a distant second on the list is Les Entreprises Michaudville, which received $156 million from the city for infrastructure work in the past four years. Michaudville appears to be a new player in Montreal, and it’s true that the majority of its business until 2013 was on the South Shore. But at the time the company recruited three directors from Construction Garnier, which had become an empty shell following devastating testimony from its CEO, Giuseppe (Joe) Borsellino, at the Charbonneau Commission, where he admitted that, in Montreal, “everything is truqué.”
In third place are the construction and concrete divisions of Demix, which received $118 million from the city for municipal infrastructure
work over four years. The Charbonneau Commission had identified Demix as part of a group that rigged bids for contracts awarded by Quebec’s minister of transport in the Montreal region.
The top three groups — TNT, Michaudville and Demix — received a total of $549 million over the past four years, or 16 per cent of the $3.5 billion the city of Montreal paid to the top 100 private entities on its supplier list, all sectors combined, between Jan. 1, 2013 and Oct. 2, 2017.
Data provided by the city of Montreal also reveal that the total number of suppliers has consistently dropped over four years, from 62,000 to 40,000.
While these numbers are indicative of less competition, the Coderre administration maintains that it saves the city money in terms of bureaucratic and transactional costs, such as by requiring fewer order sheets and invoices, for example.
Throughout the mandate that ends on Sunday, Coderre and his political team have insisted that “new players” have emerged in the public infrastructure domain, creating a healthier market for public contracts. In an interview
on Friday, the administration reiterated that position, noting that all companies doing business with the city must now be authorized by the Autorité des marchés financiers, and that any ringleaders of past collusion have been eliminated.
“It’s possible some of the same players are still around,” said Pierre Desrochers, the outgoing
chairman of Montreal’s executive committee. “But that doesn’t mean that the habits and the ways of doing business of these players remain the same.
“In any case, I don’t know what they’re doing, and I’m not able to manage them. It’s their business. But what we’ve done is set ourselves up so that (past practices) no longer take place.”
Among engineering firms, five companies ranked among the city of Montreal’s top service providers: SNC-Lavalin, SM, les Services EXP (formerly HBA Teknika), Cima+ and WSP (formerly Génivar). These companies received, in descending order, between $30 million and $12 million in professional consulting contracts since 2013.
According to testimony at the Charbonneau Commission, all five of these companies were identified as having participated in a bidrigging system to split contracts in Montreal. Last month, the head of SM, Bernard Poulin, and vicepresident Dany Moreau, were arrested by l’Unité permanente anticorruption (UPAC) as part of the Fronde investigation into collusion in Montreal, as were Kazimierz Olechnowicz, the former CEO of Cima+, his colleague Yves Théberge, and Normand Brousseau of HBA Teknika.
After examining the data compiled by the Montreal Gazette and La Presse, UQAM professor Danielle Pilette, a municipal affairs specialist, noted “a greater and greater movement toward concentration.”
“Competition is not at its best,” Pilette said. “That’s probably due to certain factors that aren’t necessarily the same ones as before.” The top factor, she said, is that “the contracts are too big.”
The timelines to complete construction projects are very short, and there are experience requirements that engineering firms must have — such as having completed a similar contract in the past two years — that are more stringent now, and that limit competition, she added.
This eagerness to complete projects can also be seen through a political lens, Pilette explained, because all governments want their infrastructure investment programs to yield results that they can brandish during election campaigns.
The work of the Charbonneau Commission led to several regulatory changes and the adoption of new laws, notably Loi 1 sur l’intégrité en matière de contrats publics, which imposed stricter ethical guidelines for company directors, shareholders and administrators. However, that legislation was softened somewhat in 2015 “to avoid completely destroying the construction industry ’s economic ecosystem,” explained Pierre- Olivier Brodeur, who was an analyst for the Charbonneau Commission and is now a member of the committee that is following up on the recommendations made in the commission’s report.
What hasn’t changed at all — unfortunately, in Brodeur’s view — is the prevailing rule of awarding the contract to the lowest compliant bidder in the case of infrastructure contracts. “If you don’t change this manner of awarding contracts, how can you hope that the economic milieu will change? Spontaneously? By magic?”
Antoine Pellerin, a doctoral student in law at l’Université Laval in Quebec City, criticizes the notion that it’s only the cost of the contract that’s of public interest.
Cost is an objective measure but it’s also a convenient excuse, he said. “For a long time, we thought that cost would allow us to avoid corruption and collusion. The Charbonneau Commission showed the exact opposite. There’s nothing easier for entrepreneurs to come to an agreement on when the only way to assess the contract is price.”
The work of Justice France Charbonneau’s commission led to several regulatory changes and new laws.