Presentation to MMCD/MED AGM 25 November 2011 Canadian Internal Free Trade Agreements The Unintended Consequences for Consulting Engineers 1 By Chris Newcomb on behalf of Consulting Engineers of BC

Unintended Consequences in a Nutshell  More bureaucracy in procurement,  Adversarial client relationships,  Poor taxpayer value,  Compromised public safety,  Discrimination against engineers,  Decline of locally-based expertise,  Weaker consulting engineer industry. 2

Presentation Outline History and Purpose of Trade Agreements, Why Consulting Engineers have a problem with Trade Agreements, Four unintended consequences of Trade Agreements, Six myths about Consulting Engineering. 3

History  1995 Agreement on Internal Trade (AIT)  2007 Trade Investment & Labour Mobility Agreement (TILMA)  2010 New West Partnership Trade Agreement (NWPTA) 4

Purpose To remove trade barriers through 5  Investment liberalisation – we support!  Labour mobility provisions – we support!  Procurement provisions for government- funded work – we oppose!

 NWPTA (Part V – A & C)  Doctors & Lawyers exempt  Engineers not exempt  “Services & investments pertaining to water” exempt  AIT  Engineers permanently exempt (Annex 502.1B)  TILMA  Engineers exempt for 2 year transition period Exemptions from Procurement Provisions 6

What is Qualifications Based Selection (QBS)? 7  International Best Practice for selecting professional consultant  Mandated law in USA and Quebec  Enshrined in InfraGuide program of Canadian municipal best practices  Three step process: 1.Shortlist three best-qualified firms 2.Select best-quality proposal 3.Negotiate fair price Problem: NWPTA inhibits QBS

How NWPTA Procurement Inhibits QBS – Part 1  Obliges client to broadcast opportunities,  Forbids rotation system,  Forbids arbitrary shortlisting,  Forbids consideration of local knowledge. 8

How NWPTA Procurement Inhibits QBS – Part 2 Forbids consideration of 9  Previous experience with client  Timely access to site & approval agencies  Local project knowledge, such as:  Soil conditions & underground utilities  Drainage & environmental conditions  Snow & wind loads  Traffic and safety  Socio-economic considerations  Local codes & practices  Any other quality measure that infers location

Why NWPTA Procurement Inhibits QBS Doesn’t recognize that: 10  Most engineering is site-specific,  Engineering is 2% of life-cycle cost, but influences 100% of life-cycle cost,  Rapid site access enhances problem resolution and public safety,  Professional engineering is not a commodity.

 Broadcasting of Requests for Proposals (RFP’s),  Unlimited numbers of proposals,  Increased cost to produce,  Increased cost to review,  Same quantity of work awarded. First Unintended Consequence of NWPTA Rise in procurement costs 11

 Reduced public safety  Adversarial client relationships  Lack of innovation  Poor life cycle value  Clients overwhelmed by quantity of proposals  No resources to apply QBS  Cheap engineering resulting in: Selection by lowest fee Second Unintended Consequence of NWPTA 12 Save On Foods Laval Bridge

 Writing more proposals, and  Struggling with adversarial client relationships  Instead of building the province Waste of talent Our best engineers are: Third Unintended Consequence of NWPTA 13

 Small regional firms can’t compete in major urban centres,  Large urban firms taking larger share of regional work,  Outcome: small regional firms are in decline,  Outcome: less local expertise available for small, urgent or emergency assignments. Fourth Unintended Consequence of NWPTA Decline of consulting engineering in small communities 14

 Just like lawyers,  Just like doctors,  Just like engineers are exempt from AIT. The Solution? Exempt engineers from NWPTA procurement provisions! 15

 Wrong!  Cronies prosper in a low bid environment,  Cronies lose out in a transparent QBS environment. First Myth Supporting NWPTA Status Quo Municipal officials will award projects to their friends 16

 Wrong again!!  CEBC Memorandum of Agreement proves 100% oppose procurement provisions,  CEBC & APEGBC do support mobility provisions,  Hence the myth? Second Myth Supporting NWPTA Status Quo The Consulting Engineers support NWPTA 17

 Wrong again!!!  CEBC represents firms of all sizes in all locations,  CEBC is trying to protect:  The integrity of professional procurement,  Public safety,  Taxpayer value. Third Myth Supporting NWPTA Status Quo CEBC is trying to protect “local” consultants 18

 Wrong again!!!!  NWPTA catchment area has about 70,000 P. Eng.’s  Most specialize in one discipline, not others  NWPTA low-bid environment leads to:  Economic pressure,  Lack of innovation,  Lack of quality,  Short cuts,  Compromised value and safety. Fourth Myth Supporting NWPTA Status Quo P. Eng. seal guarantees project value & public safety 19

 Wrong again!!!!!  In which other industry is:  Local knowledge so important to quality of service?  Cost of service such a small percentage of life-cycle cost?  Timely site access so important to public safety? Fifth Myth Supporting NWPTA Status Quo Exemption for engineers will open flood gates for other industries 20

1.Win first project using low price 2.Impress the client 3.Win subsequent work on quality Wrong again!!!!!! Clients that hire you using low price, will hire someone else using low price on the next project. Sixth Myth Supporting NWPTA Status Quo NWPTA allows firms to grow using low- price strategy 21

Moving Forward  CEBC Memorandum of Agreement,  Campaigns under way in BC, AB, SK, MB and Nationally,  Seeking exemption for engineering,  Non-partisan issue. 22