montreal's skyrocketing engineering costs are of its own making, study's author says
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"the prices are higher for services that are less good," said colin pratte, a researcher at the institut de recherche et d'information socioéconomiques (iris) who published the study at the end of may.
dave sidaway/montreal gazette
the city of montreal and the quebec association of consulting engineering firms say that despite a spike in the rates charged to the city by external engineers, the price increases are in line with the increased volume of municipal construction work around the city.
however, the author of a recent study that uncovered an “explosion” in the hourly rates charged to montreal by external engineers says the prices have risen well beyond the inflation rate in the past decade because the city hasn’t heeded the warnings of the charbonneau commission’s 2015 report for public bodies to reduce their dependence on subcontracting.
“the prices are higher for services that are less good,” said colin pratte, a researcher at the institut de recherche et d’information socioéconomiques (iris) who published the study at the end of may.
“when there’s overheating demand, when a public body like montreal puts out a lot of calls for tender, it participates in increasing the costs of public contracts because demand is greater than supply. so firms will increase their rates as much as demand will permit.”
in fact, montreal is now caught in the “worst possible scenario,” he said, because few companies are competing for the city’s costlier-than-ever consulting engineering contracts, and the city itself is complaining about errors and poor quality work by those external consultants.
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among the study’s findings:
- the hourly rates that montreal pays consulting engineering firms increased by 82 per cent between 2012 and 2024, more than double the inflation rate for the period.
- three-quarters of montreal’s consulting engineering contracts went to five firms in 2024. yet 71 firms are members of their industry association, the association des firmes de génie-conseil du québec.
- there was only one bidder for 41 per cent of the contracts awarded to any of the five firms in 2024.
- the average price of each contract awarded by the three main city departments that outsource engineering work (water, road infrastructure, urban planning and mobility) has nearly tripled, from $1.4 million in 2012 to $4.8 million in 2024. many are now over $5 million. large contracts are a barrier to competition from smaller firms, pratte says.
- most montreal engineering contracts today are “framework agreements” that award a bank of hours to a firm to work on a variety of projects; the city has shifted away from contracts that pay a fixed price per project. in 2024, 92 per cent of montreal’s engineering contracts were framework agreements paying by the hour. in 2012, they made up 35 per cent.
- the hourly rates that montreal paid consulting engineers under its framework agreements in 2024 were 41 per cent higher than the hourly rates paid by quebec city for the same types of engineers with similar experience. and unlike montreal, quebec city awards very few framework agreements. most engineering contracts in quebec city are fixed price per project.
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“we can conclude that in order for these firms to propose very high prices, they do not need to use risky illegal practices simply because they can get high-priced contracts based on the dynamics of the market itself, which is highly concentrated,” pratte said.
the office of mayor valérie plante and the city executive committee, which didn’t respond to the gazette’s questions for more than two weeks, issued a statement following a gazette article this week on the iris study and similar findings by the union representing the city’s municipal engineers.
“we are sensitive to the (iris) report’s conclusions and will take the time to analyze it carefully,” said the statement, issued by plante spokesperson marikym gaudreault.
“it must be said that the city has come a long way since 2012. a significant cultural shift has been made to turn the page on a dark period in montreal’s history under the leadership of (former mayor gérald tremblay’s) union montréal.”
the city has brought some municipal activities that were outsourced, such as snow removal, back in-house, she added.
“every dollar invested by the public service must be invested with the goal of obtaining the best possible price for the best possible service,” gaudreault wrote.
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“this principle guides our decisions at all times. however, it is essential to find the right balance between essential internal expertise and the use of external resources to allow us to be flexible as an organization and avoid over-inflating the public service.”
meanwhile, a city spokesperson for the municipal departments that award the bulk of engineering contracts said the ratio of external professional services costs to overall infrastructure costs has remained stable since 2018. in other words, the city says the costs of external engineering contracts have grown in step with overall construction project costs in the last five years.
“furthermore, the ratio of internal to external professional services has also remained stable over the years,” spokesperson gonzalo nunez said.
the city’s shift to framework agreements that pay by the hour “is essential due to the volume of projects and their ever-increasing scope, particularly to address the maintenance deficit of our infrastructure,” he said.
and while the municipal engineers’ union says the value of montreal’s annual external engineering contracts has jumped by 809 per cent, from $23 million in 2012 to $209 million in 2024, the city says it actually spent $152.4 million in 2024 because “the actual consumption at the end of the (framework agreement) is often lower than its value at the time of award,” nunez said.
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however, the municipal engineers’ union says the opposite. “our members tell us the banks of hours are used up before the end of the framework agreements,” gisella gesuale, president of the association des scientifiques et ingénieurs de montréal, said. the union also contests the city’s engineering-to-construction cost ratios and its figures for “actual” contract costs versus the contract amount.
as for the charbonneau commission, nunez said none of the public inquiry’s 60 recommendations to address collusion and corruption in quebec’s construction industry called on the city of montreal reduce subcontracting, he said.
“the 60 recommendations made in the charbonneau commission report primarily concern the government of quebec and legislative amendments that fall under the government’s jurisdiction,” nunez said.
pratte said he’s shocked by the city’s reading of the report.
“it’s true if you take a very narrow reading of the charbonneau commission’s 60 recommendations that none of them explicitly state the city of montreal must reduce outsourcing,” he said.
“but in many places in the 1,700-page report, it says public bodies should reduce outsourcing. and one of the 60 recommendations says the quebec transport department must reduce outsourcing. … it’s disappointing to hear the city of montreal’s narrow interpretation of the charbonneau commission report. it’s a shame.”
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the association des firmes de génie-conseil du québec, for its part, maintains the price increases in montreal engineering contracts are reasonable.
the cost of engineering services paid by montreal “follows the consumer price index for our sector,” pierre nadeau, the association’s deputy director general, said.
“between 2009 and now, prices have increased, it’s true, as in all sectors of the economy,” he said.
“however, the reasons behind this increase are explained by economic realities and not by shortcomings on the part of the industry.”
there’s less competition because engineering firms are less interested to bid on municipal contracts, nadeau added. he pointed to a 2021 study for his and other construction industry associations, which said 51 per cent of engineering firms had less interest in municipal contracts. among their reasons, he said, they cited “administrative burden.”
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