The Ontario Sewer and…

The Ontario Sewer and Watermain Construction Association (OSWCA), Greater Toronto Sewer and Watermain Contractors Association (GTSWCA), and Toronto and Area Road Builders Association (TARBA) represent more than 1,000 member companies across the province. Our members construct, rehabilitate, and supply materials for core municipal infrastructure projects including water, wastewater, stormwater, roads, and bridges throughout Ontario’s 444 municipalities and for the Ontario Ministry of Transportation. We appreciate the opportunity to provide comments on the draft 2026 OPSS 127 Schedule of Rental Rates for Construction Equipment.

Our members rely on the OPSS 127 rental rates as an important benchmark for time-and-material work and extra work compensation for municipalities and public works across the province. For this reason, it is critical that the published rates reasonably reflect the actual costs incurred by contractors to own, finance, maintain, and operate construction equipment in Ontario.

We are concerned that for many key heavy civil equipment categories (i.e. excavators, loaders, bulldozers, graders, haulage, crushing and screening) the proposed 2026 rates show year-over-year decreases at a time when contractors continue to face elevated equipment ownership and operating costs. While we understand that the OPSS 127 methodology is formula-driven and incorporates factors such as fuel prices, financing assumptions, and indexed equipment values, the resulting decreases do not align with the operating realities currently being experienced across Ontario's heavy civil construction industry.

Over the past several years, contractors have faced significant increases in equipment acquisition costs, including both new and used equipment; dealer scarcity premiums and supply chain constraints; financing and borrowing costs; insurance premiums; parts and component replacement costs; repair and maintenance expenses; and equipment downtime and associated operating risks.

Our understanding is that the OPSS 127 methodology incorporates historical equipment pricing datasets that are adjusted using inflation indices and then averaged over multiple years. While this approach helps reduce volatility, it also has the effect of dampening the impact of current market conditions. In today's environment, actual equipment replacement costs have increased at a pace that frequently exceeds general inflation measures. As a result, historical averaging no longer accurately reflects the true cost of equipment ownership and operation.

Additionally, we understand that the recent spike in fuels costs is, effectively, absent from these rate calculations because the average price is calculated from April 1, 2025 to March 31, 2026. This calculation period therefore only captures one month of the current fuel escalation costs and includes the elimination of the carbon tax on fuel, which is the likely cause for the downward pressure on the 2026 rates. These factors have, unfortunately, resulted in a significant gap between the draft prices and the operating reality in the field.

We respectfully request that MTO reconsider the proposed 2026 reductions. At a minimum, we recommend maintaining the 2025 OPSS 127 rental rates for the 2026 calendar year rather than implementing broad decreases that are inconsistent with contractor experience in the marketplace. This would match what has occurred in the province of Alberta for their 2026 equipment rental rates.

We also recommend that MTO:

• Review whether the current methodology adequately captures actual replacement costs for equipment, particularly in periods where market pricing materially exceeds inflation-indexed historical values;

• Consider the use of market-condition adjustments or temporary stabilization measures during periods of significant volatility, similar to approaches adopted in other jurisdictions (i.e. allow for fuel cost averaging to extend to June – the month prior to rate publication); and

• Establish a contractor-industry working group with affected stakeholder groups to review the methodology and provide feedback on how ownership and operating costs are evolving in the field.

The objective of OPSS 127 should be to provide rates that are transparent, predictable, and reflective of actual market conditions. Freezing the 2025 rates for 2026 would represent a reasonable compromise approach, while MTO reviews whether the current methodology continues to produce outcomes that accurately reflect contractor costs.

Thank you for considering these comments. We would welcome the opportunity to discuss these concerns further with MTO to ensure that future OPSS 127 rates remain fair, transparent, and representative of the Ontario construction marketplace.