August 29, 2012

School procurement push hurting construction contractors

View from the Board | Philip Hochstein

School districts across B.C. are some of the best construction customers in the business.

The work is local. The bills get paid. And, local companies have the expertise and experience needed to get the projects done on time and on budget.

That’s what makes recent procurement trends for new school construction so troubling. More and more projects are being sent to tender with an imposed procurement method – in this case design-build. So far, the ICBA has seen this in Surrey, Powell River and Port Alberni.

And, to be fair, it’s not the school districts leading the charge – it’s the provincial Treasury Board.

What this means is that instead of looking at each project, a cookie-cutter procurement method is being imposed.

This approach ignores the unique needs of each project and the condition of the local construction market.

Pre-imposing a design-build procurement forces small and medium-sized companies to invest a large sum of money up front to bid for the work.

It basically cuts out smaller, local operators – still capable of projects of this size – because they don’t have the financial backing for such bids. This is happening despite any proof that pre-imposing the procurement method offers any real savings to the taxpayer. Layered onto this problem is the fact that using design-build brings another player into the game – Partnerships BC, a provincial Crown Corporation.

It was originally founded to tackle project analysis for government. Its job was to look at a project, determine if a private-public partnership was suitable, make its procurement recommendation to government and move on.

But, like any government body, its scope has grown.

It now takes on classic project management roles in P3 projects and collects substantial fees to do so.

Setting aside the fact the taxpayer backed entity is competing with the private sector on project management, there are serious questions about the impartiality of their recommendations.

After all, if they recommend design-build over design-bid-build, they end up with a management role and the fees from that. But, when it comes to schools in B.C., the analysis seems to have been tossed out the window.

It’s been replaced by a pre-decision to do these projects as design-build. We get only one procurement model – and surprise surprise, Partnerships BC gets the official role of overseeing the project.

Construction companies and the taxpayers are left wondering, who benefits from this kind of decision?

The ICBA has long come down in favour of P3s – but always after project analysis.

Prove that it is the best way to go and then choose the procurement model. We’re not opposed to design-build either. We’re just opposed to it being used in an ideological way that ignores the reality of B.C.’s construction market and the best interests of the taxpayer.

A similar challenge has popped up in another school district. In order to prequalify, companies must have previously built two schools.

This cuts a number of companies out from bidding.

Even though they qualify for bonding and have done similar work with similar budgets, they are incorrectly deemed unable to build schools.

Taken together, these new procurement rules serve only to reduce competition and increase prices.

That hurts B.C. construction companies and it hurts the people footing the bills – taxpayers.

Government needs to put an end to cookie-cutter procurement when it comes to schools and other capital projects. It doesn’t add up for industry or taxpayers.

The ICBA will keep pressing this point with the provincial powers that be and lobby for a return to analysis so everyone gets the best deal possible.

Philip Hochstein is the president of the Independent Contractors and Businesses Association of British Columbia. Phil is also a member of the Journal of Commerce Editorial Advisory Board. Send comments or questions to <editor@journalofcommerce.com.

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