January 23, 2013

How smaller contractors can participate in P3 projects

PETER KENTER

correspondent

Public-private partnerships (P3s) seem to favour large or multi-national contractors with deep pockets.

However, a panel of industry experts appearing at the national conference of the Canadian Council for Public-Private Partnerships in Toronto agreed that smaller local contractors can grab a slice of the P3 pie if they’re motivated.

Dave Klassen, director of Design-Build, EllisDon Corporation, noted that focusing on participation in P3 projects alone masks a broader issue.

“Scale and complexity are not relevant to whether it’s a P3 project or not,” he said.

“There are only certain companies who are capable of pursuing those projects, regardless of the procurement model.”

Klassen noted that his company partners only with electrical and mechanical contractors on the P3 pursuit level.

“For the other disciplines, our procurement on these projects is no different from any other construction management project and the opportunities for smaller contractors are exactly the same,” he said.

Keith Sashaw, the outgoing-president of the Vancouver Regional Construction Association, noted that P3 projects currently represent only about 20 per cent of all construction projects, leaving considerable opportunity for smaller contractors.

“However, there’s a lot of anxiety among small- and medium-sized contractors about how to get into that game,” he said.

“The problem is serious if contractors don’t realize that the world is changing and that they’d better start adapting to those changes.”

But all sub-contractors are not created equal. P3 partners rely on top-notch support and prior experience with the P3 model.

“Large subcontractors dominate the P3 market and that makes it difficult for local sub-contractors to break into those relationships,” said Wally Budgell, president, Robertson Bright Inc., an electrical and communications contractor with offices across Canada and in Las Vegas.

“We were fortunate that we were involved in smaller design-build contracts for 25 years and had a strong relationship with EllisDon. When the opportunity came to join a pursuit team, we used what we learned and also leaned on their expertise to bring it all together.”

Budgell noted that successful P3 contractors must have an appetite for improving their game.

He also said that they must be willing to devote resources to recruiting top talent, educating employees, bidding and the intensive process of collaboration during the project.

“The P3 world has helped us — in some cases forced us — to step up our game,” he said.

“For example, if banks are conservative in lending to construction companies, the sureties are ultra-conservative.

“We’ve had to become more sophisticated in our reporting and how we do business and project cash flows.”

Budgell said he disagrees with the notion that P3 projects should be broken into smaller chunks to encourage the participation of smaller players.

“Each discipline in a P3 or design-build needs to have a champion or a leader,” he said.

“Considering the amount of sophistication that goes into a P3 project, it would be very difficult to bring a cohesive team together if projects were broken up.”

Sashaw and Klassen agreed, noting that P3 projects are designed on a large scale to achieve efficiencies and to bring projects to completion sooner.

However, Klassen noted that recent trends and changes to the P3 market are encouraging increased small contractor participation without sacrificing efficiency.

“Infrastructure Ontario has implemented a local experience requirement that will benefit local contractors,” he said.

“We’re also seeing a shift to smaller projects in the P3 world, and as municipal governments begin to employ this model there will be more opportunities for smaller players.”

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