February 11, 2013

Construction leaders discuss foreign competition

BUILDEX VANCOUVER

PETER CAULFIELD

correspondent

Thanks to both large construction projects that are slated to take place in British Columbia over the next decade and the continuing economic doldrums in much of the rest of the world, large American and European construction companies have been beating a path to B.C.

The influx of large competitors means that the local construction industry will have to look at new ways of doing business, including project planning, types of contracts and the way in which projects are put out to tender.

To help B.C. construction companies navigate the interesting times that await them, the Vancouver Regional Construction Association (VRCA) has assembled a discussion panel of respected industry experts at Buildex Vancouver.

Seminar W29 is Adapt or Die! How Will You Survive the Next 10 Years?

The panelists are Sarah Clark, president and CEO of Partnerships BC; Mike Demers is a partner with Jenkins Marzban Logan LLP; Dee Miller, vice president – administration, finance and human resources with JJM Construction Ltd.; and Cris Munro is a principal with CM2 Ventures Inc.

The moderator is Jan Robinson, the VRCA’s interim president.

Miller said all provincial governments in Canada are committed to expanding resource production, which will lead to many new and large projects, most of which will be in remote northern areas.

In B.C., present and future major construction projects include the Rio Tinto Kitimat aluminum smelter expansion; the Kitimat LNG terminal, many mining projects, pipelines; and numerous utility projects, transmission lines and wind power installations.

Miller said project owners in both the private and public sector have been changing their methods of procurement, and the large new projects coming down the pike will accelerate that trend.

“They’re looking for total solutions now,” Miller said.

“That means that in the future there will be more joint ventures with other companies. Small and medium-size contractors here, if they want to take part in those projects, will need to ensure their balance sheets are strong enough to take on the additional risk.”

Sarah Clark said that in the next 10 years the provincial government will be looking to get more out of a budget that is not unlimited.

“It will be seeking efficiency and innovation from the construction industry,” Clark said.

“The government has many demands on it and it needs to stretch the dollars it has.”

Clark said the challenge is not confined to B.C.

“Every jurisdiction in Canada and the U.S. is facing the same constraints,” she said.

Partnerships BC makes use of four different types of procurement methods: public-private partnerships (P3s), which includes a category called design-build-finance-maintain (DPFM); construction management; design-build; and design-bid-build.

Demers said the construction industry will be seeing more legal engagement in the future.

“We’re seeing more legal requirements based on U.S. models, with stricter requirements and levels of detail for project administration and for transferring risks and liabilities,” he said.

“In addition, the procurement models are changing, with the increasing popularity of P3s. Everything is becoming bigger and more complicated.”

In the future, Demers said, Canadian lawyers will need to educate American participants about Canadian practices and procedures in project execution.

“At the same time, they’ll also have to teach the locals what is legally required of them by the newcomers,” he said.

Munro said the supply chain goes back and forth between, on the one hand, using labour when it is plentiful and, on the other, buying more prefabricated materials and components when it is not.

“As labour becomes more scarce, the construction industry will start to use more integrated systems that are assembled by manufacturers and distributors,” she said.

“In addition to the skills shortage, there will also be a small business shortage, as the owners of small businesses start to retire and many of them will wind up their businesses. This, too, will have a big effect on the construction supply chain.”

Munro said there will be an opportunity in the future for horizontal integration in the construction industry.

“Contractors in the same field – mechanical or electrical, for instance – could get together and negotiate with manufacturers and distributors for better prices,” she said.

All in all, Munro is optimistic about the future of the construction supply chain.

“It’s huge and it’s naturally resilient,” she said.

Robinson is also upbeat about the B.C. industry’s prospects.

“There are some exciting new building technologies that are available now that can help address some of the challenges we’ll be facing, such as pre-fabricated materials and hybrid materials,” she said.

“We need to make use of more of them.”

Seminar W29 Adapt or Die! How Will You Survive the Next 10 Years? takes place Wednesday Feb. 13, starting at 2:30 p.m.

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