March 11, 2013

Construction companies must adapt

BRADLEY FEHR

editor

Five construction industry leaders gathered at Buildex Vancouver to discuss the challenges of foreign competition and other changes to the industry.

Jan Robinson, the Vancouver Regional Construction Association’s interim president, moderated the construction keynote panel, Adapt or Die! How Will You Survive the Next 10 Years?

She started off the discussion by asking the panelists for their thoughts on emerging trends in construction.

“As a contracting firm, we recognize that the only thing that remains constant is change,” said Dee Miller, vice president – administration, finance & human resources at JJM Construction Ltd.

She said there is now about $135 billion worth of construction work on the books in Canada and that 48 of those projects are worth $1 billion or more. She added that the size and scope of these mega projects are a major shift.

“Foreign companies are coming here in droves,” Miller said.

Mike Demers, a partner at Jenkins Marzban Logan LLP, said he has noticed increasingly complex projects that require increasingly complex relationships.

He said he used to often see 25-30 page Canadian Construction Documents Committee (CCDC) contracts, but now contract documents can be hundreds or even thousands of pages in length.

This led Robinson to ask how changes in procurement are impacting contractors.

Sarah Clark, president and CEO of Partnerships BC, said that contractors really need to understand the risks in a contract.

“You can’t just keep doing it the way you’ve been doing it,” she said.

Clark said contractors need to find out what kind of risk management is suitable and that owners need to look at how they standardize their approach to procurement.

Miller said that contractors need to figure out what they’re good at and then align themselves with others who are equally good at something else.

Her company, JJM Construction, has formed alliances and limited partnerships.

However, she warned that these partnerships require the parties involved to share some intellectual property, so contractors must be prepared for that.

“It’s a huge shift for us,” she said. “These people used to be our competitors.”

Demers also addressed how contractors and suppliers should address non-standard contracts.

Demers said he’s noticed a trend of companies spending a bit of money on the front end to take a better look at these contracts.

He said that money spent on the front end can save exponential dollars on the back end when something goes wrong.

He added that smaller projects should include as much due diligence as bigger projects.

Demers clarified his statement by saying that due diligence should be relative to the scale and scope of a project.

Miller said that the industry and its various associations should embrace the opportunity to educate owners about the benefits of CCDC contracts.

She added that associations are in an ideal position to help bridge the gap between owners and contractors.

Clark said that owners often think that transferring risk is always best, but that they might not always understand that transferring risk comes with a cost.

Demers said that figuring out who can best manage risk can lead to cost savings for everyone involved.

Clark added that people are learning all the time that they have the capability to manage risk, but if they don’t have that capability, they need to ask questions about why that’s the case.

Robinson asked the panelists what the industry must do to adapt.

Cris Munro, a principal at CM2 Ventures Inc., said that the industry must look ahead and plan for the future.

“For a general contractor, you may work well with your trades, but do you know when they plan to retire?” she asked.

Munro added that knowing that answer can make a big difference to a company.

“You must plan for the future,” she said.

Clark said it’s all about taking a disciplined approach to your business.

She said that contractors need to figure out how and on what they are going to bid.

“Don’t feel like you need to be responding to everything,” she said.

Clark also gave some advice on how to get ahead of the curve on changes that could be coming to the local construction industry.

“Look around at other markets and use it to gauge what may be coming to your market,” she said.

This story is based on a live blog from Buildex Vancouver. For live blogs from industry events visit www.journalofcommerce.com.

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