The Ontario Precast Concrete Manufacturers’ Association (OPCMA) has published provisions for a new model contract to be used between construction contractors and its member companies. The new provisions are designed not only to provide greater fairness for manufacturers, but also to offer a blueprint for the health of the construction industry through the continued presence of a vibrant and competitive marketplace for precast concrete products made in Ontario.
Among new provisions, OPCMA members would receive an agreed-upon deposit to be paid upon receiving a letter of intent, a product mobilization fee, and payment due on completion of shop drawings. Agreed-upon storage fees would also apply to completed work not transported to the jobsite beyond a certain period.
“These provisions primarily address construction delays,” says Tony Bombini, president of the OPCMA. “As product manufacturers, we’re not like other sub-contractors, who can shift to other projects when the first one is delayed. The better comparison for precast concrete manufacturers is a hotel. If a guest doesn’t show up for a reservation, the hotel still needs to charge for the room to cover lost revenue. In the same way, we may be tooled up for a big contract — at significant upfront cost to ourselves — but if that job is delayed by six months the plant is idled and revenue can drop to zero. We can’t simply gear up with other work to replace it. It can take months to set up for a new contract.”
On the other hand, if a job arrives late, it can impact other work that’s booked further down the schedule. Once production begins on late work, there’s little that manufacturers can do to accelerate the schedule.
“We’re not like forming contractors,” says Bombini. “They can tighten up a schedule by adding more workers. That’s an option that we simply don’t have, because a plant on a 24-hour schedule has already reached its design capacity. We can’t simply add floor space.”
OPCMA members accept that none of these provisions fully compensates them for project delays — but they do provide an element of fairness enjoyed by other trades, through sharing of some of the risks inherent in project delays between contractors and precast manufacturers.
OPCMA currently represents seven members and each of them has experienced financial pressures caused by project delays.
“In some cases, those pressures are so great that they’ve driven precast manufacturers to the brink of shutting down,” says Bombini. “The OPCMA was incorporated in 1962, and only a single one of the founding members is still in business. In part, unfavourable contract terms have been responsible for that instability in the industry. Under the old contract system, we stand the risk of seeing our numbers further reduced.”
He notes that, with fewer members, contractors would face the possibility that the remaining members would be forced to turn up the dial on product prices, just to remain in business. Fewer members could also mean less competition. And an industry composed of fewer members would also reduce both the resilience and capacity of manufacturers to deliver product.
As all stakeholders adopt a standardized contract, OPCMA foresees a more transparent market for precast manufactured concrete and fewer disputes going forward.
“The use of a new standardized contract will provide general contractors with greater leverage with project owners,” says Bombini. “We believe that they’ll be able to see that these changes are not only good for the construction industry as a whole, but fair and long overdue.”
This content is sponsored by the Ontario Precast Concrete Manufacturers’ Association in collaboration with ConstructConnect™ Media. To learn more about OPCMA, visit www.OPCMA.ca.