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MCAC ‘contractor challenge’ panel explores project payment, risk

Warren Frey
MCAC ‘contractor challenge’ panel explores project payment, risk
WARREN FREY — A group of experts gathered a panel to discuss the challenges currently facing contractors at the MCAC annual conference in Nashville, Tenn. Left to right: AON national director of growth, insight and innovation Gerry Russ, Procore Canada vice president Jas Saraw, Defence Construction Canada vice president operations Ross Welsman, Taco Comfort Solutions director of sales Mike Miller, Derek Ermen of Ermen Plumbing and Heating and Nashville Machine Co engineering manager Roger Wehby.

A panel composed of Canadian contractors and a Nashville, Tenn. local took a look at the major issues facing their part of the industry at the “Contractor Challenge” session at the Mechanical Contractors of Canada’s annual conference held recently in Nashville, TN.

AON national director growth, insight and innovation Gerry Russ moderated the panel and said the biggest problem facing the sector is getting paid. He began his tenure with AON by creating a report titled “Global Construction Financial Stability– A Weakening Foundation?” which examined trends circa 2018

Russ said global uncertainty means major players are coming to Canada putting stress on an already put-upon system, citing the bankruptcy of U.K. firm Carillion in early 2018.

“Seven out of ten contractors in the U.K. are losing money, Spanish companies are losing money and their all coming to work in Canada,” Russ said. “This could be a real surety issue more than anything else.”

The view from contractors Aon has surveyed is somewhat different, Russ said. The financial health of subcontractors was their number one issue, along with contractual downloading, design issues and professional liability.

“Every client had different real-life stories in today’s marketplace and no two contractors were aligned. Size and geography mattered, and were different across the country,” Russ said.

Russ added surety credit is “the number one issue among the big, big guys.”

“Vancouver will have a $2.5 billion hospital project (St. Paul’s Hospital replacement). How many mechanicals can do a $750 million project or a $250 million project?” he asked.

Defence Construction Canada vice president of operations business management Ross Welsman said. “We are guilty of low bid, but our options are very slim.”

“we need open, transparent and fair procurement, and the only way to do that is low bid,” Welsman added.

Defence Construction Canada uses many methods to transfer risk, including using modified design build models, public private partnerships (P3), “and we have one integrated project delivery (IPD) project worth $60 million in Petawawa for the Royal Canadian Dragoons,” he said.

Integrated project delivery emphasizes early collaboration on projects between stakeholders to head off problems and issues before a project starts.

Derek Ermen of Ermen Plumbing and Heating voiced his support for the IPD model as a way forward for the industry.

“What I like about the IPD model is that even if we don’t use it, it has legs that should fall into the sub, owner and contractor relationship. We’re going for less of a win-lose model and more of a win-win,” he said.

“History has said what you do at the front end is worth its weight in gold if a problem arises. You won’t get paid looking for information once a problem has arisen, you’ll get stonewalled,” Russ said.

Procore Canada Jas Saraw said artificial intelligence (AI) hasn’t had a big impact on construction yet but soon will affect risk management and legal analysis.

“We’ve seen in other industries the ability to extract clauses from contracts and use AI to analyze those clauses for risk,” Saraw said. “It’s not happening in construction yet, but we have a lot of contracts in aggregate flowing through our system which once anonymized can help subcontractors to analyze risk.”

“It’s not really a solution or an answer, but I think it’s where the technology is going,” he added.

 

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