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Industry Perspectives Op-Ed — Canadian public sector bid ‘no shows’: Why contractors aren’t bidding projects

Jonathan Burbee
Industry Perspectives Op-Ed — Canadian public sector bid ‘no shows’: Why contractors aren’t bidding projects


A common theme in public sector forums and in the course of conversations with real property leaders and practitioners is that a significant challenge for their teams right now is attracting sufficient bidders — or any bidders — to their construction project tenders. Part one of this two-part Industry Perspectives Op-Ed explores the how and why this is the current industry climate.

Why is this happening? After all, in theory, if the demand is there, you can find some place on that Economics 101 supply curve that intersects at a given price and quantity. The qualitative benefits to the business of building public projects are numerous, including the positive exposure of the firm, certainty of payment, and the steady flow of investment that is less sensitive to lending rate fluctuations.

Part of the answer is that the supply of construction services is strained due to labour availability. A recent study by the Independent Contractors and Business Association found 79 per cent of firms cannot source enough skilled workers.

Public sector owners are usually at a disadvantage in the construction marketplace when it comes to attracting contractors, but if we address the economic elasticity shortcomings, and emphasize the qualitative benefits of working on public sector projects, then we may be able to achieve more success in attracting contractors to bid on these projects.


The economic elasticity disadvantage

Real estate is often subdivided into categories such as residential and a grouping of Industrial, Commercial, and Institutional (ICI).

Jonathan Burbee
Jonathan Burbee

A literature review reveals an abundance of studies on elasticity on the demand for construction services from residential properties.

The economic attributes, including elasticity of demand, of industrial real estate such as a paper mill, supply warehouse, or an auto plant is coupled to the good or service affiliated with the buildings.

The commercial sector is an area of intense study in academia and in money markets through the use of vacancy, absorption rates of development, lending rates, lease rates, et cetera. While supply and demand adjustment cycles are often measured in years rather than months, the demand market is often mathematically considered as elastic given the ability for substitution with changes to price.

But what about the third member of the ICI category? Institutional real property refers to properties owned and operated by institutions such as governments at all levels, hospitals, schools and post-secondary campuses. Wherever public entities need to provide a function for which there is no private sector market alternative such as a fire hall or highways we find institutional real property.

To date, no research has appeared specifically dealing with elasticity in public sector construction demand. We can intuit though, that demand is inelastic because it’s like a consumer staple. Population growth leads to additional school construction. A hospital needing to meet strict health and regulatory standards eventually must replace that end-of-life cycle ventilation system. The city can’t recommend citizens use the other water distribution system as a substitute. Institutional real property, therefore, is different from the residential, industrial and commercial categories in terms of elasticity.


Pre-construction stress in public works

The reality, however, is that public project budgets are not unlimited and projects just won’t proceed in the event of insufficient funding.

This happens so often that industry commentators track the volume of project value that is brought to the market that are subsequently abandoned or put on hold and label this as pre-construction stress.

This is where the research becomes very interesting with the discovery of a related theme of studies on failed and abandoned projects. These instances were surely disappointing to say the least for the public sector organizations involved for falling short and expending funds without anything to show for it, but surely also a letdown for the construction teams who joined the project from industry.

The reasons are numerous and the outcomes vary with the cases under study and the various research methods used, but recurring themes included:

  • A lack of understanding of project purpose and insufficient description of the scope of work desired.
  • Insufficient technical knowledge in project management and procurement teams.
  • Inadequate project funding.
  • Ineffective procurement processes.
  • Lack of support from top management, including political risks.
  • Delayed payment.
  • Ineffective communications and supporting information management systems.

Perhaps one answer to addressing these root causes and enticing construction contractors back to the institutional market may lie in procurement innovation.

Jonathan Burbee is director of business development with Gordian. Send Industry Perspectives Op-Ed comments and columns ideas to


Industry Perspectives Op-Ed Part Two: Canadian public sector bid ‘no shows’ and procurement

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