Chris Gardner: Faced with a long, slow economic recovery, now is the time for government to be bold.
Forget any talk of V- or W-shaped economic recoveries, or quick turnarounds. For BC construction companies who are working off pre-COVID-19 project order books, the big question in the industry revolves around construction volumes in 2021. Business and consumer confidence, combined with the ability of governments to fund stimulus projects, will determine the level of activity in the sector in the year ahead.
BC open shop construction companies pivoted quickly and effectively to meet the health and safety challenges of COVID-19. Construction slowed in mid-March and early April as the industry worked with the Provincial Health Officer to get proper protocols in place, but never shut down. Months later, there is only a single documented case of COVID-19 being contracted by a worker on a construction job site in B.C. It’s a remarkable commitment to safety by construction contractors and by the 250,000 men and women working in construction.
It is vital that construction companies be prepared for this slow recovery. 2019 will, in all likelihood, be the high-water mark for construction activity for the next few years.
Every month, the Independent Contractors and Businesses Association (ICBA) tracks hours worked by a large sample size of our nearly 2,500 construction member companies and clients. The impact of COVID-19 is clear – there has definitely been a downturn in BC construction activity from 2019 to 2020. As ICBA reports:
- 2020 started off very strong with a 6% increase in hours worked in January and February, over the same months in 2019
- Year-to-date, the sector is down 10% compared to 2019
- The result, a 16% pull-back in construction work as a result of COVID-19.
ICBA’s current projections are that BC construction hours worked will be 10% lower in 2020 compared to 2019. Given that 2019 was one of construction’s busiest years ever, and that the broader economy has been crushed by the pandemic, this performance is a remarkably strong showing for construction – making it the envy of many other sectors who are seeing far larger reductions.
As our ICBA leadership team meets with members from across BC, we are picking up significant concerns that private sector tendering has slowed because of cash-strapped owners, uncertainty over how COVID-19 will play out, higher taxes, and ever-increasing government red tape. There is a lot of wait-and-see that is revealing itself in projects being postponed. As a result, ICBA sees the potential for another decline in construction volumes in 2021 compared to 2020.
The Conference Board of Canada’s analysis reflects ICBA’s caution about the outlook going forward. The Board projects BC housing starts to be 35,300 in 2020 and 38,000 in 2021 – a double-digit percentage drop from 45,000 in 2019.
Procore, the project management software company, used the first week of lockdown in mid-March as a statistical baseline and has been charting its BC users’ construction activity from there. Activity has been relatively steady at about 25% higher than the worst of the recession. This reinforces the idea that the first week of lockdown saw many BC construction sites pause to sort out proper COVID-19 safety protocols; but that pause was short (the COVID protocols, however, will be here until, hopefully, there is a vaccine). However, this rebound still leaves construction lagging behind its 2019 levels.
There is little doubt we will be in this recession for quite some time. We believe there will be a long tail on the negative impact of COVID-19; getting back to a more normal operating business climate will not be possible until a vaccine is developed and widely distributed.
As we transition from this unprecedented sharp decline into what will be a slow economic recovery, now is the time for government to be bold – to issue RFPs and tenders for important construction projects which both spark the economy and create needed transportation, health, housing, and other infrastructure to support jobs, our competitiveness and improve our quality of life.
Municipal governments, with limited budgets and borrowing capabilities, should focus on speeding up approvals for private investment in their community, including new housing and businesses. Mayors and councils should aggressively cut red tape and find ways to get good projects going now. Complexity and confusion will cripple our return to a strong economy.
Cutting red tape, fast-tracking approvals and inspections, issuing permits, and quickly rolling out bold plans for building new infrastructure must guide the thinking at all levels of government over the coming months.
The BC Government needs to go a step further and abandon its shortsighted, 1970s-era tendering monopoly with the building trades unions and effectively directs work to just 15% of the construction workforce. Given that fully 85% of the men and women who work in construction in BC work for open shop companies, the provincial government must ensure that every BC construction contractor and every construction worker has a fair shot at capital projects.
The provincial government is swimming in debt – estimates for the 2020/21 budget deficit are as high as $15 billion, so every dollar is precious and must be stretched as far as possible in helping the economy recover. Government cannot continue to pay construction prices they have artificially inflated by chasing away open shop bidders, favouring building trades unions, adding layers of needless bureaucracy, and putting higher risk on to contractors.
These so-called “Community Benefit Agreements” also leave out 82% of trades apprentices in BC – the ones who work with open shop companies. Rather than giving younger workers more opportunities, this policy strips that away for the vast majority of apprentices.
Throughout this pandemic, we have heard from government and health officials that “we are all in this together.” The same holds true for the economic recovery – the provincial government needs to ensure we are all in the recovery together.