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GUEST PIECE: A Construction Cost Consultant Looks at John Horgan’s Out-of-Date Labour Deal

By Denis Walsh, who has practiced construction cost consulting for more than 40 years.

The NDP-Union plan to ‘prioritize local hirings’, ‘other hiring mandates’ and ‘have more opportunity for apprenticeship training’ will add significantly to project costs: productivity down/costs up. They have imposed a new engineering discipline on infrastructure projects: ‘social engineering’.

The ‘Community benefit agreement’ for the Pattullo Bridge and other projects will come with a big price tag. The amount will depend on the implementation by the bureaucratic administrators. Contractors are currently suffering from ‘regulation burn-out’ as a result of the overwhelming burden of regulations from all levels of government. It has increased relentlessly over the past twenty years with a corresponding increase in construction cost. This new set of regulations is Trumpian in its audacity. The cost increase will match the audaciousness of the regulations.

The Island Highway model of the ’90s has long ago reached its ‘best before’ date. It is incompatible with the modern construction industry. Contractors are now comprised of teams of highly qualified professionals. The increase of specialization has resulted in an ever larger number of subcontractors and suppliers. It is now an industry dominated by small business. They are not receptive to government interference that increases their costs and paperwork especially after last year’s battle with the Federal Government against its tax changes.

General Contractors operate both as professional consultants and construction managers. Few have large workforces hired directly. Subcontracting is standard practice. General Contractors are increasingly brought on board at the design stage as part of the project team. Their fees are often negotiated and they manage bids from subcontractors and suppliers on behalf of the owner. Your approach to bids is not applicable to many specialized projects that demand input from Contractors from the conceptual stage of a project.

This contractor expertise is in high demand and very mobile both nationally and to the US. It could result in reverse discrimination: non-union contractors and their highly qualified staff may boycott your projects. The flight of this expertise from BC could be an unintended consequence.

Contractors and subcontractors maintain their own teams and work crews on a permanent basis. Hiring is done online, through personnel agencies or, for the larger firms, their own human resources department. The modern tradesperson is educated, with specialist training and is computer literate. The use of mobile devices on construction sites is now widespread. Also, specialist crews service more than one site. Transition between union and non-union sites would complicate this process.

The Horgan government intends to insert itself between the contractor and his workforce. The government will set wage rates and severely restrict the make-up of the workforce. This is gross interference in the construction process and will seriously damage it. Horgan will have partly removed cost competition from the labour component of projects. The cost consequences of this non-competitive element will only be known after the fact. Only a government with an endless supply of taxpayer dollars would even contemplate it. It could also put the quality and safety of the end product at risk while transferring the legal liability to the government.

Taking the above into account, I would caution that John Horgan’s labour model is out of sync with the realities of the modern construction industry. It may not be workable. The industry has changed a lot in the past 25 years. The term ‘hiring hall’ is now an anachronism.

Timing is a crucial factor in the construction market. Construction prices have spiked in the past year. The industry is busy. This reality will complicate the implementation of this new policy. My current public sector clients are having difficulty finding quality contractors and subcontractors to build their projects at a reasonable cost. This policy, in the current construction market climate, will make their job harder and blow their budgets out of the water.

For major infrastructure projects such as the Pattullo Bridge, innovative project delivery methods such as public/private partnerships can produce huge cost and schedule savings. The potential savings would enable you to do more with your capital funds. The trend in the industry has been to transfer cost risk from the government to the Private Sector with a resultant cost saving. This policy would reverse that trend and return risk and cost back to the government and the taxpayer.

Even for smaller projects such as schools, exploring different project delivery methods is now common because a ‘one-size fits all’ approach is considered ‘old thinking’. School districts have to maximize what they buy for their construction dollar. This policy would box them in and force them to pay more and get less.

Regarding Horgan’s ‘union-only’ plan: as a general guide, anytime a client restricts supply, the price increases. The government’s new restrictions go way beyond ‘union-only’: they almost nationalize the workforce. This will have a huge negative impact on construction cost: inflexibility = higher cost is an established fact in the industry.

For the potential cost impact, I can only give you my ‘gut feeling’ based on my experience with similar policies in the 90ies. I suggest that you plan for an increase of 10% to 20% on all projects affected by this policy. The actual increase will vary on a project by project basis.. For the Pattullo Bridge, I suggest that you pencil in an increased budget – say a range of $1.5 to $2 billion for now based on the assumption that the old budget of $1.4 billion was doable under the old rules – often a rash assumption with high-profile public projects.

Implementation will be important. If poorly implemented, this could result in high volatility in bid prices. Poor bid responses for the affected projects could result in project delays, re-bidding and even mothballing of much needed projects.

Over a three year period, this policy, depending on the scope and implementation, could absorb one to three billion dollars of the government’s capital funds. There is a high risk that this amount could increase dramatically due to current heated market conditions, poor implementation or a negative response from non-union contractors. It is a policy with a very high cost risk.

Taxpayers will have to open the funding floodgates and pour extra money into these projects or the system will seize up. Those involved in maintaining capital budgets are in for some sleepless nights: it will make every project to which it applies instantly over budget and they will not have a clue how to arrive at the right budget because it is a new and untried policy for most contractors. This is how the construction market works: new and untested = uncertainty = higher cost risk = higher bid prices.

The cost of these projects will not be based on competitive market prices as the term is commonly understood in the construction industry. It will be ‘Fake Competition’. The defenestration of this mainstay of cost management could have unintended cost consequences: out-of-control costs could be in the cards. Since contractors base their estimates on historical data of their work crews’ productivity on previous projects, this unknowable new system will result in a: ‘roulette wheel’ method of estimating’.

TRAINING THURSDAY: Change Order Management

Changes are inevitable. Changes at home, changes at work… Changes in construction! But change orders can be managed, and our Change Order Management course on September 7 in Burnaby is here to help.

Unnecessary project disruptions, cost increases and schedule delays can result from change orders not being managed well. This course will provide participants with best practices for successfully navigating this complex project management challenge.

Here are just a few things that participants will learn:

  • How to identify changes from the original contract
  • How to document the changes
  • How to price changes fairly and realistically
  • How to present and negotiate changes collaboratively
  • How to understand the importance of early detection of change orders
  • How to negotiate delay claims caused by changes
  • How to understand the wording within commonly used contracts eg., CCDC 2 and CCA 1
  • How to develop a change order process for a construction company
  • How to issue a notice of dispute
  • How to proactively negotiating fair time and material rates at the bidding stage of a project.

You’ll earn 1 Gold Seal Credit and 7.5 Group A CPD Points at this course! For more information and to register, visit www.icba.ca/courses.

While you’re there, check out our upcoming Bluebeam Revu courses in Burnaby next week. We’re starting with Bluebeam Revu Basics on August 22, followed by Document Control with Bluebeam Revu on August 23! You’ll learn BC Housing CPD Points and Gold Seal Credits for both, so don’t miss your chance to register!

Tales of Prop Rep Horror #4 – “Aussie! Aussie! Aussie! NO! NO! NO!”

Prop rep Australia is a revolving door of governments and prime ministers. Five Prime Ministers in 11 years – with none making it to an election before being ousted by the coalitions they tried to form.

This is the great lie of the B.C. prop rep supporters: that somehow their system will magically render good, consensus-led governments. The opposite is true.

Australia is “a soap opera of political intrigue, with leaders nervously eyeing caucus rivals keen on mounting a challenge.” It took more than a week of backroom deals to sort out who won the 2016 election.

“Australian legislators have developed a taste for knifing rivals that would impress Roman emperors. Proportional representation inspires such feelings, given how a smattering of seats can nonetheless deliver great influence.”

Let’s keep this prop rep blunder down under – and not make the same mistake here in B.C.

Yet another reason to Stop Prop Rep! www.icba.ca/stopproprep

Pass this post on to your friends and family – David Eby’s draconian, anti-free speech rules won’t allow us to advertise it, but individuals can spread it as much as they like. Let’s make sure every British Columbian sees it.

And stay tuned for more “Tales of Prop Rep Horror”…

Tales of Prop Rep Horror #3 – “From Russia With Blood”
Tales of Prop Rep Horror #2 – “The Pain in Spain”
Tales of Prop Rep Horror #1 – “The Puzzle of Brussels”

TRAINING THURSDAY: Managing Stress and Understanding Anger

Everyone deals with stress, and sometimes that stress leads to anger. But you’re in luck! We have two of our popular courses coming up this fall that deal with both issues: Managing Stress in the Workplace, and Understanding Anger and Healthy Responses!

In our Managing Stress workshop, you’ll learn how to recognize stress, how it affects your work and personal life, and some effective strategies for handling stress in the workplace. You’ll also learn how to reduce your stress and set goals for effectively managing both internal and external stressors. Plus, you’ll earn 7 Group A CPD Points from BC Housing! Interested? Our first session takes place on September 10 in Prince George, followed by September 17 in Fort St John, October 1 in Victoria, October 22 in Burnaby, and October 25 in Kelowna!

In our Understanding Anger and Healthy Responses workshop, you’ll learn how to understand and manage anger constructively, both your own and that of others. You’ll also learn conflict de-escalation techniques and how to build resilience. We have sessions of this course scheduled in Prince George on September 11, in Fort St John on September 18, in Victoria on October 2, in Kelowna on October 26, and in Burnaby on November 16.

You can register for these or any of our other courses at www.icba.ca/courses!

OP/ED: Horgan-Union Sweetheart Deal Not Just Discriminatory, It’s Sloppy Too

By Chris Gardner, President, ICBA
This piece was first published by the Vancouver Sun on August 7, 2018. 

What’s worse than a discriminatory Project Labour Agreement (PLA) paying off political favours and forcing unionization on the 85 per cent of construction workers who have chosen to organize themselves differently than the NDP and old-school Building Trades unions want?

How about a sloppily written PLA that contains various errors and claims to attract new workers to the trades by paying them LESS than minimum wage? The NDP and Building Trades, who for years have positioned themselves as the champions of the working poor, have agreed to pay various pre-apprentices less than the $12.65/hour B.C. minimum wage.

And not just one specific trade. The NDP and their long-time political supporters in the Building Trades have negotiated in the backroom a deal that will pay bricklayer pre-apprentices $11/hour, drywall tapers and finishers $11.78/hour, glaziers $11/hour, painters $11.19/hour, tilesetters $11/hour, and terrazzo workers $11/hour.

Why would young people consider a career in the trades when they can make more working at any other job they can find? Does that sound like a commitment to attracting the next generation, as Horgan and his Building Trades donors constantly stress?

These are high-demand positions. An ICBA survey earlier this year showed every single one of our glass companies wants to hire more glaziers, and are paying up to get them.

To make matters worse, pre-apprentices could be stuck in their positions for years, as there is a lack of seats in trade schools around the province. The millions of dollars being handed over to the Building Trades unions through a variety of per-hour fees would be better spent in opening up more training seats.

Transportation Minister Claire Trevena says the union-only model will drive up the cost of the Pattullo project by $100 million (we believe this is grossly underestimated, but let’s take the Minister at her word). Investing that $100 million in high school programs to encourage young people to learn a trade and in technical schools to train more graduates would bring a whole lot more people into the trades than handing over millions of dollars to union bosses.

But that wouldn’t repay $2.3 million worth of political favours – the amount given to the NDP by these Building Trades unions since 2005.

Despite 336 pages – including dozens outlining the excruciating minutiae of work camp life and menus – this PLA is poorly written and it’s clear that the NDP rushed it.

In what is likely a four-page-long series of typos (pages 163-166), affecting eight different classifications of Teamsters, the wages listed in this agreement drop by as much as $19 per hour in 2020 and beyond.

For example, a Group 1 Teamster drops from $31.40 per hour in 2019 to $12.13 per hour in 2020, according to the table in the deal. Obviously that’s not going to be the case, but it shows how rushed this PLA was.

Who knows what other errors and surprises lurk beneath the surface of this agreement? And what the NDP/Building Trades will change on the fly to fix it?

While much ink has been spilled on all the perks planned for work camps, trades workers may want to examine what those unionized culinary workers will be paid to be there. Janitors will start at $26.17/hour. Bakers at $34.27/hour. The dishwasher at $26.17/hour. Plus they all collect another $6.77/hour in benefits.

Bakers will out-earn fully-ticketed glaziers, roadbuilding operating engineers, and mechanics. Dishwashers will make more than two-term millwright apprentices and six-term painter apprentices. An entry-level piledriver will make $4 per hour less than the entry-level janitor.

Those bakers, dishwashers and janitors will get five weeks paid holidays. Drywallers, mechanics, operating engineers, and glaziers only get four.

It all sounds crazy, but remember, in partnership with the Building Trades, the Government has taken away the right of workers to choose whether or not to join a union and which union to join. This puts an end to fair, open and transparent procurement. No matter how a construction company organizes its workforce, every company should have the right to bid and win government work.

One year ago, John Horgan promised a new way of doing business in B.C. Sadly, it’s one where he has put the interests of his union donors ahead of what’s best for British Columbians, ahead of fairness, ahead of getting good value for tax dollars, and ahead of what individual workers want.

Tales of Prop Rep Horror #3 – “From Russia with Blood”

B.C. Prop Rep enthusiasts are hypocrites. In one breath, they claim their beloved prop rep will “make very vote count.” With the next breath, they claim no fringe parties could possibly get any power in B.C. because of the 5% threshold their systems require to get seats.

You can’t have it both ways, silly.

Unless, of course, you’re Vladimir Putin and his United Russia party, which gleefully exploits Russia’s prop rep electoral system to maintain power. Only 4 of 43 parties that ran candidates managed to get above the 5% threshold and actually “elect” members. In the 1995 election, an astounding 49% of prop rep votes didn’t really count, because they were for parties that got less than 5%.

Back to Putin. He’s become a master at leveraging those failed fringe candidates, adding them to his United Russia prop rep candidate lists and maintaining his hammerlock on power.

Yet another reason to Stop Prop Rep! www.icba.ca/stopproprep

Share this post – David Eby’s draconian, anti-free speech rules won’t allow us to advertise it, but individuals can share it as much as they like. Let’s make sure every British Columbian sees it.

And stay tuned for more “Tales of Prop Rep Horror”…

Tales of Prop Rep Horror #2 – “The Pain in Spain”
Tales of Prop Rep Horror #1 – “The Puzzle of Brussels”

MEDIA ADVISORY: ICBA in Court Today Seeking Prop Rep Injunction

The Independent Contractors and Businesses Association (ICBA) will be in B.C. Supreme Court in Vancouver today, making the case to Madam Justice Miriam Gropper for an injunction to force the provincial government to fix its flawed proportional representation referendum process.

ICBA believes the way the government has asked and structured the questions, and the restrictions it has placed on public participation, are unlawful and undermine the entire purpose of a binding referendum: to determine whether a fully informed electorate supports adopting a new electoral system.

ICBA legal counsel Peter Gall will argue that the referendum questions and process are illegal because they don’t present the public with a clear choice between the current electoral system and a defined system of proportional representation – as was the case in the two previous referenda held on this matter in 2005 and 2009.

“We are strongly supportive of holding a vote to decide whether B.C. should adopt a new electoral system,” said ICBA president Chris Gardner. “While the provincial government has been trying to rag the puck on our case – using delay tactics to keep their flawed process going, we believe it is in the public interest to ensure this referendum is conducted in a fair, transparent, and lawful manner, given that it involves such a fundamental change to our democratic system.”

WHO: ICBA, including its president, Chris Gardner, and legal counsel, Peter Gall

WHAT: Arguing for an injunction against the government’s prop rep process

WHEN: Today, Tuesday, August 7, 2018. The hearing starts at 9:45 AM and is scheduled to run all day.

WHERE: BC Supreme Court, 800 Smithe Street, Vancouver

For more on ICBA’s intended arguments today, click HERE. For our full, initial filing, click HERE.

TRAINING THURSDAY: Construction Business Management

Looking to learn how to improve the management and business systems of your construction business? Our upcoming Construction Business Management workshop is here to help!

At the end of the course participants will be able to: 

  • Understand the strategic planning process and how to implement it within their context
  • Understand the importance of a business plan and how to prepare one
  • Understand the participants within the construction industry – their roles, responsibilities and limitations
  • Understand the benefits of a participatory management culture
  • Formulate a marketing plan and understand the marketing mix
  • Develop a human resource management plan
  • Understand the employment cycle/process
  • Develop an employee performance evaluation system
  • Increase staff morale and engagement
  • Understand operational planning for construction companies
  • Formulate a financial plan, budgets, ratios and break-even analysis
  • Understand the importance of financial internal controls
  • Develop benchmarks and key performance indicators
  • Understand bonding and insurance for construction companies
  • Use risk management tools to identify risk and how to mitigate risk

You’ll also earn 5 Gold Seal Credits and 30 Group B CPD Points from BC Housing!

Our next two-day session takes place in Burnaby on August 23-24; register now so you don’t miss out! You can register for this or any of our other upcoming sessions at www.icba.ca/courses.

And while you’re there, subscribe to our training newsletter at www.icba.ca/trainingnewsletter.