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CONSTRUCTION ECONOMIST
The Journal of the Canadian Institute of Quantity Surveyors Le Journal de l’Institut canadien des économistes en construction
SUMMER 2020
Crisis to Recovery
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Perspectives of Leaders & Professionals
COVID-19 UPDATES:
• Construction Costs & Escalation – Marlon Bray • A Legal Perspective – Richard Wong & Lia Bruschetta • Balancing Economics & Healthcare – Ken Murray • Insurance Impacts – Barrie Ngeh ciqs.org
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Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 3
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The mission of CIQS is to promote and advance professional quantity surveying and construction estimating; to establish and maintain national standards; to recruit, educate and support our members.
Canadian Institute of Quantity Surveyors 90 Nolan Court, Unit 19, Markham, ON L3R 4L9 t. 905/477.0008 f. 905/477.6774 toll free. +1 866/345.1168 e.info@ciqs.org www.ciqs.org
Chief Executive Officer Sheila Lennon, CAE.................... . . . . . . . . . . . ceo@ciqs.org Editor Arif Ghaffur, PQS(F)................... . . . . . . . editor@ciqs.org Assistants to Editor Shane McKernan, PQS Yasmin Abdiladif, Dip. C.E.T. Carl Pedersen, PQS Send Change of Address to: Canadian Institute of Quantity Surveyors 90 Nolan Court, Unit 19, Markham, Ontario L3R 4L9
CIQS Board
CONSTRUCTION ECONOMIST SUMMER 2020
The Journal of the Canadian Institute of Quantity Surveyors Le Journal de l’Institut canadien des économistes en construction
Features
Perspectives of leaders and professionals. . . . . . . . . . . . . . 12 Cancellation of CIQS Congress 2020 . . . . . . . . . . . . . . . . 20 Construction costs and escalation. . . . . . . . . . . . . . . . . . 21 Impacts on insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 23 Balancing economics and healthcare. . . . . . . . . . . . . . . 25 Potential impacts on construction costs . . . . . . . . . . . . 28 Project profile: Ottawa’s LRT Stage 2 . . . . . . . . . . . . . 30
Chair: David Dooks, PQS(F)
Shadow bidding approach . . . . . . . . . . . . . . . . . . . . 32
Vice Chair/Treasurer: Erin Brownlow, PQS
In memoriam. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Director/Registrar: Jerry Crawford, PQS Education Director: Wendy Hobbs, PQS(F) Director: Arif Ghaffur, PQS(F) Director: Indu Elapatha, PQS(F) Director: Roger Ward, PQS(F) Director: Tammy Stockley, PQS Director: Hiran Dassoruth, PQS
Statements of fact and opinion contained within this journal are those of the authors, including subject matter experts. CIQS assumes no responsibility or liability for the content of such fact and opinion, nor do they represent the official policy of CIQS. Published four times a year on behalf of the Canadian Institute of Quantity Surveyors by
30
Corners
Messages
Legal Corner. . . . . . . . . . . . . . . .
15
Chair’s Message . . . . . . . . . . . . . . .
6
Young Quantity Surveyor Corner. . .
19
CEO’s Message. . . . . . . . . . . . . . . .
8
Editor’s Message. . . . . . . . . . . . .
10
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Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 5
Chair’s Message
COVID-19 and Quantity Surveyors
A
t the start of this year, expectations, and predictions for the built environment for 2020 were positive and showing another year of growth. The beginning of this year’s first quarter appeared in line with predictions, until about the middle of March when the threat of the COVID-19 pandemic became very real for every Canadian. Between March 13 and 28, every province and territory in Canada had declared a state of emergency or health emergency. In March, the CIQS head office was closed in response to Ontario’s requirement for the temporary closure of places of nonessential businesses. Full-time employees at the head office in Markham, ON, were asked to make the transition to working from home to continue supporting our members and the business operations. The transition was successfully implemented and, on behalf of the membership, I would like to sincerely thank our administration and operations team for their continued support, for being healthy and safe, working from home to ensure the Institute’s moving forward during these trying times. On May 1-2, the CIQS board of directors meeting was held virtually. All directors were in attendance and the meeting went smoothly with only minor technical interruptions. The two days of meeting were generally focused on the matters of institute regarding operations affected and impacted by COVID-19. Key important topics included business updates, communications plan,
membership, congress and the annual general meeting. The meeting agenda was covered efficiently and the matters concerning the good of institute were addressed. At this time, the board wishes to congratulate Sheila Lennon for her position: re-titled from Executive Director to Chief Executive Officer (CEO), a title that best reflects the responsibilities of the position and falls in-line with the CIQS governance structure. As Chair, I wish to offer my respect and gratitude for the time and engagement volunteered by our directors and committees who are ensuring that the institute remains active and functional in spite of the challenging pandemic. Operating as a not-for-profit organization, the CIQS has been steadily growing and we are thankful for the continued success of our members, most of who appear to be still working, despite the pandemic. History has proven from time to time that quantity surveyors have the ability to adapt and adjust to the demands for our services at times of economic impacts. Statistics Canada’s 2016 National Occupational Classification (NOC), labels estimators and professional quantity surveyors under the category of ‘natural and applied sciences and related occupations [2]’. This NOC category is currently the second least impacted by employment loss since February 2020, representing a 3.2% loss of employment. Many of the services quantity surveyors provide are capable of being completed from the
David Dooks, PQS(F)
safety of home digitally and virtually. While some services may still need to be completed face-to-face; we hope our members exercise these tasks with their safety and the safety of others in mind, while complying with all health guidelines and physical distancing protocols. With reports across the country that the number of COVID-19 cases is dropping, each province and territory is preparing to loosen restrictions, and is phasing back-to-work guidelines. As the economy restarts and we find the new norm, our profession will also need to be responsive to change to provide support and guidance for our clients in hopes of reaping positive gains. Many of these positive gains may not be measured in dollars but rather gains for future employment, social development, health care infrastructure, and implementing changes to the existing built environment for healthier and safer spaces. As we take what we have learned from this pandemic and prepare to respond to the next wave – and dare it be said, future outbreaks – our world is forever changed. Building a future to meet the new norm may no longer be focused on the economic cost today but rather the economic stability of the future as we prepare ourselves to be able to function, live, and work, while under orders to self-isolation. To conclude I offer thanks to all health occupations and essential workers who are bravely working their hardest to protect lives and provide the resources needed to sustain life. We stand strong together.
History has proven from time to time that Quantity Surveyors have the ability to adapt and adjust to the demands for our services at times of economic impacts. 6 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
Message du Président du Conseil
COVID-19 et les Économistes en Construction
A
u début de cette année, les attentes et les prévisions pour l’environnement bâti 2020 étaient positives et montraient une nouvelle année de croissance. Le début du premier trimestre de cette année semblait correspondre aux prévisions, jusqu’à la mi-mars environ, lorsque la menace de la pandémie de COVID-19 est devenue très réelle pour tous les Canadiens. Entre le 13 et le 28 mars, chaque province et territoire du Canada avait déclaré l’état d’urgence ou l’état d’urgence sanitaire. En mars, le siège social de l’Institut canadien des économistes en construction (ICÉC) était fermé en réponse au décret de l’Ontario ordonnant la fermeture temporaire des locaux d’entreprises non essentielles. Les employés à temps plein du siège social de Markham, en Ontario, ont été invités à faire la transition vers le travail à domicile pour continuer à soutenir nos membres et les opérations organisationnelles. La transition a été mise en œuvre avec succès et, au nom des membres, je tiens à remercier sincèrement notre équipe administrative et opérationnelle pour leur soutien continu et leur travail effectué à domicile tout en préservant leur santé et leur sécurité afin d’assurer le progrès de l’Institut en ces temps difficiles. Les 1 et 2 mai, la réunion du conseil d’administration de l’ICÉC s’est tenue virtuellement. Tous les administrateurs étaient présents et la réunion s’est bien déroulée avec seulement quelques interruptions techniques mineures. Les deux jours de réunion se sont principalement axés sur les questions de l’Institut concernant les opérations affectées et affaiblies par le COVID-19. Les principaux sujets importants comprenaient les mises à jour des activités, le plan de communication, l’adhésion, le congrès et l’assemblée générale annuelle. L’ordre du jour de la réunion a été traité
efficacement et les questions concernant l’intérêt supérieur de l’institut ont été abordées. À ce moment précis, le conseil d’administration souhaite féliciter Sheila Lennon pour son changement de poste, soit de directrice générale à chef de la direction (PDG), un titre qui reflète mieux les responsabilités du poste et qui correspond à la structure de gouvernance de l’ICÉC. En tant que président, je tiens à offrir mon respect et ma gratitude pour le temps consacré et l’engagement investi sur une base volontaire et bénévole par nos directeurs et nos comités qui veillent à ce que l’Institut demeure actif et fonctionnel malgré la pandémie qui sévit actuellement. Fonctionnant comme un organisme sans but lucratif, l’ICÉC n’a cessé de maintenir sa croissance, et nous sommes reconnaissants du succès continu de nos membres, dont la plupart semblent toujours travailler en pleine pandémie. L’histoire a prouvé qu’à certains moments critiques, les économistes en construction ont la capacité de s’adapter et de s’ajuster à la demande de nos services en période d’impacts économiques importants. Statistique Canada – Classification nationale des professions (CNP) de 2016 – inclut les estimateurs et les économistes en construction dans la catégorie « Sciences naturelles et appliquées et domaines apparentés [2] ». Cette catégorie de la CNP se situe actuellement au deuxième rang pour les catégories les moins touchées par la perte d’emploi depuis février 2020, ce qui représente une perte d’emploi de 3,2 %. Bon nombre des services que les économistes en construction fournissent peuvent s’exécuter de façon sécuritaire et numérique depuis la maison. Certains services devront peut-être encore s’effectuer en personne; toutefois, et il est important que nos membres exercent leurs fonctions tout en prenant les précautions nécessaires pour assurer
leur sécurité et celle des autres et en respectant rigoureusement toutes les directives de santé et tous les protocoles de distanciation physique. Alors que les rapports à travers le pays indiquant que le nombre de cas de COVID-19 diminue, chaque province et territoire se prépare à assouplir les restrictions et à instaurer progressivement et en plusieurs phases les directives de retour au travail. Alors que l’économie redémarre et que nous nous adaptons à une nouvelle norme, notre profession devra être sensible aux changements afin de fournir un soutien et des conseils à nos clients dans l’espoir d’enregistrer des gains positifs. Il est vrai que la plupart de ces gains ne pourront pas être mesurés sur le plan monétaire ou financier, mais plutôt sur le plan des emplois futurs, du développement social, des infrastructures de soins de santé et de la mise en œuvre de changements à l’environnement bâti existant pour des espaces plus sains et plus sûrs. Alors que nous commençons à tirer les enseignements de la pandémie et parallèlement à nous préparer à la prochaine vague – et osons le dire à la possibilité de futures épidémies – notre monde a profondément changé et rien ne sera plus comme avant. Construire un avenir pour répondre à la nouvelle norme peut ne plus être axé sur le coût économique aujourd’hui, mais plutôt sur la stabilité économique de l’avenir, et cela implique notre capacité à fonctionner, vivre et travailler, tout en étant soumis aux ordres d’auto-isolement. Pour conclure ce message, je tiens à remercie tous les professionnels de la santé et tous les travailleurs essentiels qui œuvrent courageusement pour protéger les vies humaines et pour fournir les ressources nécessaires au maintien de la vie. L’union fait la force et ensemble nous vaincrons. David Dooks, ÉCA(C)
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 7
Chief Executive Officer’s Message
CIQS working for you to mitigate COVID-19 impact on society
T
he State of Emergency measures put in place for Canada and countries across the globe have forced businesses to change the way they do business, both externally and internally. These measures have put immense strain on the economy, our members, and the construction industry. During this extraordinary time, we must all learn how to navigate our ‘new normal’, perhaps even more so now, as restrictions are slowly being lifted across the country. “This will be paradigm change; a post COVID-19 era. I think some professions can be almost 100% online such as mine, which is estimating and tendering. However, we need to educate supply chains to adopt positively. This can reduce office overheads significantly. I have been managing tenders sitting in my room, coordinating with three to four countries of variable time zones. Its workable.” – CIQS COVID-19 survey respondent. CIQS National has been working hard to keep our members and stakeholders informed of pandemic emergency measures and COVID-19 facts to keep everyone safe and working productively. Alexandra Parliament, our PR and Marketing Consultant, has been keeping up on announcements in real time and has created a special COVID-19 communications plan to keep us organized and on-track for as long as is required. Due to the abundance of information available and the fluidity of the situation, we created a special COVID-19 webpage on www.ciqs.org, which she updates on a regular basis as new information becomes available. Since the initial stay-at-home measure was announced in Ontario, all of the CIQS National staff have been working diligently from home to make sure we continue to meet all your membership needs.
We are still actively accepting submissions and working hard to review diaries, taking registrations for the Practice Problem exams, and scheduling interviews for the TPE. It is truly inspiring to see so many of our members taking advantage of the pandemic lockdown to work towards our internationally recognized designations. We also welcome back all members and stakeholders who renewed their membership for another year. “Our profession is as important now as ever. As the economic impacts filter through the economy for businesses to get back to work will require solid financial support to assess its capital expenditures, mitigation strategies, expansion vs. contraction strategies etc.” – CIQS COVID-19 survey respondent Our staff is also working on some exciting future programs, such as: • Student Outreach Campaign where CIQS ambassadors will promote quantity surveying as a career path to students across Canada at job fairs, career seminars, and tradeshows.
Sheila Lennon, CAE
• YQS (Young Quantity Surveyor) program created as a way for members in good standing under the age of 40 to connect and work together. • Leadership program where we will match seasoned members with YQS members, to mentor them as they build their careers within the industry. • Robust government relations campaign where we will advocate on your behalf at the federal and provincial levels. COVID-19 emergency measures have forced the cancellation of all in-person CIQS events, including Congress 2020 (more about this on page 20), but this has not slowed things down for our event planners. We have used the last couple of months to create alternative solutions such as offering chapter events via video conferencing platforms, a virtual AGM and Year in Review (more on this on page 20) and webinars, all to ensure we continue to offer important
Check out the upcoming podcasts from industry professionals • Soft Skills in the Construction Industry – A prerequisite to success (Milan Niksic) • Value Engineering – So much more than cutting costs (Alex Marsh) • Alternate Dispute Resolution (Niamh ni Chroinin) • Self-Performing Tenant Developments (Kirk Burney) • The Role of the Quantity Surveyor in P3 Projects (Michael Gabert)
Please visit www.ciqs.org/english/ciqs-podcast to access the podcasts listed above.
8 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
Chief Executive Officer’s Message
membership benefits. Details about these upcoming meetings and events will be distributed as they become available. Our first major virtual meeting was held on May 1-2, when the CIQS National board of directors met via video conference. • The Board of Directors hosted a meet and greet with Members on the evening of Thursday, January 23. • At the board meeting in May, there was a unanimous vote to cancel this year’s Congress. This was not an easy decision as Congress is our largest event of the year, where members from coast to coast and beyond have the opportunity to network, learn, and have their voices heard. Ultimately, the board felt that, due to the severity and fluidity of the pandemic, cancelling the conference was in the best interest of the organization and its members. • The CIQS is in planning stage to hold the 2020 AGM virtually, in July. • The COVID-19 Communications Plan has been developed to maintain open communications with members and stakeholder.
BRITISH COLUMBIA • PRAIRIES AND NORTHWEST TERRITORIES • ONTARIO • QUÉBEC • MARITIMES • NEWFOUNDLAND AND LABRADOR
CONSTRUCTION ECONOMIST Future of Quantity Surveyors
Roy Lewis
Journal Online
The Journal of the Canadian Institute of Quantity Surveyors Le Journal de l’Institut canadien des économistes en construction
SPRING 2020
Reciprocity Agreements
Indu Elapatha
• The CIQS has contracted Impact Public Affairs as its Government/ Public affairs firm. Impact is working with the CIQS Board to develop an advocacy plan for the Institute. • In lieu of face-to-face meetings held by National and Chapters, the CIQS will be developing webinars for members to earn CPD points. • The CIQS approved change to add, “Candidates must complete both sections of Part C – Practice Problem, bylaws, rules and regulations and ethics” to Education Policy Guidance Note paragraph 2. TPE Route 12b: Professional Experience Pathway Requirements for PQS/ECA. • The Ontario Colleges and Universities Accreditation Report was accepted and approved by the Board. • Up to 7 potential podcasts are planned for release in 2020. • Edward Traore, PQS from Alberta and Indu Elapatha, PQS from British Columbia have been awarded the Lois Metcalfe Fellowship Award for 2020.
The Construction Economist is also available in electronic format.
YQS Framework
Shane McKernan
STATISTICS CANADA RELEASES LABOUR FORCE SURVEY HIGHLIGHTING CHANGES IN EMPLOYMENT NATIONWIDE
Please visit the CIQS website www.ciqs.org and press the Publications tab.
• The next CIQS Board of Directors Meeting (virtual) will be on July 9, 2020. We understand the hardship that everyone is experiencing during these uncertain times and it was encouraging to learn that, even though 68% of respondents of our COVID-19 survey stated that their workload has changed due to COVID-19 it was not necessarily for the worse. It was mentioned that thanks to programs like Zoom and Teams, they are able to conduct all aspects of their jobs and continue to collaborate with their colleagues. Some respondents are even doing virtual site inspections. Although not ideal, it makes it possible to stay on top of active on-site projects, even during a lockdown. We thank everyone who took the time to complete our COVID-19 survey last month, but we would love to see an increase in participation of future surveys. When you receive one of our surveys, please take a few minutes to complete it so that we can continue gaining a better understanding of your needs, and can subsequently build our programs and services to better meet them. Thank you for your continued support. If we all do our part to slow down the spread of COVID-19, we can all emerge on the other side, ready to move forward, stronger than ever – together! Stay safe and healthy!
NEXT ISSUE:
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UPDATE ON COVID-19 • IMPACTS ON THE ECONOMY • IMPACTS ON CONSTRUCTION
ciqs.org
CIQS_Spring2020.indd 1
• CIQS Congress 2020 – Winnipeg, Canada • Company Profile – Tech-Cost Consultants Ltd. • Legal Corner – Robert J. Kennaley • Risk Management – Angela Lai
2020-03-26 11:20 AM
Sheila Lennon, CEO
Fellowship Announcement Congratulations to the 2020 Lois Metcalfe Fellowship Award Recipients CIQS is pleased to announce that the Board of Directors appointed two new Fellows this year. Congratulations to: Indu Elapatha, PQS(F) CIQS – British Columbia Chapter
Edward Traore, PQS(F) CIQS – Prairies and NWT Chapter
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 9
Editor’s Message
Uncertainty, leadership, and accountability
I
n the face of adversity, leaders may struggle to manage their teams effectively. Before the COVID-19 outbreak, just over half of all professionals globally worked remotely at least 2.5 days a week. This has since increased dramatically, with 88% of organizations now insisting their employees work from home while implementing physical distancing. To successfully weather the COVID-19 storm, leaders must adapt to a more flexible workplace, while creating a culture of accountability in order to foster organizational success. The infographics in this article, created by Visual Capitalist in partnership with bestselling author Dr. Vince Molinaro, shows five behaviours that leaders can adopt in order to provide thoughtful navigation through uncertainty. The impact of leadership accountability As remote working arrangements continue to be implemented, the benefits and challenges of flexible working policies are coming into sharper focus. Research shows that flexible working policies can lower overhead costs, reduce commuting times, and increase employee satisfaction. Moreover, the shift to working remotely could boost the US economy by $4.5 trillion annually, by 2030; however, achieving these benefits requires accountability from everyone in an organization, which is becoming more difficult to manage in an increasingly virtual world.
Challenges facing leaders today Leaders are currently being subjected to an array of challenges that they must overcome, such as: • The pressure to differentiate: Leaders feel increasing pressure to innovate and help their organizations stand out amongst the competition. • Executing the strategy: Leaders must align organizational practices to ensure employees are clear about what needs to be done to execute priorities seamlessly. • Leading transformational change: Constant accelerated change, across several aspects of a business, can be difficult for leaders to manage. • Creating enduring value: In exchange for loyalty, customers, boards, and shareholders have high expectations of leaders and organizations. • Building future talent: In addition to managing the day-today, leaders will have to build, nurture, and mentor the next generation of leaders. These mounting pressures can have a detrimental impact on business leaders’ performances, so it is crucial that they implement effective support mechanisms now, more than ever. 10 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
Arif Ghaffur, PQS(F)
Editor’s Message
The characteristics of accountable leaders Accountable leadership can significantly mitigate uncertainty during these unprecedented times. Research shows that among the strongest performing companies, accountable leaders consistently demonstrate the following five behaviours that set them apart from others: 1. Hold others accountable for high standards of performance: An effective leader will set out mutual expectations by reinforcing what is important, and what employees should prioritize. 2. Tackle tough issues and make difficult decisions: Picking up the phone/having a virtual call is more immediate and personal than relying on non-verbal means of communication, especially when it comes to quick and effective problem solving, and making tough decisions. 3. Communicate the strategy across the organization: Ensuring that employees have complete clarity in terms of the company’s vision can help them do their jobs more effectively. Well-defined goals will help people stay engaged while decreasing stress levels. 4. Express optimism about the company and its future: The virtual world may make employees feel isolated and disconnected; leaders must provide proactive support and a positive energy, in order to strengthening employees’ hope for the future. 5. Display clarity about external trends in the business environment: Leaders should remain transparent and communicate in a way that mitigates fear, stress, and anxiety. This will encourage employee determination and, in so doing, help the organization as a whole to succeed.
Accountable leadership can significantly mitigate uncertainty during these unprecedented times.
Leading the future As we continue to navigate through the unknown, it is crucial for leaders to be consistent in practising accountability. It is clear that this has been brought more into focus as a result of these uncertain times. Perhaps more importantly, it is necessary to encourage teams to look forward to the future, and emerge more connected and resilient. I thank you for your support and contribution to the Construction Economist, and sincerely wish the best for you and your families during these unprecedented times. If you have feedback, suggestions and, of course, any articles that you would like to be considered for publication, please email: editor@ciqs.org.
Infographics reprinted courtesy of Visual Capitalist and Dr. Vince Molinaro. Sources for the infographic can be found at www.visualcapitalist.com/leadership-accountability-in-times-of-crisis/ and www.drvincemolinaro.com. Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 11
COVID-19: PROFESSIONAL PERSPECTIVES
Amanda White, PQS President, Foresight Atlantic Inc.
Daniel Josiah, PGDip, PQS, MRICS, GSC, ACIArb Director, Contracts & Commercial, Lakeland Consulting Inc.
Q: Do you see a change in the approach to preparing cost estimates? A: The approach to preparing cost estimates will include a higher level of consideration of the supply chain for materials and labour, and risk management for interruption. A key shift that is already happening is consideration for time. This is important, as we continue to integrate physical distancing on job sites. As a result, I would expect a jump in carrying costs and general conditions for upcoming tenders for projects set to start in 2020 / 2021.
Q: How are you dealing with working remotely or away from the office? A: Working remotely for most people means working from home and that can have its challenges and distractions. With a young family, the key for us was to make sure that some routine was in place, recognizing that we all have differing schedules. Taking turns to watch the children and switching workdays with weekends (where possible) has also helped.
Q: What do you think will be the impact on the prices of construction materials? A: We are facing a global recession and prices tend to fall during a recession. However, this is a simplistic theory and will depend on supply and demand scenarios or the state of the economy in places from where the materials are obtained. Costs of materials from China or India may increase as their GDP remains positive, according to the World Economic Forum. But it is too early to tell; if demand for overseas materials decreases, the pendulum could swing the other way.
Q: Will the COVID-19 crisis change how business is carried out in the future? A: COVID-19 has compelled businesses to change the way certain interactions are carried out. For example, web conferencing (Zoom, Teams, Skype) has allowed businesses to continue operations that would typically be carried out face to face. These tools have been available for some time, and some industries utilize these more than others, however; the up-take of such tools will no doubt accelerate due to COVID-19.
Q: How will remote working impact the demand on the commercial property sector? A: As tenants and landlords adjust to the changes in maintaining a safe environment for employees and clients, the size and layout of commercial spaces will likely change to accommodate a cultural shift. You may see corporate offices leasing smaller spaces as they start to permanently work remotely and only come to the office periodically. It will be interesting to see how retail adapts – they may need larger spaces to operate effectively or go, in part or completely, to online shopping.
Q: How do you think that social distancing will impact day-to-day activities on construction sites? A: As work on essential construction projects has continued, we have seen physical distancing and sanitation measures implemented. This has meant site labour has had to plan and ensure that they are maintaining physical distancing measures even prior to commencing and during daily work activities and sanitizing at regular intervals. This will have an impact on productivity levels.
12 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
Ian B. Duncan, PQS(F), MRICS, GSC Principal, Atrium Consultants
Natalie Dione Alexander, MSc., PQS, MRICS, LEED-AP Construction Project Manager
Edward Traore, MSc, PQS(F), MRICS, PMP President/CEO, TDI Global Services Synergy Ltd.
Q: How long do you think that it will take for the construction industry to return normal state? A: The construction industry has always been dynamic and resilient. Because governments rely so much on the industry as a major contributor to the world’s economies, as soon as the constraints are lifted the world’s governments will have no choice but to support the construction sector as a priority to get money flowing ASAP.
Q: How do you think that health and safety will improve on construction sites in the future? A: Much of the currently established safety regulations that exist around Health and Safety seem to be mainly focused on reducing deaths and serious injuries of workers through the protocol and guidelines around how tools, machinery, and hazardous materials are handled. I think there will be more consideration around the sanitary conditions and upkeep to ensure that workers do not suffer adverse health effects.
Q: Do you see change in the approach to preparing future cost estimates? A: In lump sum contracts, GCs pass on most of the risk to the Subcontractors. Fear of future pandemic events of unknown proportions will likely push up Subcontractors’ margins to cover risk contingencies until things settle down, perceived risks reside, and the new normality arrives – until the next event happens. So prices spike and then level off.
Q: Does your company have a contingency plan for such crises – if so, how successful has this been? A: Thankfully, yes! Three years ago, my company started the process of implementing ‘Workplace Mobility’ which includes the improvement of technology in the way we communicate and work both in and out of office. This was not planned directly for a crisis, but during this pandemic proved to be quite useful and productive. The senior executives are also compiling staff experiences (positive and negative) to use for future improvement.
Q: How will remote working impact the demand on the commercial property sector? A: Working from home has led us to re-evaluate the necessity of commuting to large corporate offices. If remote working does become a significant preference, the demand for prime office space would drop and, consequently, so would commercial rents and capital values. This would also reduce commercial development and traffic congestion.
Q: Do you see any emerging opportunities coming out of this crisis for Quantity Surveyors? A: Understandably, this is quite a unique (we hope rare) situation for which I believe not even the best quantity surveyor could have prepared in regards to cost management and contingency planning around such a crisis. I do however believe this is an opportunity for the QS profession to recognize the importance of contract knowledge to offer counsel to our clients. What exactly are the implications and legalities of standard CCDC or owner generated Stipulated Price Contracts around Force Majeure and delay claims?
Q: What has the COVID-19 crisis meant for you, and/or your business? A: Unprecedented times call for innovative and bold moves. The spread of COVID-19 has significantly disrupted global businesses, livelihoods, and communities. This crisis has inadvertently motivated our business to embrace collaboration and working remotely through virtual platforms, as well as finding other innovative ways to be productive while maintaining efforts to minimize the impact on employees/ public health and limit disruptions to operations and service delivery. Q: How are you dealing with working remotely or away from the office? A: The COVID-19 crisis has created an opportunity to reset our business model on a sustainable footing. By working remotely or away from the office, we have been reminded in the most profound and difficult way why our organisations must be agile and flexible in response to the prevailing business environment. Q: Will the COVID-19 crisis change how business is carried out in the future? A: In the aftermath of a significant crisis such as the COVID-19 pandemic, it is an entirely understandable human impulse to expect things to ‘return to normal’ or go back to ‘business as usual’. Evidently, COVID-19 has unleashed a ravaging impact to the global economy, disrupting supply chains while stifling demand and changing business-operating models. Now, businesses must start thinking strategically on how to adapt to the ‘new normal’ as the pandemic and market environment evolve.
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 13
Angela Denice Lai, PQS, FRICS, LEED AP (O+M) Managing Partner, Core Two
Bola Abisogun, OBE, PQS, FRICS, MCIOB, PrQS Founder & Chairman, DiverseCity Surveyors
Alan Hand, PQS(F) Senior Partner/CEO, A.W. Hooker Associates Ltd.
Q: Will the COVID-19 crisis change how business is carried out in the future? A: There will be a different way of working, established by a forced change in behaviours. I believe that businesses have been enlightened to the opportunities of remote working and economic use of corporate real estate. We have had to change the way we work and we discovered the wonders of technology through virtual platforms, so in-person interaction is less necessary.
Q: Will the COVID-19 crisis change how business is carried out in the future? A: In a constantly evolving profession, the fundamentals of how we conduct business (in the UK) will not return to the delivery model(s) previously deployed. The immediate need of many (if not all) clients operating within and across the London construction sector has been one of supply chain resiliency. It is imperative that we deploy innovative ways of working, whilst seeking to mitigate increasing, and in many cases unquantifiable, project risk.
Q: What has the COVID-19 crisis meant for you and/or your business? A: Our firm already had a ‘work from home’ policy in place so this certainly helped. We had many ongoing projects, which were deemed essential so we quickly adapted to working from home and conducting remote meetings. We have found MS Teams to be most suitable and intuitive to collaborate and keep all our staff connected.
Q: How long do you think it will take return to the pre-COVID-19 state after the crisis is over? A: It will take a while. The general expectation is that there will be a ‘V’ shaped recovery of the economy, but is likely to be more ‘U’ or ‘L’ shaped, with a slow and gradual recovery. Unlike the 2008 financial crisis, this crisis has hit almost every single sector with the exception of virtual platforms and online retail; job losses and tertiary impacts are unprecedented. I believe that the crisis will not be over until a vaccine is developed. Q: How will remote working impact the demand on the commercial property sector? A: There may be less demand for commercial property as remote working may become more favoured. Companies have now seen the potential savings in not having designated office space. If staff do return, major adjustments will be needed, such as partitions between staff, extensive cleaning regimes, physical distancing requirements, and elimination of hot-desking that may not be practical, particularly for large organizations. This will again depend on the development of a vaccine.
Q: What do you think the construction sector can learn from the COVID-19 crisis? A: I have coined a new phrase, ‘NOTHING will be the same and EVERYTHING will be different’; change is inevitable. In addition to the obvious challenges, more than anything else EVERY single business process is likely to be re-engineered in one way or another. For the QS this is a clear opportunity to dissect our own business model(s) and critique both our logic and client-facing outcome(s). Q: Do you see any emerging opportunities coming out of this crisis for Quantity Surveyors? A: The future role (and workflow) of the PQS is about to change and (with the support of Alan Muse at the RICS) I will be charting the likely transition via my new initiative #PQS2030. The order of the day will be collaborative working and greater use of technological assets in an attempt to render carbon emissions to net-zero, increased operations efficiency and transparency, and designing-out waste, at every opportunity.
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Q: Will the COVID-19 crisis change how business is carried out in the future? A: I believe it is inevitable that the crisis will result in changes. We are already developing policies to help prepare our staff to safely return to working at the office and sites. I think we will see much more teleconferencing and remote collaboration in the future. This may result in less need for office space. The new ‘normal’ will not be the same as the old ‘normal’ by a long stretch. Q: Do you think that the COVID-19 crisis will encourage innovation in construction? A: Yes, it will encourage innovation. Offsite prefabrication of more assemblies and components will accelerate as will robotics in construction. Activities which currently require close interaction of multiple construction workers will be adapted with special tools and techniques to minimize working too closely together. ABOUT THE AUTHOR Interviews conducted by Arif Ghaffur, PQS(F), Editor of the Construction Economist
Legal Corner
Will COVID-19 change behavior in the construction industry? Richard Wong
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Lia Bruschetta
A legal perspective
ur industry is facing unprecedented times. COVID-19 has forced every stakeholder in the construction pyramid to adapt to new challenges resulting from a shifting landscape of site closures, weakened supply chains, and intensive health and safety requirements. Construction may become more expensive, slower as new procedures are followed, and at greater risk for future uncertainties as the effects of COVID-19 continue to evolve – including possible future waves and governmental action. In this legal corner, we share some of our early insights on how we think parties may approach contracting around COVID-19 as well as potential behavior in addressing the disputes to come, and that we hope will assist as you navigate concerns, address potential risks to your businesses, and ultimately strategize for the new normal. Contracting and construction Clauses: a new normal. COVID-19 has put the spotlight on obvious and obscure clauses alike as parties issue and/or receive claims for money and time impact. We are seeing this have an impact on procurements and contract negotiations, at times involving sureties, as parties consider how most appropriately to address and allocate risks related to COVID-19 given a vaccine is not expected for a year or more, and in light of the risk of a potential “second wave” or another future health risk. Parties and
Andrew Heal J.D., LL.M. Partner Certified Specialist Construction Law
Catherine DiMarco LL.B. Partner Certified Specialist Construction Law
Damon Stoddard LL.B., LL.M. Partner
their advisors will need to engage in front-end dialogue on issues such as project structuring, pricing, scheduling, OHSA, changes in law, force majeure, suspension and termination rights, and prudent practices; in our experience, it will be crucial for contracts to be internally consistent, which is not always the case. While some may opt for the status quo, we believe the “new normal” will be parties giving specific thought to clarifying how such impacts are addressed in their suite of contracts and subcontracts. Innovative means and methods. Even as economies re-start, the current set of supply chain disruptions, labour shortages due to absenteeism, illness or travel restrictions, and new health and safety procedures to accommodate “physical distancing” on projects will persist for some time. We expect contracting parties to respond to this challenge by analyzing existing processes and developing new means and methods to mitigate these risks. The skillsets of quantity surveyors – including cost estimating, forecasting and management – will be particularly crucial to advise in a volatile market. Another trend may be an increase in modular construction methods, which have been successful in hospital construction and residential housing settings. Overall, parties will increasingly value innovative processes and technology to minimize disruption and insulate the design and construction process from COVID-19.
Assisting clients in the built environment Solid. Legal. Advice.
www.healandco.com PHONE: 416.583.5900
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 15
Legal Corner
Re-examining project models and contract forms. Should an owner change its project delivery model or contract structures based on COVID-19? As quantity surveyors appreciate, it is crucial for owners to be realistic in resetting their budgets, contingencies, and schedules as the construction industry readjusts to the new normal. This exercise includes developing a sense of the marketplace including what risks counterparties are willing to bear or willing to share. For example, if contractors or subcontractors who may be experiencing extraordinary financial pressures are asked to bear an unusual amount of risk, this may result in behavior ranging from not bidding, underbidding and potentially jeopardizing their future financial position, or bidding with significant price and schedule contingencies. In terms of project delivery models, recent attention in contracting for complex infrastructure has focused on “relational contracting” models such as integrated project delivery, or “IPD” (e.g. CCDC 30 - 2018) and alliancing (introduced this year for the Union Station Enhancement project), which reflect principles of risk-sharing and collaboration to a greater degree than standard design-bid-build or design-build models. Painshare/gainshare mechanisms, “big room” collaborations (for IPD), and other techniques may lower overall costs, create more flexibility and teamwork, and less strategic behavior preparing for disputes or claims.
Helping your team build for success. On complex construction and infrastructure projects, your team manages both the expected and unexpected. Osler’s specialized lawyers, many of whom are also engineers, have the industry experience and legal insight to help anticipate challenges and mitigate risks – so you’re prepared for whatever comes up. Contact Richard Wong at rwong@osler.com Osler, Hoskin & Harcourt llp osler.com
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For private sector projects, pricing structures may move away from fixed-price contracting and become more nuanced possibly involving cost-plus, price adjustment mechanisms, contingency sharing, or incentives (which may also extend to schedule or other metrics). Regardless of the form of model or contract, owners are well advised during procurement to value strong, experienced, and effective management, greater specificity in the intended means and methods to address COVID-19, and meticulous record-keeping in this challenging environment. Contentious issues and disputes Revisiting existing disputes. COVID-19 has led to temporary court closures across the country. While courts are expanding the scope of hearings that may proceed remotely, parties should realistically expect delays in seeking relief from a court now and in the future. Risk profiles have also shifted in light of the pandemic. Many construction companies already felt the strain of cash flow issues, as evidenced in the recent consultations on prompt payment. According to the Canadian Construction Association, 70% of its membership are small and medium-sized businesses, which typically have less operating capital than larger enterprises. Parties may take a hard look at existing disputes against this backdrop in the COVID-19 era and may be more open to resolving disputes and prioritizing getting to completion, as opposed to engaging in behavior that may delay payment and completion. These forces may create new opportunities for settlement. Post-pandemic disputes. A flood of project disputes relating to delays, cost overruns and other COVID-19 related claims is inevitable. Parties will need, as usual, to prove their claims and demonstrate mitigation efforts and we expect parties will review current record-keeping practices, address gaps, and introduce improvements that will carry over into future projects. Given our earlier comments on drafting to address COVID-19, we will likely see more disputes on the characterization of the impacts of COVID-19 and the proper application of contract provisions relating to changes of law, termination for prolonged suspension, and stop work orders, in addition to the usual force majeure clauses. Parties may look to quantity surveyors to provide credible independent assessments in respect of the status of work on affected projects. We expect parties will also increasingly be drawn to alternative dispute resolution processes like mediation and arbitration, which can proceed remotely and likely offer a timelier resolution than the courts, as well as other benefits like customization and confidentiality. Embracing adjudication. Ontario has yet to see a significant uptake of adjudication. This may be because only contracts entered into after October 1, 2019, subject to certain grandfathering rules, are subject to the prompt payment and adjudication regime under the Construction Act. It may also be that there is still a lack of familiarity with the process.
Legal Corner
As time goes on, more contracts will become subject to the new regime, and more adjudicators will be added to the roster (note that at the time of writing, about 15% are quantity surveyors). Contractors may initiate adjudications through a payment application that includes claims for additional costs viewed to be the owner’s responsibility, leading to a notice of dispute from the owner. Given how quickly adjudications proceed and the swift response timelines, owners should remain as prepared as they can be in their documentation and management-readiness. As decisions are only interim, dissatisfied parties may pursue future arbitration or litigation – so legal counsel should be involved from the outset.
About the authors Richard Wong is a Partner and Chair of the Chambers Band 1-rated Construction & Infrastructure Group at Osler, Hoskin & Harcourt LLP. Lia Bruschetta is a litigator at Osler, Hoskin & Harcourt LLP whose practice focuses primarily on the resolution of disputes arising out of construction and infrastructure projects.
Project
Did you know? Prepared by Yasmin Abdiladif, Dip. C.E.T. Assistant to Editor, Construction Economist Megaprojects are large-scale, complex ventures that typically cost $1 billion or more, take many years to develop and build, involve multiple public and private stakeholders, are transformational, and have impact upon millions of people. Megaprojects are usually measured in billions of dollars, Major Projects in hundreds of millions, and Projects in millions or tens of millions. Megaprojects are sometimes also called ‘Major Programs’. The table below sets forth the top-20 largescale projects with a calamitous history of cost overruns:
Suez Canal, Egypt Scottish Parliament Building, Scotland Sydney Opera House, Australia Concord(e) Supersonic Aeroplane, UK, France Troy and Greenfield Railroad, US Montreal Summer Olympics, Canada Excalibur Smart Projectile, US, Sweden Canadian Firearms Registry, Canada Medicare Transaction System, US National Heath Service IT System, UK Bank of Norway Headquarters, Norway Lake Placid Winter Olympics, US Furka Base Tunnel, Switzerland Verrazano-Narrows Bridge, US Boston’s Big Dig Artery/Tunnel Project, US Denver International Airport, US Minneapolis Hiawatha Light Rail Line, US Humber Bridge, UK Dublin Port Tunnel, Ireland Montreal Metro Laval Extension, Canada
Cost overrun (%) 1900 1600 1400 1100 900 720 650 720 560 550 440 320 300 280 220 200 190 180 160 160
The above table has been taken abridged from the Oxford Handbook of Megaproject Management, edited by Bent Flyvbjerg.
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 17
YQS Corner
Congress postponement and YQS framework update
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e have learned that the current pandemic (COVID-19) has prompted authorities to cancel all gatherings and events, including all upcoming (in-person) CIQS events. While we are saddened to learn that the 2020 CIQS Congress will be postponed, we know it is the right move as safety of the membership is a top priority of the CIQS. We understand that CIQS National is working on alternative solutions in the meantime for a virtual AGM, and video teleconferencing platforms for chapter events. We have confirmation from CIQS National that the Congress for 2021 will be hosted in Winnipeg and look forward to preparing an even bigger and better Congress and YQS program. The YQS committee continues to work on the YQS engagement plan. A teleconference was held at the last national meeting earlier this month, as well as a follow up teleconference planned for June. While we intended to launch this program in-person at the 2020 Congress, we hope to have our program overview completed per the original schedule, and released with details to the membership. Below are our current vision and objectives in our proposed YQS program overview.
• Providing opportunities for young professionals • Community involvement • Leadership development advocacy We understand that CIQS National is working on additional future programs, such as a student outreach campaign, leadership program, and government outreach campaign. Keep your eyes peeled for CIQS newsletters/e-blasts for updates in the coming months – and stay safe. “Always turn a negative situation into a positive situation.” - Michael Jordan. Be like Mike!
Shane McKernan, PQS
About the author Shane McKernan, PQS, is a Project Manager for Landa Global Properties, a property developer based out of Vancouver, BC. With over a decade of experience in the construction sector, Shane’s experience includes cost consulting, project loan monitoring, and project & construction management. Shane has been on the CIQS – BC Board of Directors since 2013, where he joined as the boards first-ever student member and is now the Chapter President. Shane is also an Assistant to Editor for the Construction Economist.
Vision YQS will strengthen the quantity surveying and estimating profession by promoting its value to their peers across Canada while becoming future leaders of the industry. Objectives • Professional development • Sustainability of the profession • Networking • Providing resources and support Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 19
COVID-19 forces cancellation of CIQS Congress 2020
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n the months since the beginning of the COVID-19 pandemic, the CIQS National staff and board of directors have been monitoring the global situation closely and weighing every option available for how to best move forward with Congress 2020. There was a unanimous vote to cancel this year’s Congress at the board meeting in May. This was not an easy decision as Congress is our s largest event of the year. However, due to the severity and uncertainty of the pandemic, the board ultimately decided that cancelling the conference was in the best interest of the organization and its members. Virtual Annual General Meeting and Year In Review – Late July 2020 To ensure that there is no interruption of the operations and governance of the organization, a special, one-time, virtual, annual general meeting of CIQS members is scheduled for late July 2020, subject to board approval. To ensure that every vote is properly counted, and that the AGM adheres to the requirements of the Canada Not-for-profit Corporations Act, we will be using an advanced virtual voting platform to properly record everyone’s votes during the AGM. The AGM will be followed by our annual Year in Review where our CEO will present an overview of the programs and services that were implemented across the country since we gathered in Quebec City in 2019. A minimum of 25 members will be required to be in attendance (not including those present by proxy), 50 in total for quorum, so we ask that you
Save the Date once it’s announced so you can participate in this 2-hour virtual meeting. Take this opportunity to ask questions and interact with your board and management team. If you have never had a chance to attend Congress before, this virtual event offers the perfect chance for you to get involved with your organization – from the comfort of your own home! A formal AGM notice with the meeting time and link will be distributed, closer to the date. Looking forward to 2021 We are pleased to announce that we will return to Winnipeg, MB for Congress 2021! Delta Winnipeg has graciously agreed to offer us this year’s guest room rate of $129/night and we expect the rooms to book up quickly. We are currently in the process of finalizing venue details and plan to release further information about Congress 2021 later this fall. Thank you to our 2021 sponsors Three of the sponsors for Congress 2020 have pledged the same sponsorship for Congress 2021 and we wish to thank them for their generous support of our conference! Anyone interested in learning about our 2021 sponsorship program is
asked to contact Alexandra Parliament at marketing@ciqs.org. Rider Levett Bucknall – Badge Sponsor
Winnipeg Construction Association – WiFi Sponsor
CAMBRIAN Management Services Ltd – Refreshment Break Sponsor
We hope to make Congress 2021 our largest and strongest conference ever. Let’s all get together in Winnipeg in July 2021 in celebration of surviving the pandemic’s hardships. Stronger Than Ever – Together!
About the author Alexandra Parliament is a Marketing & Communications Consultant with over 20 years of experience. She has a formal education in print journalism and has worked in the marketing and communications departments of a PR Agency, a major Marketing Agency, a national magazine, an annual three-day festival, provincial and national non-profit organizations, and one of the largest loyalty programs in Canada. She has been published in a variety of magazines and online publications and is currently a steady contributing writer for Mechanical Business Magazine. She has been working with CIQS National in a PR/Marketing capacity since November 2018.
20 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
COVID-19 impact on construction costs and escalation in the short, medium, and long terms
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or those of you who attended our Cost & Project Management presentations over the past several months, there was a constant theme around crystal balls and the moving market, especially in terms of hard construction costs. At the time, COVID-19 was a distant problem, developing mostly with concerns around the supply chain. I guess we discovered our black sheep! There is no doubt now that COVID-19 will have a great impact on construction costs. The primary focus of this opinion piece is residential and commercial; however, it needs to be noted that the entire construction industry is interconnected. There tend to be consequences and impacts in all asset types that influence each other. After all, concrete is always concrete; it does not overly differentiate by asset (no semantical arguments please). Also, with the stimulus funds that will flow into construction they will more often or not be directed towards institutional and civil (transit) projects; with the private sector left to fend for itself (thankfully). So, the question is: what will be the impact on construction costs? Some believe costs will go up, some believe costs will come down, and both are likely correct. The question is more around time and how long the pandemic impact lasts and, ultimately, will we end up in an official global recession? The question around the recession is how hard it hits Canada. Often in a recession all bets are off and construction prices will plummet, projects will be cancelled, distressed deals will appear, purchasers can’t buy, and financing will dry up, etc.
But, that’s a little doom and gloom, and we are not there yet. THE SHORT TERM Let’s take an optimistic view and say this scenario lasts just a few weeks longer. Costs will go up, claims will be submitted, and schedules will go long. Think about temporary hoists with only two workers at a time on a 40-storey tower trying to get to their floor. That’s an hour per person lost every day (minimum). Or, the line up in the morning as site’s screen workers come in – add in physical distancing and productivity will plummet. The supply chain is now somewhat broken with it being difficult to impossible to get materials from Quebec with the shutdown, local fabrication partially closed with backlog upon restart, China going to have long leadins, and the United States somewhat in flux, etc. We will have a future opinion piece on the supply chain around trade in the coming weeks, so stay tuned! Trades Sites were already struggling with obtaining skilled labour for certain trades, and it’s only going to get worse before it gets better. That assumes the sites don’t close, as the main priority has to be safety of workers and their families. Someone has to pay for this, as trades, owners, general contractors, and suppliers will all be hurting. Costs are going to increase on projects, likely more than the sudden drop in interest rates will help. Where construction financing is in place, put that savings straight into contingency, because it’s likely largely gone.
Financing As we run through the next billing cycle, who isn’t going to try and get as much cash as possible? The risk is if the sites stop and the project is over certified, is there enough cost available to complete? If the cash is gone by the time the remobilization happens in the future, is there an increased risk of defaults? Ultimately costs go up in the short term. Revenue Can I register the condo? Can I occupy the units? If the answer to either of those is ‘No’, then costs likely go up. If the industry stops for a short period, then costs carry on and go up. Margins, however, tend to do the opposite. Who had the foresight to provide a contingency for global pandemics? Bidders The next question is: are you bidding right now? We know the trade / supplier offices are likely largely up and running remotely, and I assume there are people to bid. If you are responding to a bid call, how do you approach the bid in the new world of risk we are in? If classification as an essential service continues, but productivity is 40-50% (say) does that get factored into the bid? If the materials come from countries impacted significantly, what premium do you add, and how do you take risk on schedule or cost? Is COVID-19 here for the season, or back next year? Bid high, or bid low as you need the work (perhaps) then face cash flow issues in the future. Or, do you simply not bid, because it’s not worth it? Unless you were to go safe (a.k.a. high, with lots of caveats) and someone else goes in low, that’s less competition in a year’s time (Darwinism approach)!
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 21
Owners At this point, as an owner, perhaps you could qualify some trades, or consider delaying? After all, what’s the hurry? But, that’s a whole different topic. Lastly, once the sites come back to full productivity, (a relative term with labour shortages), then owners will want to make up time, so again costs increase and labour constrains. Projects were already well behind schedule in a lot of cases, so the situation continues to exacerbate. One way to look at tendering in the current market is that it’s like playing Russian roulette; we are genuinely into the unknown. In terms of bid quotes or budgets, the documents we have received recently from the industry are full of caveats around COVID-19. An example from one submission from a Construction Manager: “We are uncertain on how the current world affairs are going to impact pricing as a whole, until a more stable economy and construction market is apparent.” THE MEDIUM TERM What will happen in the next few months is somewhat unknown as its going to be influenced by the volume of work in the market. The issues noted above in the short term will become exacerbated. If there are many project cancellations, these would invariably mitigate cost increases and potentially invert. Less demand = less work, which often should lead to a competitive environment. This brings back fond memories of 2015 to early 2017 when bidding had the word competitive in front of it. In the medium term it’s more likely that the previous historic levels of escalation may be mitigated for some trades, but this will be entirely influenced by volume of individual trades. I’m not sure we will see a massive inversion in costs today, but it’s entirely possible as each week goes by that those costs will invariably start to soften. Now, these are general statements, and there are always opportunities to get a great price. Taking advantage of it being the right time, right place, right relationship or finding an estimator with
suspect math skills. These exist in any market! Even in the previous craziness of double-digit escalation we saw some amazing deals (including formwork!). THE LONG TERM Consider this pandemic hanging around a lot longer, then we will likely be in the middle of a full-on recession with restrictions still in place. At that point do we even care about escalation? Well yes, to a relative degree: people need homes and jobs, commerce, and business are an essential requirement. There is the prosperity part that goes nicely with health. Construction is also a massive employer in Canada with well over one million people contributing in a positive way to society in general. However, longer term thoughts would drift back to memories of 2009 or the recession before that if you’re old(er). Costs come down in recessions, liquidity dries up, companies go into receivership, work vanishes in the private sector, and shifts over to public investment. Usually the market eventually comes back and escalation goes at a fair pace again. Akin to the Monty Python dead parrot sketch, the market is dead; no it’s not it’s just sleeping. It is all about timing (and relationships). Bidding is much about timing; costs are often very much about timing. Like most things in life you want to be in the right place at the right time for good things to happen (a bit of luck never hurts either).
When people panicked, we ran out of toilet paper and hand sanitizer. This is the time for calm, pragmatic and careful consideration in the approach to development/construction planning and budgeting. Panic will do you no good ultimately. You need to have a plan, alternative plan and a back-up plan, considering the various potential outcomes and the risks, so that you can act accordingly when the time comes. No matter what happens, it is likely there will be some degree of negative outcome. However, if you can proactively manage to mitigate the impact, perhaps you can create an opportunity out of the situation. In the end it will all ultimately work out, and everyone will be changed by the experience. Hopefully construction and many other aspects of life can learn from the current challenging situation and maybe spur the industry into adopting new tools. Something positive can be gained from the learning. Let’s improve site safety and find ways to maximize use of technology to our advantage (remote working, reducing risk on site, improving productivity, analytics & data). And can escalation please slow down? Being called Doctor Doom at every market presentation is not as much fun as it seems! Lastly, when the claims come, they will be high. When the change orders are submitted, they will be high – but don’t panic!
About the author Marlon Bray, B.SC. (HONS), PQS, MRICS, Senior Director, Cost & Project Management leads Altus Group’s preconstruction and contract administration services team for Eastern Canada, which is part of the Cost & Project Management group. With over 20 years of practical, handson construction advisory experience, he specializes in ensuring the delivery of added value to clients throughout the entire lifecycle of a project, including estimating, cost reporting and change order review and management. Marlon and his team have adopted the use of leading-edge estimating technology and data & analytics, to bring a greater level of transparency and benefit to their client’s projects. For more insights on the pandemic and managing through uncertain times, please visit: www.altusgroup.com/insights-2020.
22 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
COVID-19:
Impacts on insurance
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n mid-March of 2020, the construction industry along with many other industry sectors felt the economic shock of the Coronavirus pandemic tidal wave. Contractors who were fortunate enough to remain working reported reduced productivity on average of about 30-40%(1); from staffing shortages (on and off site), impending supply chain issues, along with expanded health and safety regulations, all contributing to project delays. Insurance carriers are seeing substantial claims notices flood in, mainly emanating from the issues surrounding COVID-19, specifically on potential business interruption impact and disruption this has caused to income levels. Notably, pandemic coverage has been available to the market (since May 2018) prior to this event; however, there was not a lot of traction with insureds procuring this type of insurance.(2) Ultimately, with such claims, unless the causation of the loss was specifically insured against within that policy wording, disputing such coverage availability from other policies, would be a long and arduous journey, most likely via litigation through the courts. Prior to the pandemic reaching these shores, the insurance market was (and still is) in the midst of a hardening and challenging market cycle. Reduction in underwriting capacity, lessening or reduced market competition/ participation, narrower coverages on offer, high retention limits and, ultimately, increases on rates/premiums are all part and parcel of current insurance landscape, irrespective of the state of policy holder current loss ratios. As of Q1 of 2020, this trending has not shown any signs of easing as evidenced from Aon’s internal benchmarks, which indicate on average 8-10% rate/premium
increases, year over year. How will this pandemic then affect the Construction Sector? • Property/builder’s risk: Overall, largely unchanged as natural catastrophic exposures still exist and will be underwritten for by carriers. Claims for this line will still be prevalent, such as flood, water damage, fire, etc. Anticipate an added focus from Owners and Contractors alike to consider Delayed in Start-Up (DSU)/Business Interruption when placing coverage for future projects. Carriers have moved quickly to insert exclusionary language regarding Pandemic/Outbreaks and including clearer definitions related to Organic Pathogen. • Casualty: Due to the current lockdown/stay-at-home measures, in the short-term, underwriters should be experiencing better than expected loss ratios due to the reduction of human traffic and third-party exposures close to sites. However, the tail exposures will largely remain with the carriers and thus will still be continued to be priced into the rates/premiums. • Surety: Typically, during an economic downturn, this line of business will be at risk to a higher frequency of losses as delinquencies mount. Carriers will
be weary of claims calls mainly due to the lack of cash flow and stretched operating budgets. Underwriting requirements/reviews will tighten with more stringent balance sheet reviews to ensure that contract performance can be fulfilled by contractors. • Directors and officers coverage: As leaders of organizations try to navigate through these unprecedented times, there will be an added burden on corporate boards to determine the best course of action; failing to act or executing a plan that fails, will undoubtedly place added pressures on not only their directors but carriers alike, who may be back-stopping such decisions to a certain extent. • Cyber coverage: Cybercrime is on the uptick and with it the demand for cyber coverage as societies and organizations adapt to a work-from-home environment, which potentially creates system vulnerabilities. Leading up to the COVID-19 situation, the adaptation of this product has been subjective from company to company, as insurance buyers have different views regarding this offering, and will be driven mainly by their own risk tolerance levels. Most certainly, clearer and more concise definitions around pandemic/illness, on an exclusionary basis rather than
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 23
coverage form, would be expected in policy wordings on most lines of coverage to clarify the intent of coverage. The future of the construction industry will be influenced by how collective society ramps back up to how the “new normal” will look. The retail and hospitality sectors have been ravished and so too have the opportunities for renovation/expansion for contractors servicing those clients. Anticipate an impending shift in the commercial retail/lease sector, as tenants who are currently operating in a work-fromhome environment will realize that their businesses can survive without the expensive overhead attached to working in downtown core office spaces. From an infrastructure perspective, what will the demand be like for new schools with the use of virtual classrooms for students? What too of the need to build more robust transportation infrastructure systems, if the usage numbers are lower? More robust broadband in rural areas and better healthcare facilities for long-
term care will be the imminent priorities on which constructors will focus in the coming months. The consensus is that things will likely not be like they were – only time will tell. Sources 1. Ontario allows some essential construction projects to start May 6, 2020, online, www. constructioncanada.net/ontario-allows-
some-essential-construction-projectsto-start/?qnewsletter=20200506&en_ click=1&utm_campaign=202005-06&utm_medium=email&utm_ source=newsletter&utm_content=news 2. Russ Banham, April 3, 2020, This Insurance Would Have Helped in Coronavirus Crisis But Nobody Bought It, online; www.insurancejournal.com/news/ national/2020/04/03/563224.htm
About the author Barrie Ngeh is an Assistant Vice President/Account Executive at Aon Construction Services Group. Barrie has over 18 years of experience working in the insurance industry and has been specializing within the Construction sector for over a decade. Barrie has had extensive experience on project insurance placements ranging from P3s to complex manufacturing/residential projects. Presently, he is responsible for leading a portfolio of construction accounts that include multi-national constructors, developers and property owners. He has completed the Canadian Accredited Insurance Broker program, Canadian Risk Management and Enterprise Risk Management designation.
24 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
BALANCING ECONOMICS AND HEALTHCARE WITH THE COVID-19 CRISIS
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’m sure like many of you, I have been battling to come not really been considered, but the other complication has probably to terms with the current isolation measures to curb the been that understanding of the virus itself has been developed on impacts of the COVID-19 virus. I am trained as a mechanical the fly as transmission rates, transmission mechanisms, incubation engineer and inherently adopt a very systems-based approach periods, symptoms, and mortality rates have been figured out. to my thinking. My analytical brain and instinct have both been In the absence of this information, the medical community has grappling with the concept of why mass isolation is needed probably adopted worst-case assumptions on these parameters; for such extended periods while we see friends’ lives and however, we now know very much more about this virus than we businesses collapsing around us as a result – with seemingly did two months ago and understand the unique characteristics little contemplation over the consequences. To quell this of the virus at a level appropriate for developing a management anxiety, I would have expected global leaders to have come strategy. We know this is not an Ebola-type virus with massively together, developed some congruent strategy that makes sense high mortality rates and with much higher mortality rates in from both scientific and economic standpoints, and then to particular segments of the population. These unique characteristics communicate the plan to the masses. At the time of writing are actually the weakness of the virus and we should be exploiting however, we are five weeks into isolation in Canada and no this with management strategies. long-term cohesive plan has been presented to the public There are all kinds of contradictory information out there, other than ‘Stay At Home’ to ‘Flatten The Curve’ with no time and I am focusing below on the few simple facts that should be horizons or next steps. Governments have very much adopted completely undeniable at this point. Such facts serve as anchor a wait-and-see approach to the crisis with seemingly little points for developing a management strategy. regard for the economic impacts to individuals, businesses, and 1. The bottleneck for managing the virus from a healthcare point countries at large. Are they adopting the best approach? of view is the capacity of hospitals to deal with seriously ill The reason for this approach would likely be that the patients. We are talking about beds and staff, but it seems that COVID-19 crisis has arisen very suddenly and seems to have ventilators and ICU beds are the first bottleneck that arises. caught most of the globe unprepared. As a result, leaders 2. The ‘Stay At Home’ to ‘Flatten The Curve’ strategy that is being have sought to act in the best interests of their constituents by utilized by the majority of the world is aimed at reducing the implementing guidance provided by the medical fraternity. The number of seriously ill patients reporting to hospitals to a point challenge with this is that the guidance is being given with a where their capacity to manage them is not exceeded. If this very one-sided focus, i.e., the health of the population, and is limit is exceeded, much higher mortality rates occur. This is missing consideration for other broader interests such as the where some confusion comes in because, in order to manage economy. That is understandable because most healthcare the ICU bed threshold effectively, we should be measuring the practitioners are trained to be experts in healthcare, not economics, and their objectives are obvious. The expectation is that governments would be able to balance this with the other vital viewpoints needed in the formulation of a strategy for dealing with this crisis… and, very importantly, the economic viewpoint. It seems that because governments have A3*(B422-*@*1C(04,(D/@/E?@E(!"#$%&'( FG-/22*@(A3*(!>,+*H(?)(/()2,/2*E.( A3*(*14@4D.(?)(3?E3-.(-?C*-.(24( ?)(23*(/D4>@2(40(3*/-231/,*(1/=/1?2.( 24(-?D?2(23*(/D4>@2(40()2,/?@(4@( 2/@C(0>,23*,(5>*(24(?)4-/2?4@( been hopelessly under-prepared for this 04,(2,*/2?@E()*,?4>)-.(?--(=/2?*@2) 23*(3*/-231/,*().)2*D D*/)>,*)W(1,*/2?@E(/@423*,(1,?)?) situation, no prepared response plans were in place and they have been ‘winging it’ up to this point. As a result, the mass isolation measures that have been put in place are the ‘ideal’ measures that have been !"#$%&'()*+*,*-.(/00*12)(=*4=-*(40(/--( A3*(D/U4,?2.(40(23*(=4=>-/2?4@( !"#$%&'()*+*,*-.(/00*12)(23*(4-5( recommended by the medical fraternity. /E*)(I?23(=,*J*K?)2?@E(D*5?1/-(14@5?2?4@) 67VN<;(54*)(@42(@**5(1,?2?1/-(1/,*( 6789(:*/,); I3*@(?@0*12*5(I?23(!"#$%&' 6&'<(40(=4=>-/2?4@(?@(!/@/5/; 6L))>D*(M&N<(?@(!/@/5/; It may seem that alternatives to isolation/ self-distancing of the entire population have
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Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 25
Reference: www.ourworldindata.org/coronavirus
number of ICU beds used rather than a somewhat meaningless statistic of the total number of infections. 3. We can all agree that the ‘Stay at Home’ policy applied to most of the population is having, and will continue to have, a very detrimental effect on the economy. We are seeing layoffs, businesses closing, mortgages being deferred. This has happened so quickly that it is yet to be produced in the financial reports of listed organizations, which is when the reality will really start to sink in. 4. The COVID-19 virus has some very unique characteristics that set it apart from other viruses like Spanish Flu and SARS: a. It severely affects people of all ages who have pre-existing medical conditions. There is much confusion over this point… your age has no bearing on whether you get infected or not, but it does when it comes to dying from an infection. This fact is also mistakenly referenced to provide evidence that all ages are at risk of dying but, in reality, the majority of cases of younger deaths involve some sort of pre-existing condition that made them susceptible to death from the virus. This proportion of the population is quite small. Spanish Flu had a wide spread of mortality ages and was very different. 26 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
b. It severely affects the elderly who are typically categorized into being older than 65. The mortality rates of those above 65 are significantly higher than those below 65. c. The majority of the population not included in the definitions above seldom require critical care and are asked to self-isolate at home, even if they are diagnosed as positive for COVID-19. Once we can get agreement on some critical facts, we can use those unique characteristics of the virus to manage it. It should be quite obvious that the risk of dying (and needed critical care) mainly lies with the over-65 age group. The question is how do we stop that from happening? Currently, we’re all staying at home to try and prevent the disease from spreading. There is a common misconception that we are trying to avoid contracting the virus to avoid dying. If you are below 65 years of age and don’t have any pre-existing conditions, that should not be the case as you stand a very, very small chance of dying from the virus. This is the reason that if you are diagnosed with COVID-19, you are asked to stay at home and recover, rather than enter hospital – it’s a very low risk. In fact, what you’re trying to do is to stop yourself infecting
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someone who is predisposed to dying from the disease. But that strategy comes with a heavy burden on the economy, which will result in all kinds of other critical challenges if it continues. What other strategies are there? We should be trying to exploit the fact that the virus only viciously attacks a certain segment of the population. We really need to be protecting those at risk by isolating them alone. There is no need for the rest of the population to be in isolation if they are not at risk of dying (or needing ICU beds) and cannot infect those at risk (because they’re isolated). Those that are freed up will likely contract the COVID-19 virus over time, which should be a trivial event from them. The option still exists for people to isolate themselves if they feel that they are at risk. With the passing of time and the further proof that the infections in low risk population prove to be exactly that, more and more people will be willing to resume normal life. By freeing up those who are not at risk of dying we can get the economy going, save jobs, save businesses, and prevent a lot of destitution in the future. Those that are able to work can contribute to the support of those in isolation by paying their taxes, which would fund government initiatives to support those at risk. The government will then have more resources to spend on research into the virus to actively find a vaccine or cure to remove the isolation measures for those at risk. It will also have more resources to provide better isolation support to those that really need it rather than trying to support 100% of the population, which is not sustainable. By managing the isolation of a small population better, the demand for ICU beds will be minimized (or better managed). ‘The Curve’ will be flattened as much as possible. The results should be self-evident and a balance between healthcare and economics is struck. The revised strategy will avert the healthcare pandemic translating into both a human loss and economic loss.
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experience to provide significant competitive advantage. His strong industry network allows him to collaborate with owners’ teams, vendors and consultants to deliver results that matter. His clear vision and communication style allow him to motivate a team to deliver through a collaborative, outcomes-based approach. Ken’s passion is doing things better in all contexts by continually learning and trying to conceptualize new ways of working using these new skills and technologies. His mechanical engineering background allows him to adopt a systems based approach to tackle most problems and to create an integrated world where the system is better than the sum of the parts.
About the author Ken Murray, P.Eng, PMP, Founder and CEO of Captrics Consulting, is a leader in the mining industry with a 20-year background in capital projects, management consulting, innovation and technology. He is a ‘big thinker’ and is able to utilize his broad
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 27
COVID-19: Potential impacts on construction costs Building resilience beyond a global pandemic
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t is four months since the first case of COVID-19 surfaced in Canada and a little over two months of mandatory closure in certain provinces, which has included closure of non-essential business operations. While these measures were necessary, they have resulted in unpredictable impacts to the construction industry. We have seen a surge in operational cost, a variance in productivity, and uncertainty in the supply chain. In many ways, this event is “unprecedented” as there is no field manual, case study, or any Artificial intelligence-backed technology that predicts the timeline of this pandemic. At the time of writing, effective implementation of social distancing has slowed down the pace of the spread and provincial governments have started to assess the possibility of lifting certain restrictions. Businesses have also started evaluating their preparedness to resume operations under the constraints. With health and safety of the on-site construction staff the top priority for contractors and owners alike, the cost impacts of achieving this in the short term may be significant. As of now, strict compliance of selfimposed physical distancing norms and the use of appropriate personal protective equipment are leading to a loss of productivity on many construction sites. All of the points above are leading to negative financial impacts on most construction projects. CHALLENGES FOR THE INDUSTRY: Short term (next 6 months) We expect to see projects that were underway prior to COVID-19 slowly return to a ‘new normal’ of operations dealing with a disrupted supply chain, and increased health and safety practices. Projects in the planning stage that have secured funding, will be received in the market with competitive prices from contractors aiming to fill their backlog of secured work.
Figure 1 (Source: www.investing.com)
Disrupted supply chain: Maintaining the schedule of construction projects depends on many factors. One of the crucial factors is the health of the supply chain. Due to disruption to many global supply chains, projects that have greater dependencies on imported materials are starting to face some difficulty. (Steel, aluminium, drywall, controls etc.) The increased number of people working from home has affected production of materials and goods, while border restrictions have challenged the logistics of getting them from manufacturer to end-user. There is also disruption at the site level when goods are available to be delivered but the site is closed, or alternative hours of operation are in existence and the contractor is not able to assume ownership. The cost impact of the disrupted supply chain can be the opportunity loss of not having product available for installation, or alternatively, the additional cost of an available product substitute. This will negatively affect the construction schedule and may lead to an increase in the cost of projects in the short term. Exchange rates: Any commodities coming from the US will be affected by the high USD which, at the time of writing, is 10% higher against the CAD than it
28 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
was in January 2020. Until the beginning of 2020, the Canadian dollar had consistent performance when compared to the USD. After a low of less than US$0.70 in late 2015, the Canadian dollar had maintained an exchange rate of around US$0.75. In midMarch 2020, the Canadian dollar reached an 18-year low of just under US$0.69. From that moment to the time of writing, the loonie has been slowly recovering, and is now back over seventy cents. The impact of this will be felt by the construction industry all the way through the supply chain; Canadian purchasers will be paying more for the same goods and material than they were in January 2020. Competitive pricing: Notwithstanding the factors listed above, we can expect to see a period of more competitive bid prices. When projects that have secured funding reach the market for tender it is likely that contractors, in the shadow of the impact of a likely global recession, may become more competitive in their pricing to ensure they have a strong order book of work for the upcoming year. Long term (6 months and beyond) Despite the best efforts of the public sector to provide ‘shovel ready’ projects, we expect to see a levelling off and potential decline in construction volume through 2021, as the impact of the recession takes hold on the global economy.
Project delays: Owners of construction projects that were temporarily suspended due to mandatory site closure, or the start dates of which were delayed at their own discretion, should be conducting a quantitative risk analysis to determine if acceleration is the best option for the project. Sometimes the cost of accelerating (more manpower, more site supervision, less productivity due to trade stacking) will be greater than the Liquidated Damages for a contractor, or the loss of revenue for an Owner. There will be further cost impacts for any “outdoor” construction activities that were originally scheduled to be completed in summer, or mild weather months, but are pushed to be completed during winter months (heating, hoarding, ground thaw, paving, labour productivity, etc.). Regulatory reforms: The government or regulators may introduce new regulatory health and safety frameworks for both construction staff and the occupier. We can expect to see new project design requirements that accommodate
physical distancing compliance and enhanced quarantine features. These possible regulatory reforms will have a direct impact on labour costs (physical distancing) and revenue (more square footage for use of occupancy). Recalibration: Projects that are in the pre-construction planning phase will require in-depth analyses, considering these new regulations and economic pressures. Recalibration would include reallocation of resources, scenario planning, and cost analysis. “Never let a good crisis go to waste” - Sir Winston Churchill While the specific outcomes of
the pandemic remain uncertain, the construction industry will more than likely continue to experience disruptions in overall operations, at least in the short term. In response, organizations will need resiliency planning to mitigate any future project risks. The construction industry will inevitably be reshaped due to change in behaviours, policy changes and – put simply – the way we do business. In response to these changes, our profession has an opportunity to demonstrate the true value of engaging cost management professionals to assist organizations with managing costs, mitigating claims, ensuring business continuity, and navigating risks in times of uncertainty.
About the author Leslie Fowler, PQS, MRICS, is a Director with Turner & Townsend based in Calgary. She has over 15 years of diverse industry experience along the full lifecycle of project development. She has worked in both the general contractor and consultancy environments on projects in the public and private sectors, focusing on strategic contract planning, risk analysis, schedule and cost analysis, delay claims, and dispute resolution.
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 29
PROJECT PROFILE
Ottawa’s LRT Stage 2
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tage 2 of the light rail transit (LRT) development in our nation’s capital is underway and is one of the most complex public transit projects in Canada. The multi-line project is an estimated $4.66 billion expansion that is slated to provide access to the city’s LRT network within 5km for nearly 80% of Ottawa’s citizens. The project consists of three main extensions; the Confederation Line East Extension, Confederation Line West Extension and the Trillium Line South Extension. Funded by all three levels of government, the contracts are being delivered under a Public Private Partnership (P3) model. After a threeyear procurement process, the City of Ottawa has contracted with two separate consortia. The East-West Connectors (EWC), a joint venture between Peter Kiewit Sons and VINCI Group along with design partners Hatch and WSP Canada will be constructing both Confederation Line Extensions over the next half decade under a design-build-finance agreement. Stage 1 of the Confederation Line, built by the Rideau Transit Group (RTG), opened in late 2019 and consists of 12.5 km of track. The line is completely grade separated and uses all-electric trains. The two extensions on either end of the line will stretch Ottawa’s LRT system another 27 km in total. The East Extension begins at the Blair Station of Stage 1 and reaches 12 km east northeast along Highway 174 to Trim Road on the eastern edge of Ottawa’s suburbs, just south of the Ottawa River. It includes dual tracks, five new stations and, similar to Stage 1, will utilize an all-electric system. The extension begins with the line underneath Blair Road before coming above grade west of the new Montreal Road Station and continues in
the median of Highway 174. Three of the five new stations, Montreal Road, Jeanne d’Arc and Orleans Boulevard will be totally new, while Place d’Orleans Station and Trim Station, the train’s last two stops, currently serve as a Park & Ride for OC Transpo. Both will be converted to transfer stations. This Confederation Line East Extension is expected to be in service by November 2024. The Confederation Line West Extension, being the larger of the two expansions to the east-west line, is a 15 km extension that connects to the existing system at the Tunney’s Pasture Station before heading west, ending at Moodie Station near the intersection of Moodie Drive and Highway 417. A little past halfway, between the Lincoln Fields and Queensview Stations the LRT line splits, with the offshoot heading south to end at the Baseline Station. Where the line ends at Moodie and Baseline, the West Transitway and Southwest Transitway begin. These connections allow passengers to commute efficiently from the Kanata and Barrhaven neighbourhoods respectively. Using much of the existing bus rapid transit corridors,
30 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2020
the electric trains run both at and below grade. With the line proposed to be in service in May 2025, it will see the construction of three new stations and the conversion of 8 existing bus stations into LRT stations. At the end of the west line, the expansion features the new Moodie Light Maintenance and Storage Facility (LMSF). Simple maintenance, light repairs and cleaning, along with vehicle storage, are available at the LMSF, and it will offer the potential for future expandability. The Stage 1 contractor Rideau Transit Group (RTG) has inked an agreement with the City of Ottawa to maintain the existing Confederation Line and both East and West Extensions and provide additional vehicles to operate on the lines. This agreement was an option in RTG’s existing Stage 1 contract so the line would see equipment continuity and cost efficiencies. This maintenance arrangement will be in place until 2048. SNC-Lavalin lead TransitNEXT is tasked with the Trillium Line Extension. Beginning at the Greenboro Station, the Trillium Line will run south to the
new Earl Armstrong/Bowesville Station and turn west, ending at a newly built Limebank Station. The line includes a total of 16 km of new track, access to the airport and the combination of new and converted stations. Along the existing LRT line, the Gladstone Station will be added just north of Highway 417 and the Walkley Station will be added where the line intersects Walkley Road. Additionally, all five existing platforms are slated to be extended as part of the work to the rail system. Four new stations are to be built along the long run of the line and the 4 km airport link will feature two new stations. The rail follows much of the Osgoode Pathway, a bike path, and travels through bush and fields but does become much more complicated as it crosses transit ways, Via Rail lines, and a body of water. Ottawa’s Trillium Line Extension will continue to run diesel trains and is expected to be in service in August 2022. Several considerations have been made to accommodate Ottawa’s long-term planning around the Trillium line including provisions for future conversion to electric trains, multiple pedestrian bridges, and to allow the Airport Parkway and Lester Road to be widened. Further, the Walkley Maintenance and Storage Facility will be built just north of the Greenboro Station, to keep the trains running. TransitNEXT will be responsible for maintaining the existing and extended Trillium lines for 27 years after completion. Much of the work along the existing line was not originally scheduled to happen immediately, but the city and TransitNEXT agreed to perform upgrades now to deliver a better product to the riders and reduce long-term maintenance costs. Together, these three extensions are the largest infrastructure project in Ottawa’s history, more than doubling the cost of the previous Stage 1. The project is expected to create more than 27,000 person years of employment and provide an estimated $5.6 billion economic impact. It will increase the O-Train’s capabilities to carry up to 24,000 passengers per hour in each direction. Construction of all three extensions began in 2019 and the staged turnover
dates will see the first trains in service in about two years. The improvements being made to Ottawa’s transit system – like expandability provisions, road congestion relief, future conversion to all-electric trains, and access to Ottawa Macdonald-Cartier International Airport including direct terminal access – promise to provide cleaner air for Ottawa’s residents and significantly improve their commutes. A combined 25 million person hours will be saved by car and transit users by 2048. With the recently completed Stage 1 experiencing many issues and growing criticism, the city and its construction partners have a significant workload ahead of them through the next several years to deliver the updated O-Train network on time and make good on the promises made to their stakeholders as they all look to Stage 3 and beyond.
Sources • www.ottawa.ca/en/planningdevelopment-and-construction/majorprojects/stage-2-light-rail-transitproject • www.ottawacitizen.com/news/localnews/construction-of-lrt-phase-2leaving-its-mark-on-the-city • www.cbc.ca/news/canada/ottawa/ light-rail-stage-two-stationsoverview-1.5032672 • www.railway-technology.com/projects/ ottawa-light-rail-transit-lrt-stage-2ontario • www.ottawacitizen.com/news/ local-news/snc-lavalins-trillium-lineexpansion-on-time-so-far-but-traindelivery-in-2021-will-be-real-indicator • www.glengower.ca/wp-content/ uploads/2019/02/Stage-2-LRT_ Contract-Award_Key-Facts_Feb2019_ EN.pdf
About the author Carl Pedersen, B. Tech (CM), PQS, GSC is an Estimator for Bird Construction in Manitoba. With a background in handson construction work through a broad range of residential and ICI experience, he now has a primary focus on design-build industrial and light industrial project planning, development and cost management. Carl has also served in various roles on the CIQS Prairies & NWT Chapter including Vice President, Secretary and Winnipeg Chapter Representative. Carl is also an Assistant to Editor for the Construction Economist.
Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 31
Shadow bidding approach with the City of Edmonton
T
he proper terminology for the shadow bidding approach is ‘Construction Consultant General Contractor’ (CCGC) Project Delivery Model. The City of Edmonton has been pursuing alternative forms of project delivery for its infrastructure projects with the intent of increasing the efficiency and effectiveness of infrastructure project delivery from planning through to construction completion. This delivery model effectively leverages the skills of both design consultants and construction contractors in a collaborative effort to achieve optimal value for delivering public infrastructure. This is a relatively recent method of government acquisition for design. The key ingredient is for the contractor to work with the owner and design teams developing contract documents that work with materials and methods that are best suited to construct a successful project. The City of Edmonton, under the direction of Ryan Teplitsky, P. Eng., Project Manager, Transportation Infrastructure Delivery, has been a major leader in improving this procedure in RFPs over the last three years. This model is value driven, and the US Federal Highway Administration actively promotes CCGC “to identify and
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deploy innovation aimed at enhanced designs and reducing the time it takes to deliver highway projects, enhance safety and protect the environment.” While not heralded, this process is in use by transportation departments and public owners throughout North America. Although similar to a Construction Management at Risk contract, the City selects the contractor (through an RFP) to provide only pre-construction services, not significant construction. To date (2020), this service has proven to be far superior to typical construction management results. The bonus (carrot) for the contractors is they are provided an opportunity to bid for the project alongside a ‘shadow bidder’ that is a Quantity Surveyor. The ‘shadow bidder’ prepares the equivalent of a pre-bid estimate for the work specified. In addition, the ‘shadow bidder’ adjusts its estimate by collecting pricing from suppliers and subtrades during the bid period. If the contractor’s price is within a pre-set variance, compared to the shadow bidder’s single Lump Sum Tender Price, it has the opportunity to be awarded the construction contract. In our early experience with the first CCGC project we worked on, it was difficult for independent cost consultants (ICC) to obtain actual subcontractor pricing. Subcontractors do not want to share their prices with someone who isn’t actually going to construct the work. In this case we had tremendous assistance from the trades. For this $40 million project LCVM Consultant’s Inc. shadowed with the City of Edmonton, we had two shadow bidders (cost consultants) with Hanscomb Limited providing the ICC service as well. We collectively prepared a bidding procedure and with the encouragement of the City and support from the contractor LCVM set up procedures and an invitation form to explain our role to sub-trades and suppliers. LCVM had multiple sub trade prices provided for over 80% of the unit rates requested, and Hanscomb advised their ratios were similar. All sub-trade bids had detailed cost breakdowns shown and, in this case, most were unit prices. The contract had over 600 unit prices. A shadow bid takes place at the same time as a contractor’s bid in order to demonstrate a level playing field with confidential bidding for all involved. Individual trade prices are confidential to all the bidders, as is normal in the traditional bidding with contractors for Stipulated Sum bid projects. This process ensures value for money and confirms that expenditures are fair and reasonable. In this case, it assured competitiveness for approval of release of taxpayer funds. If the bid provided by the Contractor is within an acceptable range when compared with the independent third-party cost consultant estimate, the City can award the construction contract to the Contractor. This provides an exclusive opportunity to provide a firm construction price.
If you are looking for a public project that would fit this bill, these are some attributes that would benefit from a CCGC: • High level of technical complexity. • High level of risk. • Complex phasing and scheduling. • Budget constraints. Clear benefits to the owner, simply put, are improved control of scope, costs, schedule and quality. This means far greater transparency and accountability from independent oversight by responsible cost consultants on publicly funded projects. Benefits to the project can be: • Close involvement throughout design phase. • Collaborative behaviours. • Combined experience and knowledge. • Improved risk identification, allocation and management. • Improved value engineering. • Improved scheduling and phasing.
We hope this overview has been helpful and may pique your interest, as a Quantity Surveyor or Project Manager. If you require some detail on the City of Edmonton’s CCGC development, you may contact Ryan Teplitsky via email at ryan.teplitsky@edmonton.ca.
About the author Norman Lux, PQS(F) founded LCVM Consultants as his second career in 2008 and is the Principal Quantity Surveyor providing most of his services in Alberta and the Yukon. His firm is active in all areas where Quantity Surveying is required. Norm enjoys doing a bit of mentoring, and has been active in the TCA bid competitions every year for the past four years.
In memoriam Hugh David Thomas: CIQS Honorary Life Member July 26, 1924–April 15, 2020 Hugh David Thomas, husband to Jean Thomas (Beeton), father to David and Glynis (Jake Brogan) and grandfather to Holly, Eric, and Christopher, passed away peacefully in Camp Hill Veterans’ Memorial Building, QEII on April 15 at age 95. The family conveys gratitude for the exceptional care he received there, particularly the staff of V6E. Hugh was born in London, England to parents Edward and Susannah Thomas (Evans) and grew up on a dairy farm, one of three children. He volunteered for military service during the Second World War which brought him to Canada for flight school training in the RCAF system in Goderich, ON. Hugh took back many pictures of Canada and a maple leaf pressed between pages of his flight log books not knowing if he would ever return to Canada. Northern Scotland at the Royal Navy’s wartime home base in Scapa Flow, is where he finished his training as a Fleet Air Arm pilot. He flew many sorties in a British built torpedo dive bomber (Fairey Barracuda) with 814 Squadron from the flight deck of the carrier HMS Venerable. He later flew American F4 U’s and always regretted not getting time in a Spitfire cockpit. Military service sent him to the Pacific theatre with notable deployments in: Australia, Sri Lanka, and Myanmar. The war finally ended for him with the liberation of Hong Kong and the arrival of his carrier group to liberate British and Commonwealth prisoners of war.
After the war, Hugh trained and apprenticed in the south of England to obtain a Royal Chartered Quantity Surveyor (RCQS) designation in the construction industry. In 1955 he returned to Canada to build a life, initially in Vancouver with his wife, Jean, whom he met while completing his training. His wartime experiences created a desire for travel and exploration and coupled with career demands resulted in many moves and trans-Atlantic crossings back and forth to England, Montreal, and Toronto as well as stints in both Jamaica and Ghana where his daughter, Glynis was born in 1962. In 1976, Hugh became the first CEO of the Halifax Waterfront Corporation with the mandate to revitalize the waterfront areas in the downtown core. Hugh came to Nova Scotia and never left. The pathways, ferry terminals and repurposed historic buildings in this now vibrant section of downtown Halifax are a lasting legacy of his love for architecture and the preservation of old buildings (likely born from the destruction he witnessed in war torn England). Hugh retired in 1991 and enjoyed life on St. Margarets Bay, and then in Bedford. Always with a view of the ocean. Hugh will be remembered as a doting and caring husband to Jean, and a loving father and grandfather. He was widely respected in the industry for his honesty and integrity. We will miss his endless detailed stories of adventure, humour, mishaps from his travels and wartime memories from this last survivor of squadron 814, deployed on HMS Venerable. Condolences can be sent to J.A. Snow Funeral Home in Halifax. In lieu of flowers, any donations could be made to War Amps or charity of choice. Summer 2020 | www.ciqs.org | CONSTRUCTION ECONOMIST | 33
Hans Miethig, C.E.T., PQS: CIQS Honorary Life Member January 22, 1925-April 15, 2020 Hans Miethig passed away peacefully on April 15th at 12:30 pm. Hans was 95 years old, and his death was not related to the COVID-19 pandemic. As a young man and a victim of the horrors of WWII Hans was captured and managed to escape a Russian prison camp awaiting certain death only to end up in a US prison camp. Through that lifechanging experience Hans made a pledge to himself and to God that he would spend his life trying to make the lives of others better if he could survive the war. He was trained as a bricklayer and later attended university to become an engineer. He emigrated to Canada and obtained a job with Acres despite not speaking English. Practicing engineering was out of the question, but he was able to put his skills in drafting to use and establish a career in the Engineering Department. When Niagara College looked to start an Architectural Drafting program Hans was a natural fit, and he was hired. He was tasked with the job of creating a curriculum for a new program and he became the Founder of the Construction Engineering Technology program. He regularly sought out the needs of industry and designed the program to meet those needs.
Over the years it became obvious to Hans that associations like OACETT and the CIQS were valuable partners to have for the students and he was instrumental in establishing relationships with them. He was a strong advocate for membership and he continued to be a strong voice for Ontario colleges with all of these groups. In trying to establish acceptance by the CIQS, Hans sometimes found himself pleading his case in front of a group of elite British professionals, just a couple of decades removed from WWII, speaking with his heavy German accent. It was a daunting and intimidating task that he would endure for the betterment of his students and all those who would follow. Hans retired in 1995 but remained active as a program advisor and he attended Awards Ceremonies up until last year. In his final wishes, he asked for donations to the Hans Miethig Bursary in lieu of flowers. Hans carried such a burden for young people entering this industry for so many years it is fitting that his legacy should stand for years to come. He held on to his pledge to the very end. A memorial service will follow at some time in the future when the current COVID-19 restrictions are no longer needed. The obituary is posted at Morse & Son Funeral Home www.morseandson.com. Donations to the Hans Miethig Bursary are at: https://w3web02. niagaracollege.ca/forms/donationform/default.aspx. For questions please contact Joanne Cousineau jcousineau@niagaracollege.ca
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