On-Site August 2013

AUGUST 2013

> INS IDE <

BIG IR HYBR ON IDS pg.1

THINKING ABOUT A RANDOM ALCOHOL TESTING PROGRAM?

6

THINK AGAIN pg.38

DEALING WITH

DEALERS Technology and a tight economy drive unconventional partnerships PG. 24

MANAGING

RISK

pg.34

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VOLUME 57, NO.5 / AUGUST 2013

COVER STORY 24 Dealing with dealers Advancements in equipment technology, a tight economy and time pressures are driving unconventional partnerships between contractors and dealers.

DEPARTMENTS Comment 5 A very bad day in Montreal

8

News Industry news

13

16

Construction Stats The latest news on building permits and construction employment

14

COLUMNS 32 Software e-Procurement is ready for the big time

34

Risk

32

Treating risk before and after

36

Funny Photo Funny Photo contest

38

Contractors and the Law Thinking about a random alcoholtesting program? Think again

features 14

16

As finding skilled, local crane operators becomes more and more challenging, the Canadian Hoisting & Rigging Safety Council is working with industry to harmonize crane industry regulations across Canada.

Hybrid construction equipment has come a long way since the first machine was introduced five years ago.

Harmonizing crane regulations

Earth-movers & shakers

36

Index of Advertisers

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COMMENT

A tough day in Montreal

O

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n Monday August 5, while most of the country was enjoying a Civic Holiday, Montreal contractors were back to work after a government-mandated, two-week vacation. And oh what a disastrous day back to work it was!

Tragedy stuck when a 32-year-old man was hit in the head by a large metal object near the Bell Centre. Police reported a 12-ft. metal plate was being maneuvered into place when it broke and fell off the equipment that was carrying it.

The man, who happened to be walking near the site, was struck and killed on impact.

Across town a massive sinkhole swallowed a bulldozer and its operator at the corner of St. Catherine and Guy Streets. The construction crew was preparing to start work when the pavement gave way. According to the Montreal Gazette, the man inside the bulldozer was transferred to hospital with minor injuries.

If this weren’t enough for one day, in another entirely separate part of town, a construction site near a children’s hospital was briefly shutdown after police received reports of a suspicious package. The site was searched, and soon reopened after nothing was found.

This series of bizarre incidents, paired with ongoing press surrounding Montreal’s ongoing corruption probe, is making life for honest, hardworking construction firms tough. A local radio station even went so far as to ask: “Is Montreal falling apart?”

On that particular day, it certainly seemed like the city just couldn’t catch a break.

In reality, local contractors are doing everything in their power to stay out of the spotlight. One contractor, who did not want to be named, said: “The only thing we can do right now is keep our heads down, work hard and try not to draw any attention to ourselves. Everyone is under scrutiny.”

As timid as many contractors are currently feeling, there’s also optimism that a cleanup of organized crime in the construction sector will mean bigger jobs for legit contractors that operate transparent businesses.

“Montreal contractors are under a microscope. The firms that are going to do well at the end of all this are the ones that are willing to lay all their cards on the table,” said another contractor.

Conspiracy theories aside, the events of August 5th are a reminder to us all, that bad things happen to good contractors, and I for one am hoping Montreal’s luck begins to turn soon.

Corinne Lynds / Editor CLynds@on-sitemag.com

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CONTRIBUTORS

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MEET OUR CONTRIBUTORS FOR THIS ISSUE

PUBLISHER | Peter Leonard (416) 510-6847 PLeonard@on-sitemag.com EDITOR/EDITORIAL DIRECTOR | Corinne Lynds (416) 510-6821 CLynds@on-sitemag.com ASSISTANT EDITOR | Patrick Callan (416) 442-5600 x3524 PCallan@on-sitemag.com

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CONTRIBUTING EDITOR | James A. Barnes

“The conventional wisdom among many contractors

ART DIRECTOR | Melissa Crook (416) 442-5600 x3260 MCrook@bizinfogroup.ca

used to be that dealer service was expensive and you could save money by doing maintenance with your own mechanic. A few problems have emerged with that model…

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INDUSTRY NEWS

cafes, retail stores, amenities, underground parking, a half-acre lit public plaza, public art displays, cultural activities and more.

The project will create 1,300 construction jobs and 7.5 million construction man-hours in Calgary.

The development is also expected to

achieve the LEED Gold standard.

“I am very pleased to welcome this new and stunning addition to the dynamic Calgary skyline,” said Calgary Mayor Naheed Nenshi. “Brookfield and Cenovus are demonstrating their confidence in Calgary as an economic hub.”

EllisDon co-founder dies at 89 EllisDon co-founder and Canadian construction icon Don Smith has passed away at the age of 89.

A goliath in the Canadian and global construction industries for more than half a century, the crown jewel in EllisDon’s empire remains the 54,000-seat Skydome (now Rogers Centre).

According to EllisDon’s website, Smith bet the entire company in 1985 “on something that had never before been attempted: a fully guaranteed $400-million retractable roof stadium.”

Brookfield Place set to become Western Canada’s tallest structure Brookfield Office Properties Inc. is beginning construction on a 2.4-million-sq.-ft. office development project in Calgary this fall.

Previously known as “225 Sixth” and the former site of the Calgary Herald building, Brookfield Place Calgary will stand 56 storeys high and encompass a full block in the city’s downtown.

Cenovus Energy Inc. has agreed to lease 1-million sq. ft. of the 1.4-millionsq.-ft. east tower. Construction of that tower is scheduled to begin in September 2013 and be complete in the latter half of 2017.

Development plans call for an additional one-million-sq.-ft. office tower, a 60-ft. transparent glass pavilion, restaurants,

From humble beginnings on a shoestring budget, and with their mother as bookkeeper and backer, Smith and his brother, David, opened EllisDon on April Fool’s Day in 1951.

After starting in small home renovations the company grew quickly; tackling larger projects such as schools, universities, health care and office buildings before expanding to Nova Scotia and Alberta and bidding on airports, mining projects and civil works.

Now, the company—which is nearly 50 per cent owned by its 1,600 employees—generates more than $3 billion in volume annually and has worked around the world on every type of construction project.

Known to his family as “Uncle Bus,” Smith is survived by his wife of 65 years, Joan Smith, their eight children, 21 grandchildren and four great-grandchildren.

“Most knew him as the stuff of legends; me as simply Uncle Bus. Tough tough exterior but also a quality shared with Aunt Joan: nobility when it comes to others, especially those in need,” wrote his nephew, Mark Ellis, in a comment forum on the company’s website. “Bus’ heritage is less his formidable business savvy and success, and more the genuine warmth bestowed on us when no one was looking.”

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INDUSTRY NEWS

PCL building new facility at its North American Headquarters PCL is using several green building techniques to construct a three-storey, LEED-certified building on the northeast corner of its Edmonton campus.

Designed as a model project, the $20-million development will use Building Information Modeling technology and 3-D printouts of the build components. With a glass and concrete exterior, the building will feature about 44,000 sq. ft. of office space and workstations.

“PCL is always looking to implement innovative building solutions and add value to the projects we build for our clients,” said Rob Holmberg, executive vice-president of Canadian Buildings. “Now we are using the opportunity of constructing our own building to incorporate innovative techniques that we can apply to future projects we build for others.”

This is the third addition to PCL’s North American headquarters in Edmonton, Alta. over the past five years. The building will replace the first building ever constructed on the site nearly 50 years ago.

Demolition of the old building began on June 9. The project is expected to be completed in the fall of 2014.

$256 million and counting to repair Calgary The flood that ravaged through parts of Calgary in June caused at least $256.5 million in damages, according to city officials.

Aldermen on the finance committee met to discuss preliminary estimates in a temporary space in northeast Calgary because city hall needs $26.5 million in repairs and is not fully open.

Several of Calgary’s landmarks suffered extensive damages as a result of the flooding, such as the Calgary Zoo ($50 million), the McDougall and Civic Centre parkades ($33.9 million), Calgary Police Service’s downtown administration building ($31 million), Calgary Transit facilities ($11.7 million), the Central Library ($10 million), and the Talisman Centre ($6.2 million).

The City of Calgary expects to recuperate some of the rebuilding costs from other levels of government, however, future budgets will be considerably altered for flood damage repairs.

TD Bank Tower achieves LEED gold certification The Cadillac Fairview Corporation Ltd. announced that its Toronto-Dominion (TD) Bank Tower has received a LEED gold certification from the Canada Green Building Council.

Located in downtown Toronto at 66 Wellington St. W., the tower joins a trio of LEED certified buildings at the TD Centre complex, including one platinum building at 100 Wellington St. W. and a pair of gold

buildings located at 77 King St. W. and 79 Wellington St. W. The TD Centre boasts accessibility to the King Street streetcar line and St. Andrew and Union Subway Stations; bike racks for more than 400 bicycles; more than $250,000 worth in upgrades (faucets, toilets and urinals) to reduce water use by up to 30 per cent; smoking is prohibited within 25 ft. of any building entrance or air intake; and at least 75 per cent of the building’s general waste—and at least 70

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per cent of construction waste—is diverted from landfills.

For its sustainability efforts, the centre received the Green Award of the Year at the 12th Annual Real Estate Excellence Awards Gala—the first time the award was given to an existing building.

Bigger is not always better: Thurston About half of a billion dollars of taxpayers’ money could be spared from the Eglinton Crosstown transit project if it was tendered into smaller pieces, says the chairman of the Construction Design Alliance of Ontario (CDAO).

“Simply put, bundling the station and maintenance facility construction into one contract has hamstrung the tendering process, limited competition, stifled innovation, and isolated the small and medium-sized construction and design firms,” said Clive Thurston, who is also president of the Ontario General Contractors Association (OGCA).

An OGCA analysis suggests if the $4-billion tender had been broken down into smaller parts, up to 10 firms could have put in bids. This, according to the analysis, would increase competition, lower costs and save up to $500 million.

However, Thurston argues, the size and scope of the project meant only two consortiums expressed interest: one Canadian-based, one led by foreign multi-nationals.

“More Ontario firms working on individual projects have a direct impact on the local economy through employment, taxes and investment,” he said. “Limiting competition has the reverse effect.”

The CDAO is not opposed to bundling, he added, but it has to be done for the right reasons.

“We believe the Eglinton Crosstown project is just too big to be handled under a single contract,” he said. “The current scale of the project is such that there is a huge risk profile, and even some of the largest companies in Canada are not willing to bid. Breaking it up into smaller chunks would result in better value for taxpayer dollars.”

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News Briefs > Bird Construction Inc. has been awarded about $100 million in civil and building construction contracts that will serve the needs of its industrial clients in northern Alberta. The awards will be added to Bird’s backlog in the third quarter of 2013 and the revenue generated from these projects is expected to be in place by mid-2015. > Manulife Real Estate will develop a 27-storey office tower in downtown Calgary. The tower—707 Fifth St.—will be a 564,000 sq. ft., “AAA”, LEED gold certified building. Designed by architects Skidmore, Owings and Merrill, it will include a fitness centre, conference facility and a landscaped winter garden. > Bobcat is now offering its full equipment line—including skid-steer loaders, compact track loaders and compact excavators—at Camrose Cycle. Previously the Camrose, Alta. dealership only carried select Bobcat utility products. > Gehl has redesigned it’s website, www.gehl.com using responsive design to allow for optimal browsing from a computer, tablet or cell phone.

The website’s modern layout and navigation helps visitors find and download information quickly, such as operator’s manuals, parts manuals, product comparison charts and detailed information on the full product line. > Joseph Carrabba has been appointed to Aecon’s board of directors. Carrabba is the outgoing chairman, president and CEO of Cliffs Natural Resources Inc., a position he held since 2005. He has more than 20 years of experience in the mining industry throughout Canada, the United States, Asia, Australia, and Europe. Prior to joining Cliffs Natural Resources Inc. he worked as president and CEO of Rio Tinto's Diavik Diamond Mines, Inc. in the Northwest Territories. > John Deere has launched a mobile version of its parts website www.jdparts.deere.com for customers to access equipment parts information, pricing, availability and order parts online with their handheld devices. Customers can search by parts catalog, model number, part number, or keyword to locate the appropriate parts and attachments.

An Algonquin College building is one of eight Canadian structures that received a 2013 Canadian Green Building Award. Opened in September 2011, the Algonquin Centre for Construction Excellence, a LEED Platinum Level building, is described as a “one-of-a-kind living laboratory” on the college’s website.

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CONSTRUCTION STATS A selection of data reflecting trends in the Canadian construction industry

$ billions 7.8 7.4 7.0 6.6 6.2 5.8

Building permits up again

5.4 5.0

Contractors took out building permits worth $7.3 billion in May, up 4.5 per cent from April. The total value of building permits continued to trend upward on the strength of five consecutive monthly increases. The increase in May came mainly from the residential sector in Ontario and the non-residential sector in Quebec.

4.6 4.2 3.8 3.4 3.0

M

2008

J

J

2009

J

2010

2011

Seasonally adjusted

J

2012

J M 2013

Trend

Note(s): The higher variability associated with the trend-cyde estimates is indicated with a dotted line on the corrent reference month and the tree previous months.

Employment

Investment in non-residential building construction down

thousands 17,900 17,700

Investment in non-residential building construction decreased 3.4 per cent to $12.5 billion in the second quarter, following five consecutive quarters of growth. This decline was largely driven by lower investment in Quebec and, to a lesser extent, decreases in eight other provinces and territories.

17,500 17,300 17,100 16,900 16,700 16,500

M

J 2008

J 2009

J 2010

J 2011

J 2012

M 2013

Employment in construction holds steady In June, employment was virtually unchanged and the unemployment rate remained at 7.1 per cent. In the first half of 2013, employment growth averaged 14,000 per month, slower than the average of 27,000 in the last six months of 2012. Over this 12-month period, employment grew by 1.4 per cent (+242,000), and the total number of hours worked increased by 0.6 per cent. While employment in construction was little changed in June, it increased 6.2 per cent on a year-over-year basis.

Employment billions of dollars, seasonally adjusted 13.0

12.0

11.0

10.0 9.0

8.0

II 2008

IV

II 2009

IV

II 2010

IV

II

IV

2011

II 2012

IV

II 2013

Source: Statistics Canada

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LIFTING EQUIPMENT

CHRSC aims to standardize crane industry regulations

BY CORINNE LYNDS

A

n immediate need for certified crane operators is the driving force behind the Canadian Hoisting & Rigging Safety Council’s (CHRSC) goal to harmonize industry regulations.

Inaugurated nearly a year ago at the Crane & Rigging Conference in Edmonton, the primary goal of the CHRSC is to determine the best approach to establish common crane industry regulations and credentialing across Canada. In other words, work with all provinces to make it easier for crane operators to work outside their home jurisdictions.

“In speaking with crane industry people from all across the country, I found that there

were all these different groups, doing different things, trying to get the same results for the most part,” says Fraser Cocks, chairman of the CHRSC and B.C. Association for Crane Safety (BCACS). “So, there was a clear need for us to come together.”

As it stands right now, each province has its own set of standards and regulations for crane operators. This doesn’t pose a problem until an operator is recruited from outside their jurisdiction.

And as the crane industry is currently in a position of change—that has become standard practice.

“The larger companies are buying up the smaller companies. They’re not buying them for equipment or market share. They are buying them for their people,” says Cocks. “That’s the driver, especially in the larger crane operator category. We are dealing with a skills shortage issue in Western Canada.”

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LIFTING EQUIPMENT

As a direct result of this shortage, it is becoming more and more common for crane operators to travel long distances for jobs. The problem with this is the extra cost and wasted time that comes along with getting their credentials in order once they get to the jobsite.

Ryan Burton, who heads up DLB Cranes, a division of Surespan Construction in Langley, B.C., knows firsthand the hassle that working out of province can create. “We find when we go to Ontario it is a challenge. We have to have someone from the apprenticeship board come out and assess our operators and then they will give us an equivalency certificate. We have had these challenges in Manitoba too.”

“A lot of our guys have the Red Seal, which I guess has been a long-standing harmonization across Canada,” adds Burton. “But one of the issues with that is that it takes quite a long time to get your full certification, and it’s only another theory test. A lot of people feel that’s not enough and that you need a practical assessment too.”

(The Red Seal program was developed more than 50 years ago as a partnership between the federal, provincial and territorial governments to provide greater mobility across Canada for skilled workers).

In light of the delays caused by jurisdictional differences and the pressing need for more qualified operators, the CHRSC has garnered a lot of interest and support from industry. With roughly 100 members to date, the Council is led by an all-star executive committee including representation from BCACS, Northern Crane Services, Construction Labour Relations B.C., Cenovus and the Manufacturers Health & Safety Association.

Next steps Now that industry has begun to come together, the CHRSC is working with its members to develop some common crane industry goals.

“That was the first step. The second step is that the regulators start to take notice, and the messaging that’s coming from their local industry is consistent,” explains Cocks. “We’re not going to change laws or processes in government, we’re just going to become the unified voice of the crane industry.”

And that voice is already being heard. The Council submitted two proposals for project funding in Ottawa that will move them ahead with the objectives they are trying to achieve.

The first proposal is fairly simple: The CHRSC wants to create a map of the country so it will know what credentials are issued and what regulatory requirements are there.

“We’re setting it up kind of like an airline ticket purchasing system,” says Cocks. “So you can go online and say I am a tower crane operator from Quebec and I want to work in Alberta, what do I need to know? Are my credentials recognized?

If not, who do I contact and what are the laws that are applicable?”

The second proposal is to develop and standardize the practical assessment tool, so each jurisdiction is using the same tool to measure its operators. “We have Red Seal, but Red Seal is theory only. We want to have a practical assessment tool—that some of us are already using—used everywhere across the whole country. [Incorporating this] through the Red Seal program would be the ultimate outcome.”

Both of these proposals are involved projects that will likely take up to two or three years to complete.

Each jurisdiction is unique, with its own host of challenges. But the hope is that regulated standards across the country will make it so operators from Halifax or Toronto could hop on a plane first thing in the morning, and be working on a jobsite in Alberta by the afternoon.

No delays, practical assessments or lost time.

Contractors keep their cranes moving, and Canadians stay employed even when their local job market slows.

CHRSC Executive Committee Chairman – Fraser Cocks, B.C. Association for Crane Safety Vice-Chairman – Tom Bennett, Northern Crane Services Secretary – Gunnar Mardon, B.C. Association for Crane Safety Treasurer – David Earle, Construction Labour Relations B.C. Executive – Daryl Harvey, Cenovus Executive — Lorne Kleppe, Manufacturers Health & Safety Association Membership is open to all interested parties, including: owners/leasers of equipment, suppliers/ manufacturers, training providers, standard organizations, regulators and contractors. For more information visit www.chrsc.ca.

Send comments to editor@on-sitemag.com.

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BIG IRON

Earthmovers &shakers

PATRICK CALLAN

Hybrid-ging the gap: price, productivity and the planet

I

t has been five years since Komatsu Ltd. introduced the world’s first hybrid construction equipment: the PC200-8 hybrid hydraulic excavator. It was a project that had been on the company’s radar since it began developing hybrid technology in the late 1990s. With a newly developed electric motor, it was designed to cut fuel costs by 25 per cent and significantly reduce its carbon footprint compared with conventional machines.

Komatsu is now on its second generation excavator, the HB215LC-1, and the move to hybrid technology has been gaining momentum amongst other construction giants. Caterpillar and John Deere have recently released their own hybrid construction

John Deere’s 644K hybrid loader • Started showing hybrid machines as a concept at Con Expo in 2011, put wheel loader on the market this spring • Operating weight: 18,341– 19,099 kg.

• Interim Tier 4-emission certified engine; runs at constant rpm; 229 hp. at 1,700 rpms • Bucket capacity 4.25 yd³ • Consumes on average 25 per cent less fuel than John Deere’s conventional 644 loader.

machines in response to demands from customers for increased fuel efficiency, ease of operation, reliability and productivity. They want all of this while meeting tougher emission requirements.

With that in mind, On-Site felt the time was ripe to take a closer look at these hybrid machines: Komatsu’s HB215LC-1 hydraulic excavator, John Deere’s 644K hybrid wheel loader and Caterpillar’s 336E H hydraulic excavator. To see how they stack up against conventional machines we quizzed product experts.

How does hybrid technology work?

Rob Orlowski, Komatsu’s excavator product manager, says simply put: a true hybrid uses short-term storage of energy that would otherwise be wasted, and it releases that stored energy to power the equipment.

He explains in Komatsu’s HB215LC-1 the electric energy is captured during each swing break and stored in the ultra-capacitor; whose ability to quickly charge and discharge energy makes it ideal for this equipment application.

The ultra-capacitor helps power the swing motor and sends energy to the engine via the generator motor. The energy, he says, is then used to accelerate the engine to improve the hydraulic response of the hybrid, and the additional power is available to the engine and hydraulics. But Orlowski warns, “A customer should always be mindful when a manufacturer calls their equipment a hybrid to insure they are truly getting the fuel savings benefits of a true hybrid.”

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Caterpillar’s 336E H hydraulic hybrid excavator • Unveiled in October 2012, launched at Bauma 2013 • Operating weight: 37,200 kg.

Cat C9.3 ACERT Tier 4 Interim engine • Bucket capacity of 3.33 yd³ • Up to 25 per cent less fuel compared to a standard 336E and up to a 50 per cent improvement in fuel efficiency compared to a 336D John Chesterman, wheel loader product marketing manager for John Deere, says the diesel engine in the 644K runs at constant speed and powers an electric generator. The energy from that generator then goes into “power electronics,” which controls the amount of electric energy that’s going to a single, brushless, AC electric motor. The motor drives into a “simplified transmission.”

“It does not even have a reverse gear,” he says. “Electric motors, they work perfectly well in forward and reverse. All the reversals of this machine are done with the electric motor, so we’re eliminating shifting that every wheel loader does.”

He says the transmission only needs three gears, although it does have four operating speed ranges. “What’s coming out of that transmission are the drive shafts that go to the front rear axle. That part of it is basically identical to our conventional drive machine,” he explains.

The key with this hybrid drive, he says, is the constant speed increases engine efficiency. The engine does not have to “lug” its way up and down the whole rpm band as it would in a conventional drive wheel loader.

An added bonus of the constant speed is “it’s very quick to respond.” At 1,800 rpms the hybrid is operating very close to its maximum power, meaning the machine can have a lot of pushing power very quickly and full flow is available at almost any time.

“With the hybrid, we’re always at a constant speed so the hydraulics are very quick and snappy,” he says.

When it comes to Caterpillar’s 336E H, the design uses three key building block technologies, according to advanced technology development manager Randy Peterson.

1. The electronic standardized programmable pump transitions between the hydraulic hybrid power sources, engine and accumulator.

2. The Adaptive Control System valve manages restrictions and flows to control machine motion with no loss of power and ensures operators experience no difference in control, hydraulic power or lift capability.

3. The hydraulic hybrid swing system captures the excavator’s upper structure swing brake energy in accumulators, and then releases the energy during swing acceleration.

Why switch from conventional models?

Although hybrids cost between 10 to 20 per cent more than conventional models, Orlowski says their 25 per cent reduction in fuel consumption and carbon dioxide emissions are prime selling features. And he points out another reason why hybrids are trending. “One of the first things you will notice about the HB215LC-1 is that it is quiet,” he says.

To put these fuel savings in perspective, a 25 per cent reduction is equivalent to removing 12 passenger cars off the road each year, adds Peterson.

Chesterman explains another key advantage of a hybrid over a conventional model is its ease of operation. “One of the things we consistently hear about is making machines easier to operate,” he says. “To load the bucket on this machine and make it perform like an expert operator—the learning curve is very, very easy.”

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BIG IRON

Komatsu’s hybrid HB215LC-1 hydraulic excavator

how are they operated?

Since Komatsu’s hybrid technology simply captures energy that would normally have gone to waste there is nothing different that the operator needs to do during the course of operation, says Orlowski.

“The hybrid’s actually easier to operate,” quips Chesterman.

“If the operator knows how to operate the conventional machine, if they hop in this machine, all the controls will be identical except for three minor buttons.” There is no compromise in terms of productivity and no trade off in hauling or trunk capacity, he adds.

Based on customer feedback, one of the design requirements was to make the hybrid system completely transparent to the operator, says Peterson.

How are they being marketed?

Komatsu’s excavators are primarily being marketed at contractors who are conscious of the environment and looking to cut their fuel costs. “Komatsu believes that ecology is intertwined with the economy and our industry,” says Orlowski.

John Deere’s dealers have been focusing on customers that are “sensitive to fuel consumption changes,” according to Chesterman.

“A long-term customer need we hear about consistently is reduced fuel consumption,” he says. “Some customers are willing to invest to minimize their sensitivity to fuel [price] changes,” he says, while others are interested in hybrids for sustainability reasons.

For Caterpillar, the marketing focus is on the return for the customer by lowering their owning and operating costs. Peterson notes

• Launched in North America in March 2011 the 336E H is more productive and up to 50 per cent more efficient (ton/liter) than the previous model 336D. “Customer payback is as little as one year depending on hour accumulation, fuel cost and job site,” he says.

customers’ response?

• Operating weight: 21,228 kg.

• 148 hp. diesel engine, 2000rpm • Bucket capacity of 1.57 yd³ • Saves an average of 25 per cent fuel with an equivalent reduction in carbon dioxide emissions compared to the standard excavator model.

Orlowski says contractors have remarked about the quietness and responsiveness of the hybrid excavator. They’ve been able to achieve the same production as a conventional machine—plus there is the added benefit of a significant fuel savings. “Contractors have the opportunity to be the first environmental stewards while maintaining profitability and competitiveness,” he says.

So far customers are very interested in the technology, especially those in the more “sustainability sensitive areas,” according to Chesterman. “We have some customers who are very interested in it due to the fuel consumption reduction and the greenhouse gas reduction.” he says. The main thing, he emphasizes, is that people understand the performance along with the fuel consumption savings.

Peterson states customer feedback has been nothing short of page 22 phenomenal. “Customers have been surprised that a

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BIG IRON from page 19 machine as quiet as the 336E H Hybrid can still be so powerful,” he says. Production studies with customer operators have demonstrated performance and fuel savings even above what we have advertised. “Not only have they been impressed with the simplicity and ease of serviceability, but also with how reliable the machine is,” he adds.

Have tHere been any cHallenges?

Many operators are skeptical or surprised by how quiet hybrid construction machines are, says Orlowski. However, he counters, “This is a good feature.” He continues, “Once they realize it has the same power as a standard non-hybrid excavator they become used to the noise levels and start to appreciate it more.”

A major hurdle, says Chesterman, has been convincing customers that hybrids also offer better performance and ease of operation. Like Orlowski, he says as soon as operators get their hands on these machines they quickly realize what they can do. “Once they try the 644K hybrid, they are very impressed when compared to the conventional loaders with torque converter, powershift or hydrostatic transmissions that they are running today,” he says.

Peterson says the multifaceted nature of a hybrid excavator has created what engineers have dubbed “the three-headed monster” during the design phase: maintaining productivity and controllability while improving efficiency. “Sometimes they can be conflicting requirements,” he says.

“When you add another source of power— the accumulator in this case—it creates an additional level of integration.”

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When asked if they have plans to bolster or expand their hybrid fleets, each respective company kept its cards close to its chest, unwilling to give away too much information. But they did reveal that we can expect to see more in the years ahead—and not only when it comes to big iron.

With hybrid technology now firmly in place in the construction industry, existing models will continue to be refined while the viability of the technology across others product lines will be tested.

The success of hybrid construction equipment will weigh heavily on manufacturers’ ability to convince customers that not only do they balance demands for better fuel economy with increased productivity, they also mitigate the carbon footprint left behind.

Send comments to editor@on-sitemag.com

22 / August 2013

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COVER STORY

DEALING WITH

DEALERS Technology and a tight economy drive unconventional partnerships

BY JIM BARNES

24 / August 2013

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COVER STORY

N

ot much is static in the world of construction contracting, says Ron Slee, president of consulting firm R.J. Slee & Associates, Rancho Mirage, Calif. A welter of challenges in technology, the economy, human resources and business practices are leading contractors and equipment dealers into unconventional alliances.

“There is no question that the sophistication and complexity of modern equipment is an overriding driver in terms of the customer’s dependency on the dealer,” says Gary Agnew, vicepresident, Customer Solutions, Finning Canada, Edmonton, Alta.

Contractors look to advanced machine technology to get an edge. For example, “when you look at machine control and guidance systems, a customer can get a 40 per cent improvement in productivity by using that technology,” says Agnew. The catch? “That growing complexity can take the customer out of his or her comfort zone.

They are increasingly looking to the OEM/dealer for support in those areas.”

While it has made the machine more complex, technology has boosted the dealer’s ability to support the machine. Telematics, for example, enables the dealer to keep tabs on the condition and location of every machine in a fleet.

“The owner doesn’t have to do anything,” explains Rich Frontain, vice-president of product

support, Brandt Tractor, Regina, Sask., not even an oil change. “We’ll go out and do the work after hours, when the machine is down,” says Frontain. The owner only finds out about it when he arrives in the morning to find a tag on the steering wheel saying the oil has been changed.

“We are using in-house technical capability to predict failures before they happen,” says Agnew. The goal is preventing downtime.

“Invariably, that’s a less-expensive alternative than repairing the machine after a catastrophic failure.”

Targeting waste Fleets are shrinking as machines gain capacity and capability. Fewer machines can do the same work, but that means there is less slack in the system. “Where a contractor might have had 100 machines in his fleet in 1980, he might have had 90 in 2000 and 70 in 2010,” says Slee.

Tight business conditions mean most contractors do not want the once-popular “spare” machine sitting on their lots for parts or to cover excess workloads. “Those days are done… Since 2008, we have seen a much harder drive for the customer to have modern, mechanically sound, high-producing, fuel-efficient machines in the fleet. They’re trying to take the waste out of the system,” says Frontain.

That means downtime is a bigger risk. With a smaller number of highly productive machines, losing one to a breakdown can be a major problem.

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COVER STORY

LOCAL CONCERNS You do not have to be a large-scale dealer to read the writing on the wall.

Dealers like G.F. Preston Sales and Service Ltd., Sundridge Ont. are seeing the same trends, says Luke Preston, general manager.

The firm covers a large area in Ontario. Preston says it is quite easy for customers to find service in their local neighborhoods. However, many prefer to come to Preston because of the quality of the service. “The factorytrained mechanics are much more knowledgeable about our product lines,” says Preston. “As the machine gets more complicated, it’s harder for the customers to work on them themselves, so strong warranty becomes more important.”

Ongoing service programs that strengthen the dealerto-customer connection are very important, he says. “Service can be supplied through a service subscription. Once the customer buys into it, they don’t have to worry about anything.”

Dealers are trying to make their operations leaner, too. “All the enhancements made to construction equipment—the new materials, the advanced manufacturing methods, the electronics—have not improved the profit margin on the machine. At best, it has remained the same,” says Slee.

“We started to look at what we spent our time doing as a shop,” says Frontain. All the mechanics were working hard, but the dealer wanted to find out what they were actually working on. “We realized we weren’t always working on the things that meant the greatest value for the customer,” he says.

Up until about 2006, the dealer had its local branches do pre-delivery work on equipment. “Some of those pre-deliveries are extensive—they can take 40 or 50 man-hours to do. It can really tie up a lot of a shop’s time,” says Frontain.

Brandt decided to create a centralized pre-delivery facility in Regina that processes about 2,500 machines a year. “It frees up all that time in our shops for customer service,” says Frontain.

THe sLOw DeaTH OF DiY The conventional wisdom among many contractors used to be that dealer service was expensive and you could save money by doing maintenance with your own mechanic.

A few problems have emerged with that model, according to Slee. » Skilled mechanics are in very short supply. » A dealer mechanic can turn around a job faster that one who does not have access to specialized information about the machines. » The dealerships’ mechanics have access to specialized analysis equipment.

“The contractor mechanics don’t do nearly as good a job as the dealer-trained service technician, nor do they work to the same standard of repair,” says Slee.

Two changes contributed to reductions in the numbers of contractor mechanics.

After the recession, some contractors started looking at the costs of recruiting and keeping mechanics on staff with a more skeptical eye. At about the same time, the equipment that started to come out—especially with

the interim Tier-4 engines—was not easy for contractors to maintain themselves. And equipment is not going to be getting any simpler in the future.

“Some of the older guys still have their own mechanics. They still think they can do it on their own. I think they’re going to learn very quickly that they can’t, once they start to buy modern technology,” says Frontain.

They might be able to fix simple mechanical problems on a machine, replacing buckets and pulling pins, but the challenge of fully maintaining a modern machine is beyond most of them.

Are there savings in DIY maintenance?

If it takes your mechanic a day to fix a machine where the dealer—with access to detailed machine data, diagnostic equipment, specialized tooling and parts—might have done it in three hours, the real cost might be about the same. Add to that the other costs of downtime, including possible penalties. Then, consider that the dealer might have been be able to eliminate the downtime altogether.

Some contractors “think they have core competency in fixing equipment. They have been around equipment their whole lives.

They’re not afraid to get under the machine and get greasy,” says Frontain. “The bottom line is why would you if you don’t have to?

The dealer will take care of everything and it’s all built into the price of the machine.”

Frontain offers Brandt itself as an example of focusing on core competency. The firm runs a fleet of more than 300 service vehicles, purchased with a three-year extended warranty and a three-year maintenance plan, explains Frontain.

His service managers voiced some concern when he first explained that he wanted the supplier to service the vehicles. They would say, “You mean I have to take it to the truck dealer every time I want an oil change? I can do it right here in the shop.” Frontain told them he did not want Brandt’s mechanics working on its trucks. “That’s not our core competency. It’s not worth it; it’s not what we do. We want our mechanics to spend their time fixing customers’ machines.”

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COVER STORY

equipment. It’s important that we play an educational role.”

The new partnerships are win/win/win for the manufacturers, dealers and contractors. “The integration of information from the customer through the dealer and OEM is absolutely critical,” says Agnew. “The consolidation of global information on product performance helps in the design of new products, facilitates predictive repairs and helps makes the customer more successful.”

THe sHaPe OF THings TO COMe

sOUnD sTraTegY

“

We have to find a way where we can both make money if we’re going to be here for another 20, 30 or 40 years.

28 / August 2013

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”

“Particularly since the recession started, we are seeing customers focusing more on their core businesses. Increasingly, where activities are not core to them, they are looking for partners like us to play a bigger role in supporting those activities,” says Agnew.

The smart dealer and the smart contractor are coming to realize that self-interest is limiting them. They need to work together in joint interest, says Slee. “We have to find a way where we can both make money if we’re going to be here for another 20, 30 or 40 years.”

Perhaps it is a far-fetched idea, but “If every operator of a machine was a dealer employee—dealer-trained and dealer-managed—I suspect that the volume of parts and service consumption per operating hour would drop by between a quarter and a half,” says Slee.

The experts we interviewed all emphasized that this kind of partnership has to be assessed in terms of life-cycle costs. By failing to take into account the numerous ongoing risks in equipment ownership and focusing exclusively on the purchase price, buying the cheapest machine could turn out to be the most expensive alternative—long-term.

“Our role is to get the customers to understand that cost-per-hour, cost-per-ton proposition throughout the lifecycle,” says Agnew.

“We are the experts, simply because we spent heavily and spend our whole working lives focused on developing our capabilities around

As these changes accelerate, it seems likely that a variety of customer-support programs will be consolidated into comprehensive and integrated customer support. “Rather than participating in five or six separate programs with us, I see further integration into a single solution that involves a guaranteed performance level focusing more on lifecycle costs...

We manage all the complexity,” says Agnew.

In that sense, the dealer will become a true partner with the customer, rather than just a supplier. The dealer will be as committed to keeping his machines running as the contractor is, according to Agnew.

“For me, it’s a pretty exciting time. It is not just about selling or fixing machines anymore.

It is about eliminating downtime and improving production throughput. We are at the stage where there is some good early adoption. Some customers are migrating from their traditional management practices,” says Agnew.

The new paradigm is a work in progress. “It’s not a fully mature relationship yet—it is very much in the early stages. But it’s absolutely critical for everyone’s success,” says Slee.

“The relationship between the dealer and the contractor is about to change. It is about to be transformed radically. The ones that are open to this change are going to be very successful. And those that are not might be putting their business at risk. It has to be partnerships,” says Slee. “I don’t see any other way for people to survive this. There’s just too much at risk.”

Jim Barnes is On-Site’s contributing editor.

Send comments to eidtor@on-sitemag.com.

13-08-08 1:32 PM

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13-08-08 11:34 AM 7/8/13 11:10 AM

SOFTWARE

By Jacob Stoller

A

e-Procurement is ready for the big time

fter years of discussion and preparation, government procurement is poised to become paperless; ending an era of sealed envelopes, couriered submissions, lock boxes, and yes, last-minute drives through rush-hour traffic to submit tender documents on time.

“The Government of Canada decided about four or five years ago that there’s a tremendous amount of savings involved if they [move to an] online electronic bidding process,” says Lorice Haig, president of Toronto-based software and services provider Xenex Enterprises Inc. This August, the first fully-automated bidding system is being launched by the British Columbia Construction Association (BCCA). This will enable a completely paperless process that encompasses subcontractor and general contractor submissions. Other provinces, and the federal government, are expected to follow suit, and the trend is expected to spread to municipalities and the private sector.

All told, e-procurement could be the rule rather than the exception by 2015.

Contractors are familiar, of course, with partial implementations of e-procurement, such as the availability of tender documents online. “A lot of people think e-procurement is going to a municipal website, downloading a document, and filling it out on paper, and then driving it back to the municipality,” says Stephen Bauld, president and CEO at Purchasing Consultants International Inc. “True e-procurement is when you download the document, fill it out without leaving your desk, and send it back electronically.”

Bauld sees the trend as a win-win.

“I think this will be a tremendous boost

for the contractors and the owners,” he says. Contractors will be able to avoid those last-minute drives to submit tenders, and will gain the freedom to submit tenders to far-away jurisdictions.

The electronic process also provides error-proofing. If a required item on a form isn’t filled in, the program will prevent the bidder from moving on to the next page.

For contractors, this significantly reduces the risk of disqualification for technical reasons. “By using the online bidding apps, we have seen a significant reduction in the number of non-compliant bids,” reads the BCCA website.

Many contractors and government owners, however, are reluctant to move forward. Bauld cites two major factors: doubts that electronic documents are in fact legal, and a mistrust of the technology to keep the documents secure.

These concerns have been addressed.

The Electronic Commerce Act has removed the uncertainty around the legality of electronic documents, and has raised the bar for the security of documents used in bonding situations. In order for a document to be legally binding under the Act: »» It must bear an electronic signature that is traceable to a signatory who has the power to bind the corporation. »» There must be evidence of intent to sign by that individual. »» The document must be certified to be unaltered after all the requisite signatures have been entered.

Xenex, Adobe, and other software companies have been working closely with governments in Canada and the US

to develop technology to comply with these stringent requirements. As Haig explains, the newer technology provides a higher level of security than previous methods of signing pdf documents.

Preparing for e-Procurement In order to meet the challenges of e-procurement, contractors should be prepared to invest time in understanding the technology and ensuring that internal procedures are adequate. “This is a process change as much as anything,” says Claudiu Popa, president and CEO of security consultancy Informatica Corp.

“There will be some change management activity, and people should assume that there is a bit of a task there.”

The first step is getting a corporate resolution to use an electronic signature or seal.

Then comes setting up the infrastructure to submit electronic bids, or forming a relationship with a third-party provider like Xenex.

Submitting electronic bids raises the bar for the security of the corporation’s IT systems, and Popa recommends doing a security audit to ensure the systems aren’t subject to breaches or tampering.

If outsourcing to another firm, Popa recommends significant due diligence.

“If you don’t understand what you’re outsourcing, it increases the risk to your organization. And that means not just financial risk, but reputational risk,” he says. e-Procurement shouldn’t be seen as bad news. It is an opportunity for contractors to reduce costs and bid on more projects.

Jacob Stoller is principal of Toronto-based consultancy Stoller Strategies. Send comments to editor@on-sitemag.com.

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RISK

By David Bowcott

M

Treating risk before and after

anaging risk requires imagination and experience. In a lot of ways you’re trying to predict not only the future, but also all the steps you need to take prior, during and after a risk event occurs. This precognitive skill could mean the difference between profit and loss—or worse between company survival and failure.

Here’s a trick you can apply to your next project’s risk inventory. What am I talking about? Well, the concept is a Fault and Event Tree (FET). Basically, once you have established your project’s risk inventory and prioritized risks that are likely and severe, you simply run each risk through the FET. The FET takes the specific risk you are focusing on and applies it to a timeline.

Right in the middle of the timeline is the risk event. Prior to the risk event are all of the likely events that could lead to that

“FETs are powerful tools. Having employees and partners with imagination and experience will ensure your FETs are best in class.”

risk—Fault portion of the FET. Just after the risk event on the timeline are all of the potential impacts to your project— the Event portion of the FET. Once you have identified all Faults and Events associated with a major risk facing your project, you’re ready to treat the risk throughout the risk manifestation timeline.

For instances that could lead to the Faults, you will need to apply risk controls (also known as best practices). These risk controls prevent and mitigate the full impact of the risk event. As a compliment to the risk controls, you will need to apply risk finance tools to mitigate the full impact of risk events. Risk finance are tools, similar to insurance, that provide you mitigation cover, which advances insurance funds prior to the full impact of a risk taking place. You need to be aware of policies that have such mitigation covers in order

to apply them to the Faults of your risk.

After the risk has taken place you need to treat the Events of the risk. Treatment for these events relies more heavily on risk finance solutions, however, will require continued application of risk controls.

When risks take place they lead to unexpected costs to your project and thus you will be looking for sources of recovery in order to right your project. These are often your risk finance solutions, and if you’ve done your FET for risks facing your project, you increase the likelihood those solutions are there when you need them.

FETs are powerful tools. Having employees and partners with imagination and experience will ensure your FETs are best in class, and thus consider all Faults and all Events associated with a specific risk. Being able to identify the Faults and Events is powerful, but knowing the solutions available to treat those risks is even better. Do you have access to the latest risk controls and risk finance solutions in order to effectively treat risk?

If you have employees and partners that do not have the imagination, or worse, the experience (battle scars) then you are likely in need of a new team. Battle scars are vital to prevent and mitigate future risk events, and having people with them involved in your project could save your company.

David Bowcott is senior vice-president, national director of large/strategic accounts at AON Reed Stenhouse Inc. Send comments to editor@on-sitemag.com.

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CANADIAN WESTERN BANK ....................................www.theworkingbank.ca ................................... 35

KOMATSU AMERICA ........www.komatsuamerica.com ................................. 4

CASE .....................................www.CaseCE.com/complete ............................. 20

MANULIFT EMI LTD..........www.manulift.ca .................................................. 11

CONEXPO ............................www.conexpoconagg.com................................. 39

SMS EQUIPMENT..............www.smsequip.com............................................. 27

DETROIT DIESEL ................www.Demanddetroit.com .................................. 31

TEREX ...................................www.genielift.com ............................................... 22

DOOSAN PORTABLE POWER .................................www.DoosanPortablePower.com ...................... 2

TOPCON ...............................www.topconpositioning.com/X22.................... 29

KUBOTA ...............................www.kubota.ca ..................................................... 23

FORD .....................................www.ford.ca/WeOwnWork ............................... 40

VIEWPOINT CONSTRUCTION SOFTWARE .........................www.viewpointcs.com/onsite .......................... 33

FREIGHTLINER ...................www.FreightlinerTrucks.com/WorkSmart ....... 9

WESTERN STAR ................www.westernstar.com ........................................ 18

HCSS .....................................www.HCSS.com/On-Site ................................... 12

World of Concrete .............www.worldofconcrete.com ............................... 37

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CONTRACTORS & THE LAW

By Matthew Swanson & Brandon Hillis

Thinking about a random alcohol testing program?

Think again

O

ne of the most controversial issues in workplace law is an employer’s right to implement drug or alcohol testing programs. Recently, the Supreme Court of Canada released its decision in Communications, Energy and Paperworkers Union of Canada, Local 30 v.

Irving Pulp & Paper Ltd., a case that provides clarity to employers on some of the obstacles to implementing such programs.

Balancing interests At issue in the case of Irving Pulp & Paper was the appropriateness of a unilaterallyimplemented random alcohol testing program. Under its terms, 10 per cent of employees in safety-sensitive positions would be randomly selected for unannounced, annual breathalyzer testing. A positive test would attract significant disciplinary consequences. In 2006, shortly after it was implemented, the Union launched a grievance in respect of this program.

At the centre of almost all disputes concerning such programs, including this one, there is a struggle to find an appropriate balance between an employer’s interest in maintaining a safe and healthy workplace and employees’ privacy and human rights.

Courts, tribunals and arbitrators alike, have generally been receptive to the need to protect employee rights and have placed limitations on the ability of employers to implement these programs.

In this case, the Union asserted that Irving’s program breached the privacy rights of its members and could not be justified as a reasonable exercise of Irving’s right under the collective agreement to unilaterally implement rules with disciplinary consequences.

While recognizing that the Irving mill was a dangerous workplace, the Supreme Court of Canada determined that this factor, in and of itself, was inadequate justification for the program: [The] dangerousness of a workplace… has never been found to be an automatic justification for the imposition of random testing with consequences. What has been additionally required is evidence of enhanced safety risks, such as evidence of a general problem with substance abuse in the workplace.

It is important to note that this case concerned a policy grievance based on a desire to maintain the privacy rights of Irving’s employees, and did not address human rights considerations. In other situations, for example, individual grievances or complaints of non-unionized employees, such considerations would likely dominate the discussion. Human rights legislation prevents employers from discriminating at all stages of employment (including the hiring stage) against employees on the basis of, among other things, mental or physical disability. Substance addiction has long been recognized as a form of disability.

It is also important to note that this case took place in the context of a unionized environment, and considered factors unique to such environments.

Proceed with caution

With only eight documented incidents of impairment in 15 years, the Supreme Court of Canada concluded that there was insufficient evidence of an enhanced safety risk.

The safety gains were “minimal at best,” and, on balance, could not justify the intrusion upon the privacy of Irving’s employees.

Lessons learned To uphold a program of random alcohol testing for employees occupying safetysensitive positions, the Supreme Court of Canada has indicated that an employer must establish (1) that the workplace is dangerous and (2) that there are enhanced safety risks, such as a general problem with substance abuse in the workplace.

Implementing a workplace drug or alcohol testing program is fraught with risk. Before implementing any such program, whether in a unionized or non-unionized workplace, employers should give careful consideration to privacy and human rights issues and ensure that their program is reasonable and justifiable. If possible, in unionized workplaces, employers should attempt to negotiate such policies with the union, in which case many of the concerns set out above may be limited.

This article is provided for general information and may not be relied upon as legal advice. Matthew Swanson and Brandon Hillis are lawyers at Borden Ladner Gervais LLP. Send comments to editor@on-sitemag.com.

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