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VOLUME 59, NO 6 / OCTOBER 2015

COVER STORY 29 Cab Rules DRIVER RETENTION SPURS IMPROVEMENT TO VOCATIONAL TRUCKS

DEPARTMENTS 6 Comment

29

Win/win/win/win: The construction industry will win the election

10 News Industry news

18 Construction Stats The latest news on construction activity and construction employment

50

COLUMNS 47 Risk Take advantage of today’s insurance capital oversupply

50 Contractors and the Law Mental Distress and building contracts

45 Software

42

21

Better managing payment data

51

Index of Advertisers

37

features 21

37

Small is big:

Equipment learning

Your new drug plan:

Shifting trends in compact equipment

Tips and tricks in equipment leasing

Medicinal marijuana

4 / OCTOBER 2015

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World of Concrete Pavilion: all about Canada’s leading concrete show

EDITORIAL

Win/Win/Win/Win

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6 / OCTOBER 2015

s I write this, the ultimate result of the upcoming federal election is pretty tough to call. The poll numbers are skewing significantly and the election is still a few weeks away. But that doesn’t matter. I can already tell you who is going to win: the construction industry.

All four federal leaders have hastened to scramble on to the infrastructure bandwagon. No matter who forms the next government, all the current campaign platforms call for major investment in infrastructure.

There is a reason for that (apart from the obvious one that investment in Canadian infrastructure is needed desperately).

It is that the voters have finally woken up to the need to get the city’s roads, bridges, institutional buildings and other important assets refurbished and new assets built.

They are also becoming aware of the positive effect that investment in infrastructure will have on the national economy. A Nanos Research poll commissioned by CTV News and The Globe and Mail in mid-September found that about 45 per cent of respondents favoured investment in infrastructure over cutting taxes or paying down the national debt as the best way to foster economic growth.

Many researchers concur. According to one study released by the Centre for Spatial Economics (funded by the Broadbent Institute) investing $10-billion a year in municipal infrastructure between 2015 and 2019 would increase GDP by $1.43 per dollar spent and create 9.4 jobs per million dollars spent. That would add up to more than 81,000 jobs, about half of them in construction. These benefits could be realized without significant, long-term fiscal consequences to federal or provincial governments, according to the study.

A very quick recap of the four leaders’ basic positions shows that infrastructure has indeed become an important talking point. In alphabetical order: CONSERVATIVES: the government can simply point to its record. Among other initiatives, the New Building Canada Plan allocates $53 billion over 10 years for infrastructure. In addition $5.8 billion has been allocated over six years to build and renew federal infrastructure assets. The Canada 150

Community Infrastructure Program, announced in Budget 2015, promises to invest $150 million over two years in existing community facilities.

GREENS: Plans include the creation of six municipal “super funds” for community brownfield reclamation, water and waste-treatment facilities, sports, cultural and recreation facilities, mass transit promotion, cycling and pedestrian promotion and community housing. Investments will also be made in the electrical grid, national rail systems, and energy retrofit for civic buildings and low-income housing.

LIBERALS: The current federal infrastructure investment will be doubled to $10 billion per year for each of the next two fiscal years. The base infrastructure spending will be increased each year for the next decade. Ultimately, this means an additional $9.5-billion annual investment, boosting the federal infrastructure investment from about $65 billion to nearly $125 billion. A Canada Infrastructure Bank will be established to provide low-cost financing for infrastructure.

NDP: Municipalities will get another cent from the existing gas tax to pay for roads and other infrastructure, adding up to an additional, $1.5-billion annual investment. A “Better Transit Plan,” developed in collaboration with the provinces, is aimed at improving urban commutes and reducing environmental damage. Another $1.3 billion would be spent annually for 20 years to support public transit funding for municipalities. As well, incentives will be provided for the construction of 10,000 affordable and market rental-housing units.

Admittedly, these are election promises, and you never know what is going to come out of the pipe at the other end. As well, some of these schemes are rather elaborate and I don’t think we’ll be seeing the rubber hit the road for a couple of years yet, apart from programs that are already in place.

Nevertheless, all the potential governing parties seem to be in agreement on the subject of infrastructure, and no matter which way the ball bounces on election eve it looks like a big win for the Canadian construction industry.

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CONTRIBUTORS

MEET OUR CONTRIBUTORS FOR THIS ISSUE JIM BARNES / Contributing Editor On Tips and tricks in leasing: Knowing your real needs gets you the best lease for your equipment

www.on-sitemag.com / Fax: 416-510-5140

PUBLISHER | Peter Leonard (416) 510-6847 PLeonard@on-sitemag.com EDITOR/EDITORIAL DIRECTOR | Corinne Lynds (416) 510-6821 CLynds@on-sitemag.com (on mat-leave) CONTRIBUTING EDITOR | James A. Barnes ART DIRECTOR | Mark Ryan (416) 442-5600 x3541 MRyan@annexnewcom.ca ASSOCIATE PUBLISHER | David Skene (416) 510-6884 DSkene@on-sitemag.com SALES & MARKETING COORDINATOR | Kim Rossiter (416) 510-6794 KRossiter@on-sitemag.com

ALEXANDER BJORNSON / Lawyer, Borden Ladner Gervais LLP On Mental Distress and Building Contracts: When is a contractor liable for an owner’s peace of mind?

PRODUCTION MANAGER | Cheryl Fisher (416) 510-5194 CFisher@annexnewcom.ca CIRCULATION MANAGER | Anita Madden (416) 442-5600 x3596 AMadden@annexnewcom.ca Published by Annex Business Media 80 Valleybrook Drive, North York, ON M3B 2S9 Vice President Annex Business Media East | Tim Dimopoulos (416) 510-5100 tdimopoulos@annexbizmedia.com

DAVID BOWCOTT / Senior vice-president, national director large/strategic accounts, construction and infrastructure services, Aon On Take advantage of today’s insurance capital oversupply: A soft insurance market can help you better manage your company’s risk

JACOB STOLLER / Principal, StollerStrategies On Better managing payment data: “The key is a myriad of variations on the traditional credit card that are collectively referred to as purchasing cards…”

DAVID GODKIN / Contributing editor and freelance writer On Small is Big: Shifting trends in compact equipment.

President & CEO Mike Fredericks mfredericks@annexweb.com

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JEAN BURROWS / Freelance writer On Cab Rules: Driver retention spurs improvement to vocational trucks

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INDUSTRY NEWS

INDUSTRY>NEWS SASK. PRIORITIZES LOCAL PROCUREMENT Saskatchewan Crown corporations are taking advantage of exemptions in the interprovincial Agreement on Internal Trade (AIT) to improve procurement opportunities for businesses in Saskatchewan, Alberta and British Columbia – the provinces of the New West Partnership Trade Agreement (NWPTA).

The AIT is intended to prevent governments from erecting new trade barriers and involves specific obligations in 10 economic sectors, including government purchasing, labour mobility and investment.

Seven Saskatchewan Crown corporations are exempt from AIT provisions: > > > > > > >

SaskEnergy Inc. Saskatchewan Gaming Corp.

Saskatchewan Government Insurance Saskatchewan Opportunities Corp.

Saskatchewan Power Corp.

Saskatchewan Telecommunications Saskatchewan Transportation Co.

These Crowns continue to be subject to the NWPTA. They will primarily source from NWPTA provinces and from the rest of Canada and globally, as warranted.

The announcement follows a commitment made in the Priority Saskatchewan Procurement Transformation Action Plan, announced in March 2015.

“We are committed to ensuring our Crown corporations comply with trade agreements and recognize there is room within those agreements for Crowns to source regional solutions,” SaskBuilds Minister Gordon Wyant said.

“This is an important step forward,” said Saskatchewan Construction Association President Mark Cooper. “The Saskatchewan Construction Association applauds the provincial leadership in tackling procurement transformation to ensure Saskatchewan businesses are treated fairly.”

10 / OCTOBER 2015

“The province continues to demonstrate its willingness to listen and its commitment to addressing challenges facing Saskatchewan businesses,” said North Saskatoon Business Association Executive Director Keith Moen.

“This action by the provincial government promotes the principles of best value to both Saskatchewan businesses and taxpayers alike, while respecting the trade obligations that continue to strengthen Saskatchewan’s economy,” noted Canadian

Manufacturers & Exporters vice president and Saskatchewan Manufacturing Council executive director Derek Lothian.

Priority Saskatchewan was established in June 2014 to identify opportunities to level the procurement playing field for Saskatchewan businesses. The organization is consulting with industry and stakeholders on the balance of the action plan’s initiatives. Implementation of the action plan is a priority for government and is expected to be largely complete in 2016.

POMERLEAU TO ACQUIRE VERREAULT CONSTRUCTION Pomerleau Inc. has signed a letter of intent and has begun a due diligence process for the acquisition of the assets and project backlog of Quebec-based construction company Verreault.

“This acquisition is all about people and expertise,” said president and C.E.O. Pierre Pomerleau. “Adding Verreault’s very skilled workforce to our team of experts reinforces Pomerleau’s identity as the incontestable construction leader in Quebec—and strongly positions us for the national expansion we are undertaking,” he added.

Pomerleau is the largest construction company in Quebec and one of Canada’s leading builders in the institutional, industrial, commercial, infrastructure and civil engineering sectors. The firm was recently ranked seventh in On-Site’s Top 40 Canadian Contractor Survey.

Once the transaction is complete (for which purchase details have not been released), Pomerleau will increase its backlog by approximately $300 million and will complete the projects initially undertaken by Verreault. This purchase follows a recent announcement that Pomerleau had purchased a majority stake in Aecon Group’s Atlantic Buildings Div. for an undisclosed amount “The Verreault acquisition, combined with the recent expansion of our footprint in the Atlantic region, is a concrete example of our commitment to grow the Pomerleau brand nationally,” said Pomerleau. “We are adding skills, experience and manpower to execute a wider variety of projects across Canada and will continue looking for further opportunities to grow,” he concluded.

This transaction has been approved by Pomerleau’s Board of Directors and awaits approval from the Board of Directors of Groupe Dessau Inc. Due diligence is expected to be completed in October, 2015.

Pomerleau and Verreault have been active players in the Quebec construction industry and have worked in joint-venture arrangements on a variety of projects, including the Montreal-Trudeau International Airport expansion, the CHUM Research Centre and the Sir Mortimer B. Davis Jewish General Hospital.

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INDUSTRY NEWS

P3 conference set for Toronto Claimed to be the largest P3 conference in the world, P3 2015, Groundbreaking Partnerships, is slated for November 2 and 3 at the Downtown Sheraton Hotel in Toronto.

The event is hosted by the Canadian Council for Public Private Partnerships, Toronto.

The conference attracts key experts and players in the P3 and infrastructure space. Last year, 1,200 delegates from 25 countries, from both private and public sectors, attended.

Mayor John Tory of Toronto and Ontario Minister of Transportation Steven Del Duca are scheduled as keynote speakers at the upcoming event.

Among the many topics to be covered during the sessions will be public transit, First Nations projects, P3s for smaller projects, electrical transmission, the U.S. market, South East Asian markets, mining and high-speed and commuter rail.

CCPPP will co-locate its annual general meeting and the National Awards for Innovation & Excellence in P3s with the conference.

For the full program and further information, see www.pppcouncil.ca/events/ national-conference.html.

SNC-Lavalin leadership change Top leadership at SNC-Lavalin is changing, as Neil Bruce becomes president and C.E.O. and a member of the Board of Directors, succeeding Robert G. Card.

“The upcoming handover and smooth transition from Bob Card to Neil Bruce, currently C.O.O., comes at an important stage in SNC-Lavalin’s development,” stated Lawrence Stevenson, chairman of the Board of Directors. “Bob’s tenure left a strong legacy during a critical time for the company, with a far-reaching transformation that changed the face of the executive team, repositioned the company strategically through the sale of AltaLink and the acquisition of Kentz among others, as well

12 / OCTOBER 2015

Asphalt association names new exec Vince Aurilio has assumed the staff leadership of the Ontario Hot Mix Producers Association, Mississauga, Ont., the association reports.

“There are always challenges facing the industry. OHMPA President Steve Smith has set the bar high when it comes to quality and I fully support his vision – working collectively with our stakeholders to achieve workable and practical solutions,” Vince Aurilio said Aurilio.

Aurilio comes from DBA Engineering Ltd. where he served as manager of Pavement Engineering Services for six years. He brings over 30 years of experience working in both the public and private sectors, mainly in pavement materials engineering.

That includes a six-year stint as OHMPA’s technical director from 1999 to 2005.

“Vince carries an extensive resume with strong credentials and a wealth of experience in our industry and he has lent tremendous support to the road building community over the decades,” said OHMPA President Steve Smith. “We welcome Vince back to OHMPA after a lengthy ‘sabbatical’ and look forward to working with him in our continued pursuit of excellence in asphalt pavements.”

From 1990 to 1994, Aurilio served as the senior bituminous engineer for the Ontario Ministry of Transportation. He has been actively involved in the implementation of Superpave and the development of hot mix asphalt (HMA) technologies, such as stone mastic asphalt (SMA) and perpetual pavements in Ontario.

Aurilio is a strong advocate of pavement preservation and the use of proper life cycle costing. He has authored many technical papers, presented at various key industry functions and is a current member of the Canadian Technical Asphalt Association (President in 2006), Association of Asphalt Paving Technologists and sits on the Transportation Research Board Committee on Quality Management in Construction.

More than 95 per cent of all the hot mix asphalt producers in Ontario are members of OHMPA.

as turned its ethics and compliance system into a benchmark for the industry.

“Neil’s appointment comes as we embark on the next stage of the company’s evolution. Over the past two and a half years, he led the company’s mining and metallurgy and oil and gas businesses, including the acquisition of Kentz and its successful integration that transformed SNC-Lavalin’s oil and gas business.”

Bruce has more than 30 years of experience in the engineering and construction industry and a comprehensive understanding of the four sectors in which SNC-Lavalin operates. Before joining SNC-Lavalin, Bruce held a variety of leadership roles, including executive director and C.O.O. at AMEC.

Since joining the company in January 2013, he transformed the Oil & Gas business from a niche, 3,000-employee player into a 20,000-strong, world-class organization, before being named C.O.O. in April 2015. As C.O.O., he directed the company’s international expansion and high-value consultancy, engineering and project-management services.

“I leave the company in the very capable hands of Neil,” stated Card. “He has been a key pillar of SNC-Lavalin’s transformation to date and has shown the superior leadership skills and industry expertise that will propel SNC-Lavalin forward in the future. We will work closely to ensure a seamless transition until my departure.”

INDUSTRY NEWS

Finning, IronPlanet expand Cat auction services IronPlanet, an online marketplace for used heavy equipment and trucks, and Finning International, the largest Cat dealer in the world, have joined forces in Canada.

“We are excited to partner with Finning and host our first physical auction in Canada,” said Gregory J. Owens, IronPlanet chairman and C.E.O., following the announcement of the Oct. 21 event in Edmonton, Alta. “Our alliance with Finning supports IronPlanet’s critically important Canadian expansion efforts and furthers our ability to service our customers in Canada – and internationally – given Finning’s presence in South America, the United Kingdom and Ireland.

“IronPlanet is building the strongest used heavy equipment marketplace in the industry by offering our buyers access to a

wide selection of used construction equipment, oil and gas services equipment and trucks across multiple auction platforms.

We are pleased to be working with Finning, a leader in the world of heavy equipment, to serve customers globally,” said Owens.

IronPlanet and its Cat Auction Services live auction platform will help Finning and its customers realize better returns in their asset-disposal process through access to IronPlanet’s 1.4 million globally registered users. IronPlanet customers will benefit from Finning’s international presence and the opportunity to buy or sell quality used heavy equipment across multiple geographies.

“Finning is excited about this new alliance and we look forward to leveraging this global marketplace to provide value for our customers,” said Juan Carlos Villegas,

Finning International chief operating officer and Finning Canada president.

One in 13 Canadian workers make a living in construction As Canada marked Labour Day the construction industry is recognizing the contributions of 1.3 million Canadians who build, repair and maintain a whopping $2.1 trillion worth of infrastructure each year.

“We’re very proud of our one million strong construction workforce,” says Rosemary Sparks, executive director of BuildForce Canada. “Labour Day is an opportunity for us to show our appreciation for what’s been built, and to welcome the thousands of new faces who will lead the industry and build Canada into the future.”

Canada’s construction industry is

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undergoing the most dramatic demographic shift in its history. Over the next decade up to 250,000 workers, who make up onequarter of Canada’s construction workforce, are retiring. They’re making way for a new wave of younger workers who will fill new positions as baby boomers retire over the next 10 years.

“Right now, the average age of a

construction worker is 41,” adds Sparks.

“A decade from now, the workforce will look much different, as the industry promotes construction careers in more than 50 trades and occupations, to a younger generation.”

Calli Zwierschke is part of that changing face of construction. The 24-year-old began her career in the skilled trades five years ago, and is proud to be an apprentice

electrician. “It’s a career that allows you to build skills for life,” says Zwierschke. “It’s a fantastic lifestyle with the flexibility and opportunity to apply your skills anywhere in the world.”

BuildForce has been reaching out to the next generation of construction workers where they live – online. Using YouTube, Facebook and other social media platforms, BuildForce has reached more than three million Canadians aged 15 to 25 who visited its redesigned Careers in Construction website at www.careersinconstruction.ca.

BuildForce Canada is a national, industry-led organization that represents all sectors of Canada’s construction industry.

Its mandate is to provide accurate and timely labour market data and analysis, as well as programs and initiatives to help manage workforce requirements and build the capacity and the capability of Canada’s construction and maintenance workforce.

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INDUSTRY NEWS

Construction idea exchange opens

OCS says union sites are safer

Canadian Construction Innovations (CCI), an institute with a mission to instill a new culture for research and innovation in the Canadian construction industry, has launched a Clearinghouse for Construction Innovation in Canada portal.

“The purpose of the clearinghouse portal is to provide the industry with new innovative solutions ready for use and implementation in the construction marketplace,” explains CCI Board Chair John Bockstael.

“It is also to advise the industry of what is coming – tools and developments yet to be realized in the industry.”

CCI President Pierre Boucher explains that the portal will serve as a database of who is who in construction research and innovation. A full list of industry researcher and resources will soon be added. The portal will also serve as a hub for industry stakeholders, to discuss concerns or issues of common interest that require new innovative solutions.

The CCInnovations website (www.ccinnovations.ca) was established to provide the necessary framework to enhance industry-wide collaboration for innovation in the construction industry, with the aim to increase competitiveness, productivity and financial performance.

Unionized construction firms in Ontario are “safer” places to work than nonunion ones, claims a new study released yesterday by the Ontario Construction Secretariat.

The Toronto-based Institute for Work and Health study, which examined Workplace Safety and Insurance Board (WSIB) claims data between 2006 and 2012 from more than 40,000 construction firms across Ontario, shows that unionized workers reported 23 per cent fewer injuries requiring time off work than non-union workers.

This is the first peer-reviewed Canadian study to examine the occupational health and safety benefits of unions in Ontario’s industrial, commercial and institutional (ICI) construction sector.

In particular, workers at unionized firms were 17 per cent less likely to experience musculoskeletal injuries (injuries or disorders affecting mobility, especially muscles, tendons and nerves) and 29 per cent less likely to suffer critical injuries (injuries with the potential to place workers’ lives in jeopardy) while on the job, the study found.

Despite filing fewer claims resulting in critical injuries and time off work, unionized workers did report a greater total number of “no lost time” claims – incidents that did not result in lost wages, productivity, or disability or impairment.

“These findings suggest that unionized workers are encouraged to report injuries, including injuries that don’t require time away from the job,” says Institute for Work & Health Senior Scientist Dr. Ben Amick, co-lead investigator on the study with fellow senior scientist Dr. Sheilah Hogg-Johnson.

“At the same time, these reporting practices enable construction unions to better identify and proactively manage workplace hazards that lead to injury,” says Amick.

When researchers eliminated the effects a firm’s size has on its overall rate of workplace injuries – larger firms

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typically have greater resources to devote to workplace health and safety programs – unionized firms still reported 14 per cent fewer injuries requiring time off work, and eight per cent fewer musculoskeletal injuries. (Data for critical injuries could not be measured when controlling for firm size.)

The study has been published in the American online version of the Journal of Occupational and Environmental Medicine.

In the article, the scientists discuss other factors that might explain the union safety effect. These include:

sector in Ontario is showing its commitment to being a leader in worksite safety and productivity.”

Altogether, seven years of injury

claims data for unionized and nonunionized firms employing more than 1.5 million full-time-equivalent workers were analyzed for this study.

• more robust specialized apprenticeship; •u pgrade and safety training requirements for union members; •p rograms and practices that more effectively identify and reduce construction work hazards; • o ngoing skills training that allows union workers to report accidents without fear of repercussions; programs that provide a foundation for safer skilled work throughout one’s career; • a more effective role for unions in influencing government regulations designed to improve workplace health and safety.

“Creating safe and healthy workplaces continues to be a core value of the unionized construction industry in Ontario,” says Sean Strickland, C.E.O. of the Ontario Construction Secretariat, which funded the research study.

The Ontario Construction Secretariat was formed in 1993 as a joint labour/management organization representing 25 unionized construction trades and their contractor partners in Ontario’s industrial, commercial and institutional construction sector.

“This first-of-its-kind study shows that the union safety effect is having a tangible impact in Ontario’s ICI construction sector and through our investments in safety, specialized training and apprenticeship programs the unionized construction

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

BUILDING PERMITS FLAT IN JULY

HOUSING STARTS TREND UP IN AUGUST Housing starts in Canada continue to climb thanks to a hot condo market, according to a report from the Canadian Mortgage and Housing Corporation, Ottawa.

“Housing starts have been trending up, supported by strong condominium activity in Toronto. This is in line with CMHC’s most recent forecasts that would see demand shift from new higherpriced single-detached homes towards lower-priced alternatives,” noted Bob Dugan, CMHC’s chief economist. “While national starts have increased, housing construction has started to slow in Alberta and Saskatchewan as a result of weakening economic conditions related to the decline of oil prices.”

According to the report, the trend measure of housing starts in Canada was 196,565 units in August compared to 185,642 in July. The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

The standalone monthly SAAR was 216,924 units in August, up from 193,253 units in July, according to CMHC. The SAAR of urban starts increased by 13.6 per cent to 201,312 units. Multiunit urban starts increased by 19.5 per cent to 142,927 units, while the single-detached urban starts segment increased by 1.4 per cent to 58,385 units.

In August, SAAR urban starts increased in Ontario but decreased in British Columbia, the Prairies, Atlantic Canada and Quebec. Rural starts were estimated at a SAAR of 15,612 units.

Thousands

Housing Starts in Canada–All Areas

240

215

216,924

190 196,565

165

140

August 2013 Housing Starts, SAAR

18 / OCTOBER 2015

August 2014

August 2015

Housing Starts, Trend Line (6-month moving average)

Canadian municipalities issued building permits worth $7.7 billion in July, a 0.6 per cent drop. That slight decline followed a 15.5 per cent increase in June, according to a report published by Statistics Canada.

Driving the decrease nationwide were lower construction intentions in the non-residential sector, mainly in Ontario and Alberta.

Permits for non-residential buildings dropped 13.9 per cent to $2.7 billion, following a 13.8 per cent increase in June.

The value of permits rose 8.7 per cent to $5.0 billion in the residential sector, after growing 16.7 per cent increase in June.

Four provinces registered increases, led by Ontario and British Columbia. Quebec reported the largest decline in July, after posting a 39.9 per cent increase in residential building construction intentions in June.

Multi-family dwelling permits reached $2.5 billion in July, a 14.3 per cent increase over the previous month. That followed a 37.0 per cent advance in June. Gains were posted in four provinces, led by British Columbia and Ontario.

Billions 9.5 9.0 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0

July

2010

2011

2012

Seasonally adjusted

2013

2014

July 2015

Trend Cycle

Source(s): CANSIM table

LABOUR FORCE NUMBERS STABLE Statistics Canada reported flat employment numbers in August, with an increase of 12,000 jobs representing 0.1 per cent growth.

At the same time, the unemployment rate increased 0.2 percentage points to 7.0 per cent, as more people searched for work. “Prior to August, the unemployment rate had held steady at 6.8 per cent for six consecutive months,” noted the national statistical agency.

An increase of 54,000 in full-time employment was offset by a decline of 42,000 in part-time work. Year over year, employment was up by 193,000 or 1.1 per cent.

Saskatchewan, Newfoundland and Labrador, Manitoba and New Brunswick showed significant growth in employment while little change was recorded in the rest of the country.

The national construction labour force slipped 0.3 per cent, from 1,363,200 in July to 1,359,600 in August. Year over year numbers changed little, with a 0.6 per cent decline from August, 2014.

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Compact Equipment

SMALL

BIG

IS “

Shifting trends in compact equipment

R

BY DAVID GODKIN

ead customer surveys, go to customer jobsites and speak to customers. They want their compact machine to meet its capability by dig depth or breakout in the smallest package possible,” says Greg Worley, product manager, Caterpillar.

It sounds like the measure of a piece of compact equipment is the same as heavy equipment: production. But are there other ways of looking at the value of a mini-excavator or compact track loader than tonnes of material per hour cut or carried? And what about maintenance? Is it easier to maintain a compact track loader simply because it’s smaller than a standardsize excavator? These were some of the questions we posed to four CE manufacturers – and along the way learned about trends in compact equipment design, manufacture and performance.

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on-sitemag.com / 21

Compact Equipment

Mini-excavators: doing more with less horesepower.

Cat 304E2.

First up: Corey Rogers, marketing manager, Hyundai Construction Equipment Americas. “I think production is important, but I think it’s secondary to precision. A lot of contractors are doing landscaping, small grading and land improvements, putting in waste and electrical lines.” As important to the precision with which your machine moves along vertical walls is its power-tomachine-size ratio, according to Rogers.

That is not to be confused with sheer horsepower for better ground speed, adds Worley. He says that, compared to other construction machines, Cat’s smaller excavators travel 3.5 m.p.h. at best. That means they actually use relatively low horsepower.

“It all really comes down to your hydraulic displacement, as opposed to HP. In today’s technology, even on our larger machines, you can do so much more with less HP.” On its 3.5 to eight-tonne machines, Cat runs its High Definition Hydraulic system, a combination of open- and closed-centre systems, which Worley says is “all about efficiencies, fuel savings, precision and controllability.” Not surprisingly, Hyundai also gets the most from its mini-excavator engines employing “maximum hydraulic system capacity,” including increased efficiencies through better pilot control.

“A lot of our machines are equipped

22 / OCTOBER 2015

with nitrogen accumulators that keep constant pressure on that pilot system and help provide better reactivity and controllability out of the joy sticks,” says Rogers.

Optional proportional controls, meantime, give the operator the ability to meter the amount of speed and pressure applied to a specific attachment.

While Worley agrees precision controls are vital, he insists the measure of a great mini-excavator remains its breakout power: will it dig a hole, especially if you’re using a smaller machine? Interestingly, he says the competition against Cat’s 301.4D or 301.7D compact excavator is not the other compact equipment vendors. The real competition is manual labour. “Our customers say `My guys could plant a tree – two guys and a couple of shovels, doing the job in 30 minutes. Or I could use a machine and do it in five.’ These are time and labour saving devices.”

SHIFTING TRENDS In recent years, mini-excavators have enjoyed a competitive advantage over backhoes. There are many reasons for this, not the least of which is the ability to slew the entire house, boom, dipper, bucket or breaker upon the undercarriage for spoil placement.

Worley would only say there are advantages and disadvantages to both machines and that “at the end of the day, it comes down to having the right machine for the right application.”

Rogers went further: “A backhoe is limited in working range. On a backhoe you take your outriggers back up and re-position the machine. A mini-excavator is much more versatile; it’s going to be quicker, more productive and you don’t have that much of a footprint.”

CTLs became a dominant machine from 2000-2005. “Growth in CTLs was phenomenal,” says John Deere’s Product Marketing Manager Greg Zupanic. But then something happened. “CTL folks said `Whoa, wait a minute – these machines are much more expensive to operate and there’s a lot of maintenance involved because the rubber tracks cost more than the tires.”

This provoked a “softening” in the CTL market over the next five years, and skid steers became more competitive. More recently, the pendulum has swung back again as the CTL market has rebounded and the skid steer market declined. “The economy,” says Zupanic, “is getting a little bit better. There’s a lot of work available.

Housing and commercial building starts are very strong across North America.”

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To prove his point, Zupanic cites AEM statistics for the last twelve months which show that approximately 37,000 skid steer units were sold in Canada and the U.S. By comparison, 39,000 CTLs have been sold over the same period. That, says Zupanic, represents a market increase of 23 per cent for CTLs versus a two per cent increase for skid steers. “So for the first time in its history, track loaders have outpaced skid steers in North America in terms of sales and in terms of growth year-over-year.”

How does this translate into an actual comparison of CTL/skid steer production?

Zupanic contrasts the 100 HP 332 John Deere skid steer with its 100 HP 333D compact track loader. Skid steer: 181 tonnes p/h. CTL: 205 tonnes p/h. Why the difference? The heavier, tracked machine provides more stability and pushing power, which converts into more breakout force from the pile.

“Guys are realizing you can get a lot

Hydraulic design is key to machine performance.

Hyundai R520LC-9.

more work done, but you can also work more often throughout the year. That’s because they have great flotation – they

Compact Equipment

only have four or five psi of ground pressure. A skid steer has 30-40 psi, depending on the weight of the machine.”

Affordable, versatile skid steers undergo constant development.

Deere 332E.

on-sitemag.com / 25

Compact Equipment

CTLs vs. skid steers: it depends on the application.

Takeuchi TS60V.

MAKING A CASE FOR SKID STEERS Is a CTL a better investment than a skid steer? Not necessarily, says Takeuchi’s national product manager David Stegner.

If you’re comparing productivity, “There’s no contest. The track loader is going to win every time,” especially in wet ground conditions. But if you’re working on hard, dry surfaces a lot where flotation, traction and balance aren’t vital, then the skid steer is a good, relatively inexpensive option, he says.

In fact, CTLs are Takeuchi’s core product.

Contractors learn to be more versatile with

their equipment, downsizing from a large skid steer to a smaller track loader, for example, “to get equal or even better performance,” says Stegner. At the same time, you’ll find pilot controls on a skid steer, too. And while the Takeuchi TS 50R wheeled skid steer may not feature height adjustment, its ride controls for operator comfort over rough terrain are a big plus, says Stegner.

Some manufacturers opt for a dual lap bar which swings to the side. Takeuchi and others have embraced the rear pivoting lap bar, which includes integrated arm rests for

support and keeps the hands close to the controls. The instrument panel and function switches on a Takeuchi skid steer, meantime, are overhead. The key benefit, according to Stegner: more room for the operator, using space “that would otherwise be wasted.”

One question, though: when you have instrumentation near the pilot controls as you do on a CTL, won’t you get better line-of-sight than on a skid steer with the instrumentation overhead?

“You’re right. On a lot of tasks you would be looking eye level or down, for

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Compact Equipment example, grading tasks,” says Stegner. “But if you’re doing a lot of skid-steer loading you would be looking up over the dump truck. So it would be line-of-sight, too.”

LITTLE MAINTENANCE? If it’s smaller, that must reduce maintenance requirements, right? Forget about it.

Despite its size, a mini-excavator has all the same components as a standard-sized excavator, requiring virtually the same maintenance and care for continued performance and service life. A case in point, says Rogers, is track tension. Adjust the rubber track too loosely and you’ll accelerate wear, bringing the excavator to a halt until a new track can be installed. “Make it too tight,” he says, “and the rubber will tear and increase wear on the traction motors, sprockets and front idlers.”

In addition to maintaining proper track tension (referencing OEM specs) Zupanic offers three tips: 1. Every day, clean out any track mud before it dries or freezes.

2. Operate your machine in the right conditions. If you want to run a CTL over rock and gravel, fine, but remember “gravel is not a friend of rubber and limit the amount of time that you’re rotating…

Every time you turn, that gravel is going to get sucked or pushed into the undercarriage in between the rolling components and the rubber. It’s easy to turn quickly and often, but in those conditions you’re going to burn through some rubber.”

3. “Cowboy” operators who run a machine hard all day long or spin their tires at the pile going nowhere aren’t doing you or your machine any favours. Tell them to save it for the monster truck rally.

Finally, in a recent online forum, one owner complained that every piece of compact equipment he’s encountered has too many ledges and lips where dirt and mud can accumulate. “There are so many of these ledges that they put on the blade at the front, and underneath it’s ridiculous.

You can’t possibly clean your machine.”

The solution: smooth surfaces all

around. Design the machine to reduce material buildup such as clean-out holes under the upper rollers and sloped side frames. That is Hyundai’s approach.

“Material falls out and is easy to scoop,” says Rogers. “Our machine designs also

minimize the grooves and edges that can otherwise contribute to material build-up.”

David Godkin is a B.C.-based freelance writer and editor. Send comments to editor@on-sitemag.com.

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VOCATIONAL TRUCKS

Space and high visibility are driver priorities.

Peterbilt Platinum cab.

CAB RULES T

DRIVER RETENTION SPURS IMPROVEMENT TO VOCATIONAL TRUCKS

BY JEAN BURROWS

he importance of the cab in a vocational truck can’t be overstated. Your driver spends 95 per cent of his time there… Not looking at the shiny grilles and spiffy paint job on the exterior.

Those of us who drive a desk all day appreciate the comfort and efficiency that comes with a customized, ergonomically correct workspace. It’s slightly different for drivers – in addition to those considerations, safety is of key importance when navigating the hazards of highway driving and crowded job sites.

We surveyed seven vocational truck manufacturers about the features of their vehicles (such as dump trucks and concrete ready-mix trucks) that are specifically aimed at keeping drivers comfortable, productive and safe.

Driver comfort and satisfaction is a

major trend in dump-truck design, according to Kevin Baney, chief engineer at Kenworth Truck Co. He points to features such as a larger interior, a more logical dash and switch layout, better braking performance, and information centres with instant feedback as having the potential to improve the driver’s experience both on the road and at the job site.

“We actively engage customers for their feedback on cab design, both during the development process and after the product is in the field,” says Charles Cook, marketing manager for Vocational Products at Peterbilt Motors Co. “The cab designs of our Model 579 and 567 were the result of the most extensive research and development in our company’s history.”

Peterbilt worked closely with customers throughout the design process to refine every detail – from pedal and gauge placement to the look and feel of the materials, Cook says.

on-sitemag.com / 29

VOCATIONAL TRUCKS

International WorkStar.

Visibility is a high priority in all cab design.

“

FLEETS ARE SPEC’ING MORE PREMIUM CONTENT AND TRIM LEVELS TO HELP RECRUIT AND RETAIN THE BEST DRIVERS.

”

30 / OCTOBER 2015

“It’s a large investment to change the overall design of vehicles, so we make those changes strategically and don’t make big changes very often,” says David Hillman, vice president and general manager of Navistar’s vocational line. “But there’s never such a thing as a perfect spec.

Continuous improvement is the phrase that describes our approach.”

Navistar made major changes to its steel-cast vehicles about 10 years ago, at which time various ergonomic improvements were made. “We paid attention to such things as the location of dials and switches (and how this impacts drivers’ reach) and head turn (how easy it is for drivers to see what’s around them).

“We studied what tasks drivers performed in a day and how often, then built CAD models to test the human interface design.

We then shared those results with clients in a design clinic – bringing in customers and drivers as an additional litmus test.”

“Ergonomics and comfort go hand in hand. We design the interiors to maximize operator productivity and minimize driver fatigue. We do this through designs that enhance ergonomics and optimize comfort,” says Cook.

“Ergonomics involves almost every area

of cab design – gauge placement and illumination, interior lighting, visibility, pedal position, arm rests, seats, etc.,” says Cook.

Western Star, for example, offers large, waterproof switches that allow drivers to work with their gloves on and are protected from water and salt which can create shorts.

And once the product is in the field, the market provides feedback if there’s dissatisfaction with an existing design.

“The fleet managers will let us know what feedback they’re getting from the drivers,” Hillman says.

“We do customer satisfaction surveys and collect data through several channels, but the most important measure is direct communication with customers and dealers,” says Cook. “Peterbilt and its dealer network stay engaged with customers throughout the ownership experience and take the feedback that we get very seriously.”

CUSTOMIZATION The manufacturers offer various levels of customization – from interior finishes to seating to gauges. Navistar’s Diamond Logic electrical system allows for customization within the control panel, for example.

Wing panels reduce reach distances by swinging the panel closer to the driver. This can be handy on concrete mixers, which typically don’t carry passengers, but could encroach on passengers’ leg space in dump trucks or those used for paving installations that might have two or three people riding in the cab.

Cab design can reduce driver fatigue, allowing them to remain focused and productive throughout the shift, says Andy Hanson, North American Vocational sales manager at Volvo Trucks. “Separate inner and outer door seals keep elements and noise out, while the thick floor covering dampens noise and provides thermal insulation” he says, adding that the noise level within cabs is typically 72 to 77 decibels.

Both Peterbilt and Mack indicated that cab interiors can be customized to meet the full range of customer requirements and preferences.

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VOCATIONAL TRUCKS Logical, ergonomic presentation of vehicle data improves safety, productivity.

Mack Granite cab.

Mack Granite series: jobsite safety a priority for truck designers.

“Automatic and automated transmissions continue to gain share every year. They reduce operator fatigue and can improve fuel efficiency,” says Cook.

“Particularly with the industry’s shortage of drivers, operating a truck with an automatic or automated transmission can help lessexperienced drivers perform like a more seasoned driver.”

Mack also credits the increased use of automatic transmissions in helping reduce driver fatigue.

Physical comfort is important when you’re spending seven or eight hours sitting. Standard level features of Volvo seats include contoured cushions, a seven-in., fore-and-aft slide and a power air lumbar support. Additional features, including heated and extra-wide cushions, are offered at the Comfort level.

Steering wheels and steering columns can be adjusted for optimum drive comfort,

32 / OCTOBER 2015

while switches located on the steering wheel and stalk allow drivers to operate frequently used controls without taking their eyes off the road.

When Kenworth added four in. of space behind the seats of the T880 vocational truck to allow for more seat travel, it also opened up space on the back wall to hang coats and hard hats.

CREATURE COMFORTS Of course, cab comfort depends on sitting on a forgiving chassis.

At Mack, the Granite galvanized steel cab is mounted on airbags and shocks and the chassis is engineered to allow maximum wheel cuts to provide superior maneuvering in tight spaces.

Air suspension is standard on Volvo

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trucks. Rear cab suspension air bags are mounted outside the frame rails for greater cab stability when cornering, while lateral shock absorbers reduce swaying of the cab.

Hardened rubber dampeners in the suspension system help absorb the impact of a severe shock to the cab.

Western Star offers rubber bump stops to provide an improved ride over rugged terrain.

Freightliner mentions that its suspensions reduce axle vibration, resulting in a smoother ride for drivers.

Visibility is one of the most important operating features at a job site, says Baney of Kenworth. The windshield in the T880 is 50 per cent larger than its previous generation cab to give drivers a better view of the terrain, obstacles and workers around the truck.

All of the manufacturers mentioned windshield design and placement as important features.

Freightliner’s 114SD also touts outstanding visibility from a 2,500-sq. in. windshield and downward sloping cab hood. It also features a low step-in height and strategically placed interior and exterior grab handles.

Volvo’s VHD cabs feature a panoramic, one-piece windshield, slim A-pillars, and sloping side windows to increase drivers’ visibility.

“You always have a solid, three-point entry on Volvo trucks,” Hanson says, pointing out that the grab handles are located on the interior of the cab. This eliminates hands slipping off exterior handles that are wet from snow or rain.

Bluetooth-equipped steering wheels are standard on the VHD cabs, so drivers can use the phone hands-free, as are air bags.

Lane departure is a common cause of highway crashes and Volvo includes lane departure in its driver alerts. A windshieldmounted camera tracks the road markings and provides audible and visual alerts if the driver has drifted out of lane.

Remote diagnostics also impact driver productivity by letting maintenance staff determine whether flagged issues can wait

34 / OCTOBER 2015

Vehicle data at a glance: Kenworth cab.

to the end of the day, or the weekend. Last year, Volvo started monitoring its automated manual transmission (I-Shift) as well as the engine.

“Previously, if drivers saw a light come on in the instrument panel or a code they didn’t understand, they might have just parked the truck for the day to avoid damage,” says Navistar’s Hillman. “We say (remote diagnostics) takes unplanned downtime and turns it into a planned maintenance activity.”

GuardDog Connect is Mack’s real-time diagnostic and monitoring service. As with other systems, such as Peterbilt’s SmartLink or Navistar’s OnCommand Connection systems, once the truck arrives at a maintenance centre, the dealer and technicians already have the information and parts they need.

“If there is an increased focus when it

comes to cab interiors it is that fleets are spec’ing more premium content and trim levels to help recruit and retain the best drivers,” says Cook at Peterbilt. “With the industry’s shortage of drivers, recruiting and retaining the best operators can be challenging. Obviously equipment plays a significant role in a fleet’s ability to get and keep drivers.”

“The truck’s interior should accommodate and adjust to a wide range of body types and sizes,” Kenworth’s Baney says. “No fleet owner wants to hear a driver say he’s leaving or needs time off because he’s uncomfortable in the cab. The cab should adjust to the driver, not the other way around.”

Jean Burrows is a freelance writer based in Guelph, Ont. Please send comments to editor@on-sitemag.com.

YOU HAVE THE CON Ergonomics plays a huge role in dashboard design, ensuring switches are positioned to minimize drivers’ reach and to maximize the time drivers’ eyes stay on the road.

Some manufacturers are also incorporating an in-dash display unit. Mack’s Co-Pilot driver information display provides real-time fuel economy and trip data, along with detailed maintenance and fault summaries and supplemental sensor readings.

At Volvo, the over-sized driver information display presents data on fuel efficiency, trip mileage, battery voltage, and fluid levels. It can also be set to display specific gauges. And the performance bonus display provides real-time driving feedback to help increase fuel efficiency.

Kenworth’s driver performance centre is a five-in., high-resolution colour display with digital gauges that provide real-time operation about the truck’s operation, including oil and transmission temperatures, a sweet-spot visualization of RPM and fuel economy, engine torque, PTO status, and pop-up diagnostic alerts.

At Navistar, the driver information display includes Bluetooth and an integrated microphone in the headliner.

Voltage 36 V Weight* 3.9 kg/8.6 lb Cutting Wheel Diameter 230 mm/9” Maximum Cutting Depth 70 mm/2 ¾” AP 180 Battery Running Time 15 mins AP 180 Battery Charging Time with AL 500 Quick Charger: 100% 25 mins AR 900 Battery Running Time 75 mins

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Leasing

into with the lessor. “People are free to enter into whatever they want,” notes Powell. “That allows for a lot of flexibility.”

“The great thing about it is that it’s very customizable. The tough thing about it is that it’s very customizable,” says Manitzas with a laugh.

TIPS AND TRICKS IN

LEASING

KNOWING YOUR REAL NEEDS GETS YOU THE BEST LEASE FOR YOUR EQUIPMENT

BY JIM BARNES

S

elf-knowledge and familiarity with your financing options is crucial in making good decisions on equipment finance. That might sound obvious, but often it is not always the case – especially when it comes to equipment leasing.

“There’s still a big gap in knowledge,” says Lou Manitzas, team leader, OneWorld Business Finance, Austin Tex. Many people think of car leases when they think about leasing. “They don’t realize there are a lot of different ways to do a lease on equipment.”

Before you even begin to think about whether to buy, obtain a capital lease or operating lease or rent, you have to define your needs in terms of both the machine and your business finances.

FINANCE AND TAXES Tax liability is one concern. If you want to keep assets off your books so you have more elbow room to finance other aspects of your business, an operating lease (where the lessor retains ownership of the equipment) might be the way to go. However, if you are a public company, the trend has

been to put all leases on the balance sheet for transparency, according to David Powell, president and C.E.O., Canadian Finance & Leasing Association, Toronto Before you approach lenders, you need to be familiar with your financial statements and company history. That will give you some idea of the rate you can expect – which might not be the rate advertised on the lessor’s website.

For smaller deals, “application-only” financing may be available, where you just fill out an online application and include basic financial details, notes Manitzas. For larger transactions (usually more than $150,000), the lender may request three years of financial statements. You should also be prepared to provide two years of company tax returns and personal financial statements and tax returns on the guarantors or company owners.

You will also need to provide a comparable interim statement for the most recent monthend, according to Manitzas.

The first thing to note about commercial leases is that they are not regulated.

They are simply legal contracts you enter

DO THE HOMEWORK When beginning the leasing process, first check out the prospective lessor. He is researching you and you should research him, through the Web, the Better Business Bureau and any references, says Manitzas.

It’s hard to believe that this needs to be stated, but read your lease documents carefully and then hand them off to your lawyer and accountant. “Too many people sign leases and send them back without a review. This can only cause problems,” notes Manitzas. Do not assume that the proposal and the lease document are identical. The lease document will supersede any proposal you may have received.

Read the language about renewals and extensions carefully. Some leases provide for guaranteed renewals without lessee approval, notes Manitzas. Watch for language that builds in extensions; for example turning a 36-month contract into one with 36 months and a 12-month extension. That’s extra profit for the lessor.

“When you’re done with the process and funded, make sure to receive countersigned copies of all documents,” says Manitzas. “Some companies will try to sign some lease documentation but not execute critical addenda – materially changing your agreement.”

WORKING WITH THE LESSOR As with other business relationships today, an element of collaboration is developing between lessors and lessees. In an operating lease, the lessor is most likely going to take back the equipment at the end of the lease, so he has a vested interest in understanding the technology and how it has been used in calculating residual value, notes Powell.

on-sitemag.com / 37

Leasing TEN QUESTIONS TO ANSWER BEFORE SIGNING A BUSINESS LEASE “You want to be clear about how you’re going to be using the machine, so there are no surprises when you return it,” says Powell. “If it’s an operating lease, you have the responsibility to maintain the equipment... [The lessor has] a good sense of what ‘normal wear and tear’ is for different kinds of machine.”

“When you go in to describe the equipment you need in the application, the lessor might actually be able to give you some good advice,” adds Powell. “They have a lot of operating information, and some ways they can almost be like a consultant.”

Even if it is a capital lease where you keep the equipment, the lessor wants to see you succeed. It’s not altruism, it’s getting repeat business. “They will make efforts to accommodate a good customer.

They might be very willing to renegotiate the terms of the lease,” says Powell.

You can finance equipment through an independent leasing company like his, a bank or the manufacturer, says Manitzas.

He tips his hat to the dealers. “If you have upper-tier credit, it’s worth talking to the equipment vendor,” says Manitzas. “They can offer very low lease rates by balancing off other elements of equipment costs. There could be discounts behind the scenes,” he says. “If the goal is to get the equipment under a service contract and get new equipment every three years, then it’s probably

1. How am I planning to use this equipment/vehicle and for how long will I need it?

2. Does the lessor understand my business and the role of this transaction in it?

3. What is the total lease payment, and are there any other costs I could incur before the lease ends?

4. What happens if I want to change the lease or end it before the term expires?

5. How am I responsible if the equipment/vehicle is damaged or destroyed?

6. What are my obligations for the equipment/vehicle in terms of insurance, taxes, and maintenance during the lease term?

7. Can I upgrade the equipment/vehicle or add equipment under this lease?

8. What are my options at the end of the lease?

9. How do I return the equipment/vehicle?

10. Are there any costs at the end of the lease?

Provided by CFLA. best to go to the manufacturer. You’re always going to get the best deal that way.”

However, “If the goal is the best product at the cheapest rate, you’re probably best to go with an independent,” says Manitzas.

LEASING TRENDS The industry is evolving as most are, driven by technology. Lessees and lessors becoming more like partners, says Powell.

GPS and remote diagnostics can help the lessor monitor the condition and usage of the equipment, he notes. “Lease payments made on a per-day or even perhour basis seem to be a coming trend,” says Powell. Ultimately, payments will be based on usage. “We’re almost there, now.”

“Increasingly, fleet companies are offering fleet-management services,” notes Powell. Instead managing your equipment

SUMMARY OF EQUIPMENT FINANCING OPTIONS CRITERIA CASH PURCHASE LOAN Initial capital required Significant Variable Down payment usually 100% of cost at least 25% Effect on existing Some Reduction banklines Decreases available Loss of liquidity credit line Effect on operating Significant Variable capital Impact from High front-end costs down payment Payments Significant Variable Entire cost of equipment paid up-front

in-house, the leasing companies will offer those services, according to Powell.

Flexibility in payments based on usage is another important trend. For example, “If a big part of your business is snow-removal, then you might want to tailor a lease where your payments for certain pieces of equipment are higher in winter when you have cash flow,” says Powell.

The bottom line? Know yourself, know the lease and work with the lessor.

“You would be shocked,” about some companies’ casual attitudes toward leases, says Manitzas. “Some very large companies don’t even read their lease agreements... At the end of the day, it’s a five-page document in 10 point font… Most people skim it, sign it, and send it back.”

Jim Barnes is contributing editor to On-Site.

Send comments to editor@on-sitemag.com.

CAPITAL LEASE Minimal May be only 1 or 2 months advance payments

OPERATING LEASE Minimal May be only 1 or 2 months advance payments

Possibly none

Likely none

Leases frequently represent sources of additional credit

Leases frequently represent sources of additional credit

Minimal

Minimal

Low front-end cost

Periodic payments

Fixed Fixed No increase during the term No increase during the term Payments may move with of lease (Floating rates often of lease (Floating rates often changes in interest rates also available) also available) Provided by CFLA.

38 / OCTOBER 2015

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Professional content for professional contractors

OCTOBER 2015

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Your new drug plan

XXXXXXXX

Medicinal weed is moving into the mainstream and employers must have a strategy in place to manage the inevitable issues.

BY JOE TERRETT

W

ho would have believed the time would come when employers would have to find ways to accommodate weed (aka marijuana) in the workplace? You had better believe it!

Now that marijuana is considered legitimate for “medicinal” purposes and is prescribed by doctors to treat a variety of maladies from anxiety disorders to acute, chronic pain, it is something employers will have to deal with. Set aside the image of a slacker listening to Dark Side of the Moon while digging into a bag of Cheetos to satisfy post-toking munchies.

“We have this imagery in our heads of a stoner, but medical marijuana can be beneficial to some patients,” says Dr. Barry Kurtzer, medical director and chief medical review officer of DriverCheck Inc., a provider of workplace medical testing and assessments based in Ayr, Ont. Kurtzer, heading up a session on medical marijuana at the recent Partners in Prevention safety conference held in Toronto, Ont., stressed that medical marijuana is now like any other prescription medicine.

Since the Marijuana for Medical Purposes Regulations (2013/2014) were implemented a year ago, patients no longer have to go to Health Canada for their medicine – but they are not allowed to grow their own, either. It can only come through licensed producers (LPs), of which there are currently 17 who grow and sell. Eight others just grow. Prescriptions come from doctors or nurse practitioners.

Health Canada estimates that there will be 450,000 authorized patients by 2024 (currently, there are 40,000) and there are as many as a thousand LPs under review.

The therapeutic ingredients – tetrahydrocannabinol or THC, and cannabidiol or CBD (this one lacks the high) – are activated by heat, either by lighting up or using a

vapourizer (which heats but does not ignite).

An employment and labour bulletin from McMillan LLP, a Toronto law firm, observes that employers have a duty to accommodate employees’ disabilities to the point of undue hardship. A court would look at the cost, whether there is outside funding to subsidize the cost, and the health and safety issues that may be involved. If second-hand smoke is the issue, an employer would have to demonatrate that the user could not be isolated or a vapourizer would be a problem.

So far, no employer has been able to make the undue hardship case.

“In Canada, automatic job termination

without case-by-case review could result in human-rights complaints or other legal consequences,” Kurtzer warns.

He recommended employers put a marijuana policy in place and offer employee education as well as supervisor training; ensure the user is okay for safety-sensitive work; conduct periodic drug tests; monitor outcomes of physician follow-ups; and find other work for those not fit forsafety-sensitive activities.

Joe Terrett is editor of Plant, a publication of Annex Business Media East. For more information, contact: editor@on-sitemag.com.

on-sitemag.com / 41

EXHIBITORS Company Booth Website Armtec.......................................44.................... www.armtec.com Bon Tool.....................................14....................www.bontool.com Canadian Cutting and Coring........52....................... www.cancut.ca CanCrete Equipment....................29..... www.cancreteequipment.ca Dayton Superior...........................37......... www.daytonsuperior.com Form and Build Supply................22........... www.formandbuild.com HCM Shotcrete.............................3...............www.hcmshotcrete.ca International Surface Preparation Canada......................39...... www.surfaceprepcanada.ca Key Resin...................................35.................. www.keyresin.com Kryton International.....................24..................... www.kryton.com National Concrete Accessories......46............................www.nca.ca Nawkaw Corporation/ US Formliner..............................27................... www.nawkaw.com NGL Group..................................13................ www.structegra.com Poraver North America.................48.................... www.poraver.com ProAll International......................49..................www.proallinc.com Quad-Lock Building Systems.........2.................. www.quadlock.com Ready Mixed Concrete Association of Ontario..................41....................... www.rmcao.org RectorSeal..................................50................ www.rectorseal.com Reinforcing Steel Institute of Canada......................26.........................www.rebar.org Tilt Wall Ontario...........................21....................... www.tiltwall.ca As of Aug., 2015.

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Held concurrently with Construct Canada, PM Expo, HomeBuilder & Renovator Expo and IIDEXCanada, the event features a concrete-specific tradeshow and educational events.

The Pavilion will be open from 10 AM to 5 PM on Weds. and Thurs. and from 9 AM to 1 PM Fri. The Ready Mixed Concrete Association of Ontario is the sponsor.

42 / OCTOBER 2015

International architectural roundtable: How is concrete transforming design now and in the future? – Weds., 8 AM High rise speed of construction: Highlights the latest advances in costeffective, insulated concrete forming for high-performance thermal shells and disaster-resistant structures.

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Design, materials and workmanship in concrete floors will be reviewed with a focus on current issues, concerns and solutions.

Information on the new national standard CSA A23.1-2014 “Concrete Materials & Methods of Concrete Construction” will be included. – Thurs., 9 AM Six storey construction: Wood or concrete? Features a presentation on a materials-selection approach when identifying types of construction for mid-rise construction. – Thurs., 10:30 AM Ontario Cast-In-Place Concrete Development Council Roundtable: This discussion will focus on the design and construction challenges unique to major tunneling projects. – Thurs., 1:00 PM For more information, contact: Informa Exhibitions (416) 512-0203 events@informacanada.com www.concretecanadaexpo.com

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Software

By Jacob Stoller

Better managing payment data

M

uch of what contractors do with software has to do with the handling of money. More than their peers in many other lines of business, contractors must monitor, record, and attribute a wide and sometimes unpredictable array of expenses. Getting it right often spells the difference between profit and a debilitating loss on a project.

Furthermore, errors in reporting can have legal and regulatory repercussions.

IT systems that manage these chores have become more powerful and, with the help of cloud computing, more affordable.

Contractors, however, should also keep an eye on a parallel trend – the widening scope of online payment services provided by financial institutions.

The charge has been led by credit card providers such as Visa and MasterCard. A decade ago, credit and debit cards were reserved for occasional purchases such as office supplies. Today, businesses are using these technologies increasingly for strategic expenditures that were formerly handled by purchase orders.

The key is a myriad of variations on the traditional credit card that are collectively referred to as purchasing cards, or p-cards.

Unlike their forbears, p-cards often involve no plastic at all, but 16-digit virtual card numbers that can be assigned for specific cost centres and then returned to a pool and re-assigned. The advantage for businesses is that they gain access to sophisticated online portals for monitoring and tracking expenses, assigning spending authorities and reporting for regulatory purposes. Essentially, this allows them to outsource various aspects of their e-procurement.

“P-card use has expanded well beyond

traditional plastic card usage by employees for the purchases of goods and services,” says Patrick Sulston, vice-president and senior business leader, commercial business development at MasterCard Canada.

According to a 2014 North American study conducted by the RMPG research corporation, 18 per cent of businesses are using p-cards for strategic spending, 10 per cent say they will in the next year and a further 20 per cent will go over the next three years.

Mike Patterson, market management – Wholesale Card Solutions at Citi Canada, says p-card adoption for very large contractors is in step with other industries, but that smaller providers are lagging behind the curve.

“Typically, adoption slows in the construction sector as you move towards the small to midsized businesses,” he notes.

Through the supporting management portals, the p-card systems give contractors access to a suite of expense-monitoring tools that allow managers to achieve a fine degree of control over the day-by-day spend.

Essentially, contractors are getting “an expense product that can help them streamline their processes, and at the same time give them information that consolidates where they spend money and who spends what,” says Don Manson, senior manager for Commercial Cards at Scotiabank. Restricting purchases to preferred vendors – allowing for volume discounts – is one aspect of this level of control.

An important feature is real-time reporting of irregularities. “You can use reporting tools to ensure compliance without process overload,” says Sulston. “Rather than having to monitor individual transactions, contractors can oversee and manage purchasing card programs by exception.”

Much of the benefit to the bottom line, Patterson notes, is around speed. RPMG, for examples, reports a 60 per cent-plus improvement in the time between order and the receipt of goods. All this helps contractors improve their working capital, making them more competitive.

Contractors will find growing pressure from their customers to accept them. Since vendor fees finance the card systems, card providers are hoping that the appeal of a shorter payment cycle will encourage more contractors to sign on. To sweeten the pot, they have also begun to provide volume discounts on large transactions. As well, payment could get even faster. A method called straight-through processing, where payments are processed immediately upon invoice, is now being adopted by some organizations in the U.S.A. Another improvement on the receivables front is mobile technology for accepting traditional credit cards. One that is attracting a lot of attention is Square, a system that allows anybody to collect payments in the field using a credit card through a portable device that attaches to a computer or cell phone.

A mechanical contractor, for example, could equip its service technicians with these devices, enabling them to collect payment for service calls on the spot.

“Square has many features perfect for contractors, such as a mobile invoicing feature and offline mode which allows you to take a payment even if you don’t have a reliable signal on your phone,” says Jenny He, communications lead, Square Canada.

Like the card providers, Square provides online tools for tracking of transactions, which includes integration with QuickBooks and other popular software packages.

Jacob Stoller is a principal of Torontobased consultancy StollerStrategies. Send comments to editor@on-sitemag.com.

on-sitemag.com / 45

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RISK

By David Bowcott

Take advantage of today’s insurance capital oversupply

A soft insurance market can help you better manage your company’s risk

T

he world is awash with capital, and that capital is desperately trying to find alternatives to traditional investment options.

Traditional investments like global equity markets and bond markets don’t offer the level of diversification that modern portfolio managers need to ensure minimal investment volatility and achievement of investment goals. One of the beneficiaries of this quest by global sources of capital to find alternative investments is your company.

The insurance market has an over-supply of capital and, as Economics 101 tells us, excess supply leads to lowering prices. The insurance industry refers to this as a “soft” market. We have had a soft market for the past several years, as global capital sought more and more investment options in order to meet return goals over the same period.

So how is capital investing in the insurance industry to provide this excess supply of funds?

One of the relatively new vehicles in the market is the catastrophe bond. The traditional capital structure of the insurance industry was that primary insurance carriers would sell insurance to individual and corporate consumers. To manage their internal risks, they would spread their risk to reinsurance companies that would be paid ceding premium for taking on all or a portion of the underlying risk written by the primary insurer.

These catastrophe bonds, or insurance bonds, are a replacement source of capital to reinsure company capital. In most cases, the primary insurance companies would

cede their catastrophic risk amongst the reinsurance companies, but with global sources of capital attempting to quench their thirst for non-correlating investment options, the cat bond/insurance bond market is bringing this hungry capital to the table – and it is effectively stealing the lunch of the reinsurance industry.

A brief note on correlation: correlation is an investment measure of diversification.

If investments are highly correlated, they tend to move up and down at the same time. A classic tenet of investing is diversification, which means you look to develop a bundle of investments that do not correlate and thus you minimize the risk that your portfolio will have dramatic volatility. That is to say, it will plot along with a more predictable return of capital.

Given that the chance of a hurricane has little to do with the equity markets going up or down, you can understand why the world’s sources of capital would be interested in taking a piece of insurance investments. The cat bonds/insurance bonds allow global sources of capital to purchase the bonds and thus bet on the risk of things like earthquakes occurring in the northern hemisphere.

Another dynamic that has left the global reinsurance market on the sidelines has been the growing trend of primary insurance companies retaining more risk, given greater levels of actuarial comfort with risk. Sometimes it is also a growing need to meet return goals with some greater risk taking.

This higher retention appetite of

primary insurers and the growth of cat bonds/insurance bonds have left the reinsurance sector out in the cold. And when they are cold, they too get desperate – thus, the amount of capital competing for your premium dollars has increased over the past several years. This is a good thing if you are looking to achieve strong coverage at very competitive pricing.

With so much insurance capital in the market, the ability for a contractor to take advantage of coverage for risks they face to their business has never been better.

With the growing amount of risk-taking opportunity in the construction world, everincreasing drivers like globalization, new project-delivery models and the growth of lifecycle outsourcing, insurance capital is a vital strategic partner if you are looking to take intelligent risks in order to attain success.

You are in the business of taking on risk and charging for that risk you have taken on. If you are not deeply familiar with all your options to manage that risk, you too will have an investment portfolio that is exposed to excess volatility. Do yourself a favour and make sure you are fully aware of the changing capital dynamics of the insurance sector and all the tools that are currently available, given this changing dynamic, to more effectively manage your company’s risks/opportunities!

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

on-sitemag.com / 47

Professional content for professional contractors

October 2015

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on-sitemag.com / 49

CONTRACTORS & THE LAW

by Alexander C. Bjornson

Mental Distress and Building Contracts

C

When is a contractor liable for an owner’s peace of mind?

ontractors often deal with claims for deficiencies from owners. Most contractors do not realize that in certain circumstances they could be held responsible not only for the cost of remediating a deficiency, but also for damages for mental suffering caused by the inadequate construction.

Awards of “general damages” such as this are still part of a developing area of the law and are only granted in limited circumstances. One type of general damages – those for mental distress – are recoverable where such damages were in the reasonable contemplation of the parties at the time the contract was made, and an object of the contract was the “peace of mind” of one of the contracting parties.

The degree of suffering must be enough to warrant compensation. Damages for mental distress arising from breach of contract are generally not awarded where both parties are sophisticated commercial entities.

Damages for mental suffering were recently awarded in a decision coming out of Newfoundland and Labrador. In Hickey’s Building Supplies Limited v. Sheppard, 2014 NLCA 43, the Sheppards wanted to build a retirement home. To move around, Mrs. Sheppard relied on a cane, a wheelchair, or had to crawl on the floor. It was very important to the Sheppards to have a home that gave them pleasure in their retirement and also provided suitable accommodation for Mrs. Sheppard’s needs.

Although the building contract did not explicitly require a level floor, the Court found that the Sheppards had contracted for one.

The contractor was fully aware of Mrs. Sheppard’s medical and disability issues and knew

50 / OCTOBER 2015

that the Sheppards wanted floors that were level and continuous. This was reflected in the contractor’s notes, discussions with the Sheppards, and the installation of special features to accommodate Mrs. Sheppard.

Instead of a level floor, there was a quarter-inch difference between the tile and hardwood flooring in the home. While the contractor conceded this difference existed, it argued that this was permitted under the National Building Code, which incorporates accessibility standards. By simply adding transition strips, the flooring was compliant with the Code and the written terms of the contract.

The Court found that the contract required level floors because the contractor knew of the Sheppards’ requirements for floors that were level and consistent. Consequently, the Sheppards were awarded damages for the cost of remediating the floors.

A majority of the Court of Appeal also agreed that the uneven flooring warranted an award of general damages for mental distress. Mrs. Sheppard’s circumstances made it foreseeable that failure to live up to the terms of the contract would cause distress. As conceded by counsel for the contractor, an object of the contract was peace of mind. The contractor understood the psychological benefit that the Sheppards had contracted for. While any construction project should result in a floor that is hazard-free, it was particularly foreseeable in this instance that mental distress would result from the deficiency.

Turning to whether the degree of mental distress warranted compensation, the majority noted that Mrs. Sheppard spent more time at home than most people and the inconsistent

flooring required her to go about her activities in a state of fear and anxiety associated with the risk of tripping. She was particularly vulnerable because of her compromised balance and fragility. Mr. Sheppard also suffered from the risk of tripping and bearing the worry and concern over his wife.

Concluding that an object of the contract was “peace of mind,” the contract had been breached and the degree of distress warranted compensation, the majority of the Court of Appeal upheld the trial judge’s award of $15,000 to the Sheppards jointly.

It is clear from the Court’s reasons that in rare circumstances, where a party has contracted for “peace of mind,” failure to satisfy contractual obligations may lead to damages for mental distress.

This decision is particularly applicable to contractors dealing with individuals rather than commercial entities. Contractors can mitigate the exposure that may be faced in “peace of mind” contracts by clearly drafting exclusion language. For owners, the decision underscores the importance of having their construction requirements set out in the contract. If the Sheppards had ensured that the level flooring specifications were stipulated clearly in the contract, the litigation could have potentially been avoided.

(This article is for information purposes only and may not be relied on for legal advice.)

Alexander C. Bjornson is a lawyer at the law firm of Borden Ladner Gervais LLP. He practices in the area of commercial litigation, with an emphasis on contract and construction disputes.

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