Construction Business | January/February/March 2019 Vol. 16 No.2

January/February/March 2019 Vol. 16 No.2

PM 40063056

Penticton Hospital Tower Rory Kulmala, VICA CEO | Infrastructure | Roofing Insurance, Bonding, Surety | 2019 Wood Works! BC Awards

keep at th s ng Drawi centralized. your data that s rd oa hb Das ts. gh si in give you

Everything on one powerful platform.

Manage everything from tendering to closeout with the world’s leading construction software. Procore helps keep your team in the know by connecting field and office to deliver projects on time and on budget.

See for yourself at procore.com/tour

field ep ke to ss Mobile acceice connected. and off procore.com | 866 477 6267

Inside 06 Connections Rory Kulmala, CEO of the Vancouver Island Construction Association, is focused on bringing value and service to members.

January/February/March 2019 | Volume 16 No 2

PUBLISHER

MANAGING Editor Contributing writers

10 Feature Project The Penticton Hospital Tower is a significant addition to the community and will improve healthcare delivery for the city and the South Okanagan region.

Industry Focus

B.C./ALBERTA SALES

14 Insurance, Bonding, Surety

Improving Infrastructure Planning Carbon Reduction and Trenchless Technology Collaboration in Public Procurement

Departments 04 Message from the Editor 27 The Legal File The ABCs of CBAs Budgets and Estimates: Are They Binding?

Certified and Deemed Substantial Completion

30 Industry News

Charles Bois Katy Fairley Kirk Goodrum Grant Haddock Jonathan Huggett James Klassen Brian Lawson Steve McConnell Tim O’Connor David O’Sullivan Derek Ratzlaff Vita Dos Santos Tim Sportschuetz Dan Gnocato Tel: 604.549.4521 ext. 223

PRESIDENT Kevin Brown

20 Roofing

23 Infrastructure

Cheryl Mah

PUBLISHED BY

Financial Capital Challenges Is Subcontract Default Insurance Dead in Canada?

Insurance Exclusions for Defects

A Fluid Solution: PMMA roof membranes Atypical Roof Construction Challenges Achieving Green Roof Success

Dan Gnocato dang@mediaedge.ca

vancouver office 2221 Hartley Ave. Coquitlam, B.C. V3K 6W9 Tel: 604.549.4521 Fax: 604.549.4522 Toronto office 1000-5255 Yonge St. Toronto, ON M2N 6P4 Tel: 416.512.8186 Fax: 416.512.8344

Copyright 2019 Canada Post Canadian publications mail sales publication agreement no. 40063056 — ISSN 1710-0380 Return all undeliverable Canadian addresses to: Suite 1000 — 5255 Yonge Street, Toronto, Ontario, M2N 6P4

PRINTED IN CANADA

Construction Business is published four times a year by MediaEDGE Communications Inc. as follows: January/ February, March/April, September/October, November/December.

Yearly Subscription: CANADA 1YR $35* 2YR $60* USA 1YR $60 2YR $110 INT 1 YR $85 2YR $150 *Plus applicable taxes REPRINTS: No part of this magazine may be reproduced in any form — print or electronic — without written permission from the publisher. Requests for permission to reprint any portion of this magazine should be sent to the publisher.

Circulation Inquiries: 416.512.8186 ext. 232 circulation@mediaedge.ca

proud sponsor of

Cover Photo Penticton Hospital Tower

February 12 & 13, 2020 Construction Business is British Columbia and Alberta’s construction magazine. Each issue provides timely and pertinent information to contractors, architects, developers, consulting engineers, and municipal governments throughout both provinces. Complimentary copies are sent bi-monthly to all members of the Architectural Institute of B.C., B.C. Construction Association, B.C. Roadbuilders and Heavy Construction Association, Consulting Engineers of B.C., Construction Specifications Canada — B.C. Chapter, Greater Vancouver Home Builders’ Association, B.C. Ready-Mixed Concrete Association, Independent Contractors and Businesses Association of B.C., Urban Development Institute of B.C. and Vancouver Regional Construction Association.

November 6 & 7, 2019

Editor’s Note

Collaboration

A

nyone who has ever been seriously injured understands the important role that hospitals play in our communities. My family has had our fair share of hospital visits with broken bones topping the list of reasons. Having a modern facility that offers quality care makes a big difference in stressful situations.

For Penticton, the new patient care tower at the regional hospital is a vital expansion that will ensure safe, timely and effective healthcare. The building is the largest one underway in the city and like any hospital project, it presented many challenges. Read about how the team led by EllisDon delivered this complex job on time and on budget with strong teamwork and collaboration.

Also inside this issue, we speak with Rory Kulmala, CEO of the Vancouver Island Construction Association (VICA). Kulmala says the island has been seeing record activity levels over the past few years and he anticipates a strong 2019. He is focused on making sure VICA continues its mandate of enhancing value and services to its members. This year the association is introducing the inaugural VICA Awards in April, with Construction Business as the proud media sponsor. Look for full coverage of the awards in our next issue.

Our annual feature on insurance, bonding and surety can be found starting on page 14.

Subcontractor default insurance and defect insurance are highlighted by industry experts. In

our infrastructure section, the focus is on the importance of collaboration in public procurement and strategic infrastructure planning.

Cheryl Mah Managing Editor

BFL MAKES A DIFFERENCE

INSURANCE, RISK MANAGEMENT & SURETY BOND BROKERS FOR THE WESTERN CANADIAN ROAD BUILDING AND ROAD MAINTENANCE INDUSTRY For the Western Canadian ConstruCtion and development industry

BFL CANADA Insurance Services Inc.

Suite 200 - 1177 West Hastings Street, Vancouver, BC V6E 2K3 Phone: 604.669.9600 | Fax: 604.683.9316 construction@bflcanada.ca VANCOUVER • CALGARY • WINNIPEG • TORONTO• OTTAWA • MONTREAL • QUEBEC • HALIFAX |

4

construction business

January/February/March 2019

WWW.BFLCANADA.CA

Regional Safety Advisors Experienced construction industry professionals ready to answer your questions about OH&S, including WorkSafeBC regulations.

We’ve got the answers you’re looking for..

Our Regional Safety Advisors are available to assist contractors who have safety questions or concerns, are looking to develop safety programs and materials, or want to prepare for COR™ (Certificate of Recognition).

These services are available to all construction (sector 72) employers, and select aggregate and ready-mixed employers.

Now serving contractors in the Lower Mainland, Northern BC, Southern Interior, and Vancouver Island.

Each Regional Safety Advisor offers extensive knowledge of and experience in construction industry health and safety, and will focus on providing straightforward and practical assistance to all types and sizes of construction companies for whom meeting safety goals can sometimes be challenging.

E E R Fconsultation • in-house and/o on-site safety r advice • quick & easy !

• just call or em ail Making Safety Simpler 604.636.3675 | info@bccsa.ca

Connections

Enhancing Value and Service

fter two years into his job as the chief operating officer of the Vancouver Island Construction Association (VICA), Rory Kulmala says it’s everything he expected and more.

Kulmala assumed the role in February 2017, succeeding long-time CEO Greg Baynton who spearheaded the organization since 2006.

“Running a construction association wasn’t really something on my radar but I knew Greg from working in the industry and he was an early advisor to me about the role when he decided to retire,” says Kulmala. “With his encouragement along with friends and colleagues in the business, I applied for the job.”

While Baynton might be a tough act to follow, Kulmala is up for the challenge. A Victoria resident, Kulmala has more than 25 years of industry-related experience within the private and public sectors focusing on engineering, construction and large-scale development projects both regionally and nationally.

6

construction business

Born in Thunder Bay, Ontario, Kulmala graduated with a Diploma in Civil Engineering from the Confederation College in 1993. He went on to obtain an MBA from Royal Roads University. He also has his professional designation as an applied science technologist and is an accredited project management professional.

“I was working at the Naval Reserve when I finished my schooling and then I came out to the West Coast for training and made the decision to stay,” recalls Kulmala, noting the mild winter won him over.

His career includes stints for a Victoria developer, as a consultant in northern Alberta and running his own company. He also worked at B.C. Ferries for almost 12 years and spent two years at B.C. Transit, involved in engineering and project management.

Prior to joining VICA, Kulmala was at bcIMC where he worked with the real estate development team on a variety of investments across the country. A corporate structure change at bcIMC in 2016 required a move to Toronto which was not

January/February/March 2019

By Cheryl Mah

of interest to Kulmala. That was the same time the opportunity at VICA presented itself.

Advocating for the membership and industry has not been a difficult transition for Kulmala, who believes his background in construction has definitely help to smooth the way.

“I’m really enjoying engaging with our members. I know what they do. I know how they do it. I think that’s how I feel I provide value — I’ve been there, done that,” says Kulmala, who retired from the Naval Reserve in 2017 after 28 years. “My role is to ensure the association is providing relevance and value to members and that the expectations of the board and members are being met whether it’s through advocacy, networking or education.”

Founded in 1912, VICA is one of the oldest not-for-profit construction associations in Canada. The association operates out of two offices (Victoria and Nanaimo) with about 1012 staff. It represents more than 450 member companies working in the commercial, institutional, and multi-family residential sectors.

Wilson M. Beck Insurance Services Inc. “General Insurance & Contract Bond Brokers” ~ Serving the construction industry ~ ~ Personal, auto & ICBC fleet insurance ~ ~ Commercial insurance ~

BURNABY 303-8678 Greenall Avenue Burnaby, BC V5J 3M6 Tel: 604.437.6200 Toll Free: 1.888.437.1100

KELOWNA 107-2040 Road Kelowna, BC V1Y 9N7 Tel: 250.763.3840 Toll Free: 1.888.292.6202

CALGARY 640-1414 8th Street SW Calgary, AB, T2R 1J6 Tel: 403.229.2060 Toll Free: 1.855.229.2002

Constructive Advice — Superior Service www.wmbeck.com

Connections

A main initiative for VICA in 2019 will be working with industry partners and municipalities on social procurement.

Construction activity on Vancouver Island has been at record levels for the past two years, with economic and population growth fueling the demand for residential and non-residential space. VICA expects total building permits to be around $2.6 billion for 2018, which is 16 per cent higher than the total value in 2017.

A number of major projects under construction or in the planning stages are helping to drive volume on the island including the Capital Park mixed use project, various wastewater treatment plant upgrades, the Victoria Crystal Pool replacement and a new Cowichan Valley Hospital.

“When you have strong housing, it will drive demands and needs around the non-residential sectors,” says Kulmala. “The outlook for 2019 is very strong. Victoria is seeing record amounts of multi-res type construction. There are still a fair amount of public projects and investment projects that still need to happen.”

The positive outlook, however, is constrained by the ongoing concern over a skilled labour shortage. Retirements and “just not enough people coming into the trades” continue to be a challenge for the industry, notes Kulmala.

“By 2025, we’re estimating we’re going to be short 12-15,000 skilled trades in B.C.,” he says.

“We have lots of room for growth. We’re seeing 1 in 60 youth in school going into trades and we need to get that number up. We are also motivated to see the number of women increase.”

Attracting people is made even more challenging by other industries (healthcare, hospitality) also competing for talent, he adds. As well, projects elsewhere in B.C. such as LNG opportunities are a big draw for many trades.

“We do a lot of programming with youth and promoting construction to youth — that’s what I 8

construction business

really enjoy about my job — the outreach, training and education,” says Kulmala, noting VICA offers Construct Your Future, a free program that provides in-class training for people to learn about construction as well as job placement.

Along with education, networking opportunities are another core member benefit that the association offers year round. In April, the association will be hosting its second annual conference and launching its inaugural awards gala. Kulmala acknowledges starting an awards program is a big undertaking but says showcasing member successes is important and guidance from VRCA president Fiona Famulak has been valuable. VRCA hosted its 30th annual Awards of Excellence in 2018.

Working and collaborating with the other regional construction associations is another important piece of what VICA does, according to Kulmala.

“It allows continuity across all the independent associations in terms of advocacy, issues and approach ....so I do have regular dialogue with my counterparts,” says Kulmala, who also sits on the board of trustees that governs the BCCA Employee Benefits.

A main initiative for VICA in 2019 will be working with industry partners and municipalities on social procurement. Social procurement is a growing practice that seeks to better leverage tax dollars to achieve positive social outcomes aligned with community values and strategic objectives.

“Over the last two years we’ve been working with the Association of Vancouver Island and Coast Communities to develop a partnership for a social procurement hub. This is a first for Canada, I believe, where you have a region that’s going to develop and create a mandate for

January/February/March 2019

social procurement,” explains Kulmala. “We are looking forward to working with our partners and industry on this important development in public sector procurement practices.”

The aim of the procurement initiative is to develop a cohesive approach to social procurement in local governments across Vancouver Island and the Sunshine Coast while enabling individual communities to create their own strategic focus regarding community benefits.

Social procurement is similar to the community benefit frameworks introduced at the federal and provincial levels in 2018. The NDP’s Community Benefits Agreement (CBA), however, introduced a building trades union-hiring model for major public-sector infrastructure projects, which has drawn strong opposition from key industry groups and business organizations.

“We support social procurement and community benefit agreements. Our sensitivity is that a CBA need not be tied to a labour accord such as labour agreements,” says Kulmala. “We don’t align to a prescribed labour component and the government setting up a whole new crown to manage labour is a recipe for increased costs.”

As VICA starts another year, the association’s focus will continue to be on advocacy, member engagement and enhanced services.

“Our goal is always to demonstrate to our members that there is value in the association and value in membership,” he says. “VICA is a respected voice on the island for the industry and I take great pride in that role. We will continue to collaborate with industry players to provide solutions and to help our communities thrive.”

Outside of work, the 57-year-old is an avid motorcycle rider and enjoys supporting the various activities of his two teenage daughters.

WHAT MAKES OUR

SURETY SOLUTIONS UNIQUE? OUR

SPECIALISTS KNOW...

You can differentiate yourself in the market with The Guarantee.

Contract Surety Commercial Surety Developer Surety For over 146-years, our history has been firmly rooted in Canadian tradition, and our future is focused on innovation leadership. Our committed and experienced underwriting team collaborates with our broker and client partners to tailor surety solutions that are flexible and responsive for evolving business needs and an ever-changing marketplace.

Find out how we are different. theguarantee.com

Excellence, Expertise, Experience ‌ Every time

Feature Project

New Tower Improves Patient Care

atients in Penticton and the South Okanagan region will see a significant improvement to healthcare access and services when the new patient care tower at the Penticton Regional Hospital opens in April, 2019.

Construction of the tower, named after local businessman David E. Kampe, is a two-phase project that includes a 480-stall parkade and renovations in the existing hospital to significantly expand the emergency department and to update the pharmacy and material stores.

The six-storey tower (plus mechanical penthouse) consolidates a number of departments that were dispersed throughout the existing hospital, which will improve efficiencies and give patients better access to services such as cardiology, neurology and orthopedics.

Being delivered as a public-private partnership (P3), EllisDon Infrastructure was selected by the Interior Health Authority (IHA) in 2016 to design, build, finance and maintain the tower for a 30-year period.

EllisDon broke ground on the project in summer 2016, delivering the project on time with substantial completion achieved in Decem10

construction business

ber 2018. At peak of construction, almost 400 workers were on the site daily.

“We are now into the operational commissioning phase and acquainting our staff with the new facility,” says IHA chief project officer Brent Kruschel. “When it opens to patients in April, we will have a modern facility that matches the quality of care provided by the staff and physicians.”

The 281,000 square foot tower is located on the existing hospital campus, directly to the east of the emergency department and existing buildings. The tower is connected to the hospital on the first three levels.

“This was not a green field development project. We took over an existing surface parking lot and part of an access road to have the space for this tower,” says Kruschel. “We have multiple connections to ensure patients and staff can easily move between key departments.”

The tower will increase capacity and functionality of ambulatory care services and includes a surgical services centre, five new operating rooms, 84 new single-patient rooms, a new medical device reprocessing unit (MDR), a rooftop helipad and space to allow the UBC Faculty of Medicine program to expand.

January/February/March 2019

By Cheryl Mah

Level one features reception, offices, commercial space and ambulatory care clinics. Surgical services are located on the second level while the third floor contains the UBC Faculty of Medicine program and the MDR department for cleaning and sterilizing surgical equipment. Levels four through six contain the inpatient rooms each with private washrooms.

“The tower also has a permanent MRI suite — a service that up to now has been provided by a mobile MRI unit — which is a major improvement,” says Kruschel. “We’ve also been able to fund a nuclear medicine suite, improving medical imaging in the region.”

The main challenges on this project included an aggressive schedule, a constrained site and availability of trades. The project required carefully scheduled just on time delivery of materials due to the lack of lay down space and storage.

“This was a massive project for the community of Penticton,” says Kruschel. “The focus was on local hires so just the availability of trades needed on a project of this size was a challenge.”

Another challenge was working adjacent to the hospital which remained fully operational during the construction period. Careful planning and good communication was important

Feature Project

to minimize noise, vibrations as well as disruption to patients. Of course, tying the tower into the existing hospital added another level of complexity to the job.

“With a project of this size, it brings with it a certain level of complexity. Integrating into and minimizing impact to the existing functioning campus was challenging, but with the dedicated project team and collaboration from all partners, we were able to deliver this state-of-the art facility,” says David McFarlane, EllisDon senior vice president and area manager, Pacific region.

Houle Electric undertook the complex electrical system work on this project, integrating the tower with the existing hospital for power, fire alarm and all low-voltage systems. The job included 20 electrical rooms, two new 4MVA transformers and three 1.25 MVA generators.

“There were numerous design changes and the tight schedule with no extension made for a challenging project,” says Houle project manager Geoffrey Beukema, adding integrating the existing mechanical equipment room to the new one while maintaining a working hospital was another big challenge. A high amount of detail was required for the installation schedule.

The tower is built to post disaster standards with reinforced concrete and structural steel.

The exterior is a combination of brick, wood grain panels and prefinished metal panels. Wood was used where practical to meet the province’s Wood First Act, according to Parkin Architects project director John MacSween.

“We have wood feature elements on the exterior cladding. We have a heavy timber B.C. wood canopy at the main entrance and the interior public areas also have wood elements and finishes,” he says.

Designed to achieve LEED Gold, the project features low VOC and sustainable materials, energy efficient equipment and systems, a high performance envelope and an emphasis on natural daylight.

12

construction business

“The goal was to create a patient friendly environment with views and access to natural light,” says MacSween, adding the overall interior design aesthetic is influenced by the natural topography of the Okanagan Valley. “The colours and materials are reminiscent of the valley — oranges, rust, hues that you see in late summer to fall.”

Many of the details inside the facility focus on Lean design which has been shown to encourage the highest quality of care and increase overall efficiency. Patient health and safety, infection control, staff efficiency are all priorities in modern hospital design. For example, there are larger single patient rooms, bigger windows that maximize natural light to assist the healing process, and reduced walking distances for staff.

“We looked at an overall strategy to improve staff performance and efficiencies. Clinical drives the planning,” says MacSween. “One of the toughest challenges we face, whether a new or renovation project, is to never have the public and service circulations cross. This is one of the few projects where we have zero crossovers

January/February/March 2019

between front of house corridors and back of house corridors.”

Clearly separated public and service access was one of the three main planning features for the tower, says project architect Shuang Cao. The other two were standardization of room layouts and use of daylighting.

“We planned the waiting areas along the perimeter of the building to maximize daylighting and large windows on the inpatient floors allow daylight to penetrate into the corridors,” she says.

MacSween cited the aggressive schedule as the biggest challenge. “In a conventional project, we would spend three or four years designing it and then it would go out to tender followed by another three years to build it. We designed and built this tower in less than three years.”

Design work for Phase 2 of the project is underway. Construction is expected to start by summer of 2019 with completion in 2021.

“This is the most important facility built in Penticton in 30 years. It’s very much a civic icon,” says MacSween. “It will provide key healthcare delivery in the city and region for years.”

Special Advertising Feature

Brought to you by Bigfoot Crane Company

Working at Height in the Spring: 10 Ways to Stay Safe Key Takeaway: Be prepared for unpredictable spring weather by keeping the jobsite clean, planning for the forecasted weather, using the right PPE, and taking thorough safety precautions.

Temperatures may be rising, but spring brings its own set of risks (and borrows some from winter) that need to be taken seriously. Keep these best practices in mind while you’re working at height this season to stay safe while enjoying the breeze.

1. Always check the weather.

The only thing consistent about spring weather is that it changes consistently. Be prepared for the heat or cold by checking the weather ahead of time and plan accordingly, and always be prepared for sudden changes that could occur.

2. Complete thorough safety checks on all large equipment.

With inconsistent weather comes loose earth, mud that gets everywhere, and a higher risk of rust when equipment is repeatedly soaked and left to dry. Always make sure to check equipment and machinery before using it and stay up to date on safety regulations by checking WorkSafeBC.com and using tools like Bigfoot’s Crane Academy.

3. Secure your materials.

High winds can pick up quickly in the spring and are often stronger the higher you work, as the site is usually more exposed. Make sure the materials you are working with are secure at all times to avoid injuries or falls from loose materials or objects blowing around.

4. Avoid using power tools in rainy or wet conditions.

Water is an excellent conductor of electricity. By using power tools in the rain or wet after a rain, you not only run the risk of damaging your tools, but risk electric shock or electrocution if any wires become exposed while you work. Play it safe and use hand tools where possible or set up cover over your work area to keep the area dry.

5. Be wary of thunder and lightning storms.

Spring storms are especially dangerous to those working at heights, as lightning is drawn to metal and tall structures. Monitor the weather report, be aware of your environment, and if the weather looks dicey, don’t risk working in a storm.

6. Give yourself some traction.

Slipping is always a risk when working on the jobsite but becomes even more so when working at height on wet surfaces. Wear boots and gloves that fit well (make sure they are tight enough that they can’t slip off, but not so tight as to cut off circulation) and have a lot of traction and grip to prevent accidents.

7. Always wear appropriate fall PPE, even if working at a lower height.

Most fall-related accidents occur at 30 ft. or less because people view lower heights as less dangerous, but it takes very little height for a fall to cause injury or even death. Height should be treated seriously and with caution in any season, but mud and rain make it especially important to utilize fall PPE in the spring.

8. Let your fall PPE dry naturally before its next use.

Drying equipment with an electric dryer or heater can weaken or melt the material, ruining the equipment and putting its user at risk.

Blot your equipment with towels and hang it up to dry completely on its own whenever it gets wet, and always check it carefully before each use.

9. Dress warmly enough, and cool enough.

Spring weather may feel warm compared to winter, but its unpredictable nature means that temperatures can drop to hazardous temperatures, especially when coupled with consistent cold rains. Dress in layers to ensure you can always keep up with whatever cold or heat the day throws at you.

10. Train staff to identify weather-based illnesses.

Heat and cold stress occur when the body either warms up faster than it can cool (resulting in heat exhaustion or sunstroke) or cools down faster than it can warm up (resulting in frostbite or hypothermia). While they happen more often in summer and winter, they can also strike in temperatures that don’t seem very extreme. People working at heights can also be at a higher risk as they tend to be more exposed to the elements. Make sure there are staff on site who are trained to recognize and treat signs of heat and cold illnesses.

Bonding, Insurance, Surety

Financial Capital Challenges

By Brian Lawson

negative results. The same can also be said for the subcontractor default insurance (SDI) market where one of Canada’s largest insurers has all but pulled out resulting in a tightening of underwriting in this space. Some of the larger general contractors who used SDI as a risk management tool will now, in some cases, be coming back to traditional surety bonds to offset and manage some of the risks associated with subcontractor default.

When all of these factors are put together, it appears to demonstrate a potential crisis. The surety industry is looking to stabilize results. At the same time, the demand for surety bonds usage is expected to increase requiring larger levels of surety support, yet we have transitioning construction companies with potentially weaker balance sheets.

CONSTRUCTION IMPACTS

I

t is 2019 and the construction and surety industries are mutually heading towards a set of problems that some haven’t yet considered.

Most people in the construction industry recognize the overwhelming issue at hand, which is a very real and looming labour shortage.

This problem can be somewhat mitigated by immigration and training of new workers. However, another subtle but very real issue that looms, is the lack of capital being retained within the construction industry. Specifically, financial capital within construction companies themselves.

The second issue that further adds to the financial capital challenge is the continuing increase in individual construction contract values. Twenty years ago, the value of a large mechanical contract as performed by an average size contractor would have been $10 million. In today’s market it is not unusual to see similar scope of work contracts in excess of $30 or $40 million. The problem at hand in the current economy is that even though we are seeing contract values quadruple, the financial strength of construction companies’ balance sheets are not increasing at the same pace.

CHALLENGES

SURETY INDUSTRY

There are two main challenges driving the lack of financial capital. One is the aging population and two is the escalating dollar value of construction contracts. Individually, you will see that both are real issues that need to be dealt with. However, when combined, one issue actually accentuates the other.

Let’s consider the impact of an aging population on the industry. As the population ages, so too do the owners of many of the private construction companies in Canada. As these aging owners begin to retire, their main issue, along with their firm’s legacy, is getting their money out of their company. The last five to 10 years have generated very good financial results for these companies and now it is time for the owners to take some of their money off the table.

As these construction companies become more valuable due to their strong financial results, it is more difficult for the younger employees or children of the owners to purchase these entities. Other economic issues for opportunistic purchasers that compound this difficulty are rising interest rates, rising cost of living, housing affordability, etc.

How do these issues and challenges impact the surety industry? Firstly, the issue of transitioning construction company shareholders or owners is of great concern to the surety companies. The sureties have enjoyed long lasting relationships, not only with the companies themselves, but also with the key owners at the helm. As these owners look to retire it is imperative to demonstrate that the new shareholders have the same resolve, skill and motivations as their predecessor in order to continue the ongoing surety relationship. Secondly, the sureties are also looking for a strengthening of balance sheets rather than diminishing ones. The combination of quadrupling construction contract values and a construction company’s balance sheet being depleted by retiring management can create an opposing result.

Let’s also take a look at what’s happening in the surety world. The surety industry in Canada is coming off one of its worst financial outcomes in decades. Large general contractor losses in Ontario, the collapse of international construction companies, and an overall weak construction market in Alberta have all been contributing factors to the surety industry’s

14

construction business

January/February/March 2019

How does this impact the construction industry? If the risk for failure has increased demonstrated by the 2018 surety results, then now more than ever is the time for owners and general contractors to manage their risk by utilizing surety bonds. If surety underwriting tightens up, it could limit the number of contractors and subcontractors who can secure bond support reducing competition and in turn driving up contract prices. The increase in contract prices could deem projects to be overbudget which affects the amount of work a company is able to obtain from the market.

A prudent step for an outgoing owner of a successful construction company would be to start retirement planning early with an accountant and in coordination with an experienced surety broker. If the owner is leaving the company with an expectation of future profits to help fund retirement, they will need to understand the possible repercussions to their company’s balance sheet.

In coordination with the outgoing owner’s discussions, the incoming owners and shareholders need to have similar discussions with a surety broker to understand the needs of the surety company and keep the strength of their own balance sheet intact. The company needs financial strength in order to withstand the aforementioned storm that is brewing, but also to be able to stretch their limits of surety support to ensure success at securing and performing larger valued contracts.

Brian Lawson has 30 years of surety experience and is a principal and director of Wylie Crump Limited, a Navacord broker partner located in Vancouver. Navacord is one of Canada’s fastest growing commercial insurance brokerages offering risk management and consulting solutions.

Bonding, Insurance, Surety

Is Subcontract Default Insurance Dead in Canada?

By Steve McConnell

O

ver the last 20 years, Zurich’s subcontractor default insurance (SDI) has steadily gained market share.

Touting itself to be an alternative to sub-trade bonding (it isn’t), many large general contractors have adopted this product. The advantage to the general contractor is obvious.

They can pick any subcontractor they want without waiting for bonding company approval.

They can then shift the risk of subcontractor default to Zurich and charge the project owner for this service at a profit. They can keep the overall cost low by eliminating payment protection for sub-trades. Many general contractors have built their bidding strategy around this product. For years, Zurich was the only insurance company that offered SDI. In recent years, new entrants came into the market. This is about the time that things started to unravel for Zurich.

Accurately assessing subcontractor default risk is not easy. Whether you are a bond underwriter or the SDI manager for a larger general contractor, the risk assessment process is essentially the same. Review the subcontractor’s technical knowledge, the character of their leadership team, their past experience, their operations, their financial strength and their safety record. Most times, the assessment can be incorrect but the subcontractor will still manage to complete their contract.

Even when the risk assessment is wrong, there is usually no penalty to the bond underwriter or the SDI manager for their inaccurate assessment. It’s good to be lucky in the subcontractor assessment game and gambling can be profitable.

Eventually, luck runs out. When a subcontractor default occurs, it can be spectacular. Maybe Zurich’s SDI pricing was too low, maybe too many general contractors were using the product, maybe they chose the wrong general contractors to work with or maybe everyone was lulled into a false sense of security and the qualifying process for SDI became undisciplined. Whatever the cause, Zurich has now exited the Canadian marketplace and has significantly retrenched with the product in the United States.

It is important to recognize that several large Canadian general contractors have made SDI a central part of how they do business. It’s not easy to be a national general contractor. As proof, a very large “too big to fail” general contractor is currently on financial life support in Ontario.

Margins are thin, competition is fierce, some clients won’t or can’t pay and legal disputes are common. A downturn in the business cycle can be deadly for any business with a large overhead. Smaller competitors can be more nimble,

innovative and adaptive in their regional markets.

Every competitive advantage matters.

Any subcontractor who works with the large national general contractors must monitor and re-assess what is happening in the SDI market.

When the SDI market was competitive, many large general contractors became very flexible on their risk assessment procedures. Some subtrades were getting significantly more work under SDI with less financial assessment or scrutiny. Companies that were enrolled in SDI but still needed bonds for other clients were still subjected to a standard process of risk assessment.

Sub-trades that have been working exclusively under the formerly lax SDI programs may find that they no longer qualify for traditional levels of bond support.

Despite its challenges, SDI will continue for the foreseeable future. General contractors will not want to give up the profits they make from this product nor will they want to give up the competitive advantage it gives them on some projects. With newer insurance companies coming in to replace Zurich, it’s reasonable to expect higher rates, varied SDI policy wordings from each insurance company and more stringent risk assessment being followed by the generals.

These new insurers will be assessing each general contractor client based on their past history of selecting good sub-trades and on their ability to maintain discipline in quality sub-trade selection across all of their divisions and regional offices. The Achilles heel of the SDI product has always been the human element. When a general contractor really needs to win a project to achieve its internal revenues

targets, it’s so tempting to take a flier on that sketchy sub-trade whose price is so much lower than everyone else’s.

Subcontractor default insurance has become an important part of the Canadian construction marketplace for the national general contractors.

New insurance companies will step in to provide the SDI product in some form. For the product to remain viable, it must be profitable to both general contractors and to the insurance companies who back them. Each new player will be very aware of the fate that has befallen Zurich and they will be looking for ways to adjust their product to make sure they keep claims to a minimum.

Expect higher pricing, a more rigorous qualifying process and likely smaller aggregate work programs than what we have seen in the past. When either the new SDI insurance companies or the generals feel that they have too much risk in a project, they will revert to traditional bonding to take on this risk. This will mean that any sub-trade who works in this segment must re-build their traditional bonding relationships. Going forward, they will need to coordinate their balance sheet strength and their total expected work programs so that both the needs of bond underwriters and the needs of the new SDI underwriters can be satisfied. If SDI claims continue, be ready for significant change.

Steve McConnell is a bonding and construction insurance specialist with more than 20 years of experience with John Ross Insurance Services Ltd., part of the InsureBC group of companies.

January/February/March 2019

construction business

15

2019 Wood WORKS! BC Wood Design Award winners Awards evening held on Monday, March 4, 2019 • Vancouver Convention Centre

Environmental Performance

Residential Wood Design

Multi-Unit Residential Wood Design

Shift House, Vancouver Measured Architecture, Vancouver

Virtuoso, Vancouver Adera Development Corporation, Vancouver

UNBC Wood Innovation Research Laboratory Prince George Stantec Architecture Ltd., Vancouver

Prefabricated Structural Wood

Western Red Cedar

Wood Innovation

Curved Trusses for Tyron Road, Victoria Evan Williams, Victoria Truss 2007 Ltd. Cobble Hill

Kwakiutl Wagalus School, Port Hardy Lubor Trubka Architects, Vancouver

Temple of Light, Kootenay Bay Patkau Architects, Vancouver

Event Sponsors

Reception Sponsor

And BC member associations

Proud to be a part of

Jury Sponsor

Sponsors

Commercial

Swallowfield Barn, Langley

International

Chongqing Yuanlu Community Center, Chongqing, China

15 years of Wood Design Awards in BC were celebrated by more than 450 distinguished design and building professionals, including architects, engineers, project teams, local governments, industry sponsors and guests. The annual awards evening recognizes leadership and innovation in wood use and publicly salutes continued excellence in wood building and design. There were 103 nominations in 14 categories from all over BC as well as international submissions.

Wood WORKS! is a national industry-led program of the Canadian Wood Council, with a goal to support innovation and provide leadership on the use of wood products and systems. Wood WORKS! BC provides education, training and technical expertise to building and design professionals throughout BC.

Special Recognition Award

Jury’s Choice

Technologist Award

Surrey Fire Chief Len Garis

University of British Columbia, Vancouver Wander Wood, Vancouver

Thomas Abbuhl

Wood Design

Interior Beauty Design

Asher deGroot MOTIV Architects Inc., Vancouver

Ts’kw’aylaxw Cultural and Community Health Centre, Lillooet Unison Architecture Ltd., Vancouver

Indian Residential School History and Dialogue Centre, Vancouver Formline Architecture, West Vancouver

UBC Campus Energy Centre, Vancouver DIALOG, Vancouver

Wood Design

Engineer

Architect

Wood Champion

Jie Lee, Challenge Design Pte. Ltd. Shanghai, China

Darryl Bowers, Weiler Smith Bowers Structural Engineering, Burnaby

Shelley Craig, Urban Arts Architecture, James TuerBC Vancouver, JWTEngineering ArchitectureStudent and Planning, IslandBC UBC Centre,Bowen Vancouver,

Shelley Craig Urban Arts Architecture, Vancouver

Institutional Wood Design: Small Institutional Wood Design: Large

wood-works.ca/bc

@WoodWORKSBC_CWC

Bonding, Insurance, Surety

Insurance Exclusions for Defects

By Tim O’Connor

C

ourse of Construction (COC) insurance policies, also known as Builders Risk policies, contain various coverage responses for defects and understanding the subtle differences can greatly affect how your policy responds to a claim.

Before we look into these various exclusions, it is important to note that a COC policy will only respond if triggered by physical damage that occurs by accident or chance rather than design. Recognizing defects and taking the steps to fix them prior to any physical damage occurring would be a business risk/expense and not be recoverable through a COC policy.

What are Defects?

There are three addressed aspects in the Defects Exclusions: 1) Design, plan or specification defects.

The consequences of an error in the de sign are that there may be consequential damage if the integrity of the structure has been compromised. Professionals who are involved in the design process would normally have coverage under their own Professional Indemnity insurance policy.

2) Defects of Materials Materials that do not meet the design criteria and are not fit for the purpose intended.

3) D efects of Workmanship This relates to construction and assembly

work that is incorrectly undertaken either on site or off site.

Most Canadian COC policies contain the “cost of making good” exclusion wording. This wording, with minor variations, excludes the cost of making good faulty or defective workmanship, material or design provided, however “resultant damage” to the property shall be insured.

DE & LEG Clauses The London Markets Defects Exclusion (DE) and the London Engineering Group (LEG) are a series of graduated wordings, developed by underwriting groups in the 1990s. There wordings present an opportunity for policyholders to purchase incremental cover for instances involving defects, with LEG offering three levels of cover and DE offering five.

The broadest exclusion clauses within each set (LEG 1 and DE 1) are absolute exclusions for damage cause by defects, while the narrowest exclusion clauses (LEG 3 and DE 5) will preserve cover for resultant damage, excluding only any costs that improve upon the original design, plan, specification or materials.

In most cases, COC policies written in Canada will contain the equivalent to the LEG 2 18

construction business

Exclusion

Excluded Cost

DE3

The property which is in a defective condition i.e. the roof frame and bolts which constitute an integral structure is excluded but all property which is free of defects including the roofing panels and the wall would be covered

DE4

In this case it is only the cost of the bolts that are excluded

DE5

It is only the additional cost of improving the design that is excluded

LEG 2

The cost excluded is the cost that would have been incurred to replace the bolts had it been established that they were defective prior to the failure.

LEG 3

It is only the additional cost of improving the design that is excluded

exclusion, which typically leaves them with cover for consequential damage to non-defective property.

The below example is commonly used to explain the various differences between the LEG or DE clauses. Since it is very rare to ever see a policy written with less than the equivalent of LEG 2 or DE 3 coverage we will not include DE 1&2 or LEG 1 in the comparison.

applied to the LEG3 clause, it may be preferable to seek cover excluding the defective part, under the LEG2 clause option to which a lower deductible applies.

Scenario Example: A project consists of a number of steel framed buildings on a single property. The designers have miscalculated the stress on the bolts that secure the roof beams together. Mid-way through the project, bolts fail as the final roofing panels are being attached to one building, which collapses damaging the neighbouring completed building.

The costs associated with this event would be: • Replacing the bolts that failed, • Replacing the damaged roof structure, • Making good the damage to the supporting wall, • Damage to the neighbouring unit, • Redesign costs of the defective bolts, and • Replacing all the defective bolts already installed in the other units.

Total Value of Loss $20,000,000 Cost of fixing defective prior to loss

-$100,000 Cost of betterment -$200,000 (new, improved bolts)

LEG 2 Deductible -$50,000 Covered Loss $19,650,000

* Additional Note: In most cases, the cost to replace defective bolts that have been installed in other buildings, but have not suffered damage, would not be covered. * Additional Note: Costs associated with gaining access to a defective part, such as wall removal, would normally be excluded under LEG 2 and included under LEG 3.

From a coverage standpoint, it would appear as though the ideal exclusion clause to obtain for a COC policy would be LEG 3. However, that is not always the case. LEG 3 can be a costly amendment to an existing policy and it will come with much higher deductibles compared to LEG 2.

For example, where the value of the defective part itself is less than the higher deductible

January/February/March 2019

Scenario Example: LEG 2 Method (Subtract the hypothetical cost of fixing defect immediately prior to physical damage occurring)

LEG 3 Method (Subtract the hypothetical cost of fixing defect immediately prior to physical damage occurring) Total Value of Loss $20,000,000 Cost of betterment (new, improved bolts) -$200,000 LEG 2 Deductible -$250,000 Covered Loss $19,550,000 *In this case, the LEG 3 clause would actually lead to a lower covered loss amount.

Take the time to discuss what is, and in the case of defects, what is not included in your construction policies with your insurance representative. The slightest variations can lead to significant differences in recuperated costs. Each project you begin will have its own unique features and it is paramount to have an insurance professional, with industry experience and expertise, customize your coverage as needed.

Tim O’Connor is vice president, client executive, construction at BFL Canada, Vancouver.

Roofing

A Fluid Solution: PMMA Roof Membranes

By Kirk Goodrum

Trained crews can apply PMMA roof membrane systems very efficiently. This application efficiency, together with PMMA’s fast cure times, allows advantageous scheduling options.

Application of PMMA

A

lmost 175 years ago, the low-slope roofing industry began with the construction of roof membranes using a field-applied liquid component and a reinforcing fabric. Built-up roofs using coal tar or bitumen were the standard for well over a century; however, in the last 50 years, factoryproduced membranes grew in popularity and also secured a place as a dominant method of roofing application. During recent years, fluidapplied materials, albeit without the use of a kettle, have been filling a need for difficult applications where prefabricated membranes are not the easiest solution.

Fluid-applied materials used as flashing solutions have led to the resurgence of the concept. Fluid-applied membranes improved the continuity from the roofing membrane to the vertical termination. The development of high performance materials to be used at these critical junctions is a major advancement for roofing manufacturers and applicators alike. Based on the reliable performance of the flashing materials, professionals are now beginning to use them for complete roof systems.

Modern fluid-applied membranes are one of the fastest growing sectors of the roofing market.

Although they maintain the field-constructed concept of the past, that is where the similarities end. The liquid and reinforcement components that are utilized today are highly engineered.

Whether it is the base polymers, the types of curing mechanisms or the versatility in design, this is not your grandfather’s roofing.

History of PMMA One of the predominate chemistries in Europe and North America is polymethyl methacrylate, commonly referred to as PMMA. PMMA is a widely used polymer known for its toughness

and clarity. Applications for PMMA range from bone cement and dental fillings to countertops, road markings and aquarium glass. The uses for PMMA are quite extensive, but a commonality lies in the intended exposure to harsh in-service conditions. The ability to handle abrasion and its inherent resistance to degradation from ultraviolet (UV) radiation makes PMMA a solid choice for rugged applications such as roofing and waterproofing.

The use of PMMA in roofing and waterproofing has a surprisingly long history. Even though it is often categorized as new technology, it has been used in roofing for more than 30 years in Europe and 15 years in the United States.

What is PMMA? PMMA resins, in liquid form, are an intermediate step toward achieving a PMMA roof membrane. Although the liquid contains some PMMA, it is mostly comprised of methyl methacrylate (MMA) monomer blended with a complicated concoction of additives aimed at achieving a particular set of performance characteristics. PMMA resin requires a peroxide to initiate a reaction, which turns the MMA monomers into a high performance PMMA membrane.

The process of curing PMMA is called free radical polymerization. A peroxide is used to react with the MMA monomer and create an unpaired electron. The monomers then begin to link together like a chain. Pure MMA would be too hard and brittle for roofing and waterproofing applications, so additives included in the formulation serve the purpose of increasing flexibility. The key to formulating flexible PMMA is to use additives that participate in the reaction and do not migrate from the cured film.

The PMMA polymer chain has a unique feature that makes it ideal for fluid-applied field applications. The end of the polymer chain is always available for additional links. So, when catalyzed liquid is applied over a cured membrane, such as a lap or tie-in, the polymer chain can continue from the cured membrane into the membrane that is forming. The polymer chain creates a chemical bond between layers of material. A chemical bond is much stronger than a simple adhesion bond and adds a level of attachment that is unmatched outside of factory-controlled conditions. This bonding can be formed on day one or at year 10 when an additional penetration through the system is needed.

PMMA polymerization reaction can occur at temperatures below freezing. Most manufacturers will allow application down to 23⁰F (-5⁰C), which can be a distinct advantage in colder climates. Materials should be kept in conditioned storage to maintain the proper viscosity and aid in the dispersion of the peroxide. Proper dispersion of the initiator is important to the uniform curing of the membrane. Manufacturers recommend that the initiator be stirred into the material for at least two minutes to ensure full dispersion.

The polymerization of PMMA usually takes less than 45 minutes, depending on the temperature and the membrane is rainproof in 15 minutes. For many roofers, the peace of mind that comes from knowing that the material is fully cured when they go home for the night is valuable.

In addition to roofing, PMMA can be used for balcony and parking deck surfacing and waterproofing. Its ability to withstand the rigors of pedestrian and vehicular traffic is well known in Europe and makes PMMA a premium choice for many business owners. Inherent toughness makes PMMA a viable option for commercial roofing.

Conclusion PMMA has established itself over the last three decades as a leader in fluid-applied technology.

UV resistance, durability and fast cure make it a great choice for roofing and waterproofing applications. It seems that PMMA is no longer just a new technology that everyone is watching with a wait-and-see attitude, but an exciting advancement in roofing and waterproofing that could be the beginning of a fluid-applied revolution.

Kirk Goodrum is the research and technical development manager for Siplast.

January/February/March 2019

construction business

19

Roofing

Atypical Roof Construction Challenges

By Derek Ratzlaff

R

oofs can often be the defining structural feature of a new building, but engineering an atypical geometric roof can present a number of challenges. Roof construction that deviates from a traditional flat or planar roof needs extra attention to ensure it functions as well or better than a more typical roof. This article will outline some of the key points to consider when undertaking a curved or geometrically challenging roof profile.

into the building, but the effort to keep snow from moving on a roof surface is usually much more cost effective than designing the roof to handle accumulated snow. A snow guard structural attachment is often complicated if they are placed after the roof membrane is installed.

Special care is required if the guards require penetration through the membrane to provide the connection to the roof structure.

Drainage and snow buildup

Roof overhangs are often required and can provide many benefits for building function, protection of pedestrians from sun or rain, or shading to prevent solar heat gain. One attribute of roof overhangs is the thermal bridging that can occur with temperature differences between interior and exterior spaces. This is especially difficult to deal with when providing a continuous soffit from the inside to outside.

This was the case at Jasper Place Library where the large temperature swings in Edmonton required a thermal break to separate the concrete slabs on each side of the envelope. The solution was a continuous pre-fabricated structural thermal break. These were sent to the general contractor who installed it on the formwork prior to pouring the roof concrete. Reinforcing details within the thermal break use stainless steel to reduce the heat transfer typical within reinforced concrete construction. This system allowed significant areas of overhang that could

Roofs with variable slopes often require more thought when deciding how rain and snow are managed. With rain, a curving roof will naturally funnel rainwater to potentially only one or two locations; this may overwhelm a drainage system that is not designed to drain the majority of a roof area in one location. Long slopes can also induce water flow that may be too fast to control when it gets to a drain location, and parapets may be required to control water direction.

Accumulated snowfall brings different issues to curved roof surfaces. Many membrane roof systems are very slippery and may allow snow to slide and pile up on roof areas if not controlled.

To achieve the uniform snow loads that produce more efficient structures, many curved roof systems use a snow guard system to reduce the tendency of snow to slide along a sloping surface.

These snow guards must bring these loads back 20 construction business

Thermal breaks

January/February/March 2019

behave structurally as part of the main building, yet endure the 50°C temperature differentials typical of an Edmonton winter without causing condensation on the interior surfaces.

An additional challenge of this project was to allow for the complex structural behaviour required with the large canopy projecting over an exterior deck. The structural thermal break units were designed to transfer the variety of loads through the envelope and achieve a consistent soffit; a continuous slab behavior; and a functional envelope.

Construction issues Using a non-linear or non-orthogonal building design often requires changes in the typical construction process. Often details typically used in flat or single slope roof systems no longer work in curved roof assemblies, or at least require variations in detailing to suit varying slopes. The erection of curved or undulating roofs often requires a different methodology in construction techniques.

Constructing curving structures often benefits from the flexibility of natural materials, and slender wood structures use their flexibility to advantage to achieve the curvatures required.

However, this same flexibility can be a hindrance when erection requires long slender objects to be moved into position. This same flexibility can cause large stresses in the members if the erection procedure does not account for it.

Roofing

Grandview Heights Aquatic Centre

At Grandview Heights Aquatic Centre, the slender glulams required large spreader beams to be used to keep the glulams in the curved shape when being lifted from the ground to the roof.

Multiple spreader beams were used to provide support for the members at four points along the length, instead of only two used for a rigid beam element. Simple connection detailing allowed the placement of each element to proceed quickly. Once the procedure was in place, the erection proceeded efficiently to stay within the window imposed by both the project schedule and the weather.

Jasper Place Library

Summary In conclusion, when undertaking a curved or geometrically challenging roof profile, special structural solutions may be required. Understanding both the interaction of the environment with the building and the methods used to construct it allows these issues to be dealt with effectively to achieve interesting and innovative roof shapes.

Derek Ratzlaff, P.Eng., P.E., Struct.Eng., is a principal with Fast + Epp Structural Engineers, headquartered in Vancouver. With a background in the construction industry, he contributes a strong emphasis on expressive structures that remain practical to construct.

This combination of design and construction knowledge has been a key factor in the success of his projects.

January/February/March 2019

construction business

21

Roofing

Achieving Green Roof Success

By James Klassen

Bold Intentions On July 24, 2018 the City of Vancouver voted to institute policy requiring the incorporation of green (vegetated or living) roofs on “all new commercial, institutional, industrial and multi-family residential developments”, and that would maximize “opportunity for green roofs in renovations to older [ICI] and multi-family residential development.” Since the fall municipal elections, city staff has been hard at work to develop a framework within which to write a policy or bylaw that makes sense for Vancouver.

It is clear to Vancouver’s policy makers that any policy will need to couple with a construction standard that ensures green roofs serve Vancouver’s Rain City Strategy. Coupled with that is the challenge of developing a regionally specific standard capable of adapting to a continually changing B.C. south coast climate that produces heavier, short-duration rainfall events. Sewer infrastructure is taxed beyond capacity, and green roofs hold part of the promise to reduce the burden. While Toronto developed a construction standard to support that city’s own green roof bylaw, it addresses in very general terms the waterproofing requirements for the roof platform supporting vegetation, but is silent on the subject of quality assurance for either roofing or vegetated systems. Vancouver is poised to change that and adopt a comprehensive standard that successfully brings waterproofing and vegetated roofing together, with a view to longevity and sustained development.

Comprehensive standards Green roofs represent the future for roofs in Vancouver. Among their many benefits, green roofs delay the deluge of heavy rainfalls and divert considerable runoff destined for storm sewer infrastructure; they work in tandem with an ‘envelope first’ building design approach to improve energy efficiency (Vancouver’s Zero Emissions Building Plan, ZEBP), foster biodiversity across the built environment, and can provide opportunities for growing local edible produce.

To realize these benefits, green roofs in Vancouver will need to follow standards that ensure: • the roof as a platform is robust, built to objective standards, and won’t leak.

• the vegetation assembly design is stable (this is important for steep slope applications).

• the roof is properly drained (including overflows at the roof perimeter, at an effective height above the drainage plane).

• the vegetated assemblies will resist wind uplift, particularly on ‘flat’ roofs.

• fire safety (typically through a comprehensive maintenance requirement).

22

construction business

• appropriate plant selection (not everything works in the local climate).

• seasonal irrigation is provided (summers in Vancouver are becoming drier and warmer).

Like Toronto and other cities with distinctive policies, Vancouver’s policy may also spawn revisions to both the city’s construction and renovation regulations and urban agriculture policies, and address occupied roof spaces to include, among numerous possibilities, minimum parapet heights, mandatory access and egress, and water sources.

Developing these standards is hard work, the product of multi-stakeholder participation and, to some degree, consensus for the mutual success of those who build green roofs, and those who mandate and regulate their construction.

And it will take time. Such a standard should incorporate requirements for products and testing, performance benchmarks, and maintenance protocols. Some of this has never before been developed. Vancouver may be setting the benchmark for a new way of legislating and regulating green roofing.

Quality Assurance and collaboration is key Green roofs often get a bad rap. They are called uninsurable, leaky, fire hazards, costly and a poor investment. Sure, there are substantive arguments in response to its detractors, and leading that charge is Green Roofs for Healthy Cities. But for green roofs to succeed against continued skepticism from change resistors, they will have to be designed and built to align with clear, objective, broadly accepted and verifiable standards.

Green roofs succeed when the platform — the waterproofed roof beneath the vegetation — is properly constructed and protected from damage. A poorly conceived and constructed platform that leaks fosters uncertainty and makes every green roof look bad. Unfortunately, building codes do not regulate quality, and instead

January/February/March 2019

govern building design and construction to ensure fire safety, structural and seismic stability, accessibility, energy efficiency, interior comfort and occupant health. Some roofing associations, including the CRCA, offer a warranty or guarantee for workmanship, but only the RCABC’s RoofStar Guarantee is a fully-rounded quality assurance/quality control program that covers both materials and workmanship, with demonstrable success. For green roofing to succeed, roofs as platforms will need to be built to the highest verifiable standards.

Those standards should include material, design and installation requirements, and the support of manufacturers and builders through material or performance bonds. Independent observations during the course of construction, and after its completion, tie it all together and lend credibility to a certificate of quality assurance issued by an industry-based guarantor.

That’s quality assurance, guaranteed.

Collaboration among trades and a mutual respect for each other’s work is critical, accomplished through coordination, a consent to common goals and standards, and persistent dialogue. While that sounds idyllic, it is achievable and simply means a reorientation from ‘me’ to ‘we’ because, as many now recognize, the status quo is not delivering the outcomes anyone can be satisfied with. Together with objective standards for both the roof and vegetated assembly, combined with a program to verify green roof quality, an ‘all together’ approach offers the master key to unlocking the success of green roofing in Vancouver.

James Klassen is a RoofStar technical advisor and staff writer with the Roofing Contractors Association of British Columbia. He serves as a co-chair of the Green Roofing Information Think-Tank (GRiT) (West Coast chapter) and contributes to education and policy development for sustainable green roof design. Learn more about RCABC RoofStar Guarantee Program at http://www.rcabc.org/

Infrastructure

Improving Infrastructure Planning

By Jonathan Huggett

W

ell functioning infrastructure is a vital part of creating a liveable community. Whether it be roads, sewers, airports, ports, water supply, recreation facilities… the list is endless. Vast amounts of money are involved in what has become a complex, and in many ways significantly dysfunctional venture.

As in many facets of our lives, the challenges around the delivery of public infrastructure are complex and difficult to manage. There is no single magic bullet that deals with all of the issues.

Whenever large amounts of public money are spent on complex projects, the chances of disaster are evident everywhere. Stories in the media about cost overruns, technical failures, alleged corruption, and public opposition abound.

Of course this is not just a British Columbia issue, or even Canadian issue; the infrastructure saga is to be found in every community in the world. There are various aspects to explore. Principally, and in no particular order, these might include funding, public communication and approval, environmental regulation, the role of indigenous peoples, availability of skilled workers, identifying risk, holding companies and people accountable, small and large P political, oversight, design and construction, project need and objectives — just to name a few.

A typical major infrastructure story goes something like this. Someone, could be politician, CEO or similar, usually suggests that we build a project and it will cost no more than $100 million. A few months later, after more thought has been provided, the project has grown to at least $150 million. Further refinements and consultation take place and the growth continues usually reaching at least $300 million. At this point, few can define what the original objective of the project really was, and the debate now focuses on more important topics such as which level of government is going to pay for it, what role will indigenous peoples play in its delivery, which consultants and advisors have been appointed, and the debate is further

fueled by the entry of ad hoc citizens groups who object to any or all of it.

When a community loses sight of the original objective of the project, it usually starts the downhill path to a project that will be either late, significantly over budget, failing to meet the requirements, a source of public opposition, and likely all of the above.

Faced with these worldwide challenges, the Organization for Economic Co-operation and Development (OECD) was asked to identify global best practices in strategic infrastructure planning and to explore how selected OECD member countries deal with planning challenges.

In its report dated March 2017, it identified infrastructure planning strategies in the transport and energy sectors of the countries reviewed and noted that these countries share some high-level similarities.

“Most rely on bottom-up, project-by-project assessment of costs and benefits. The use of a topdown approach to developing infrastructure plans is relatively uncommon. Planning strategies are predominantly based on estimates of national population and economic growth rates rather than on detailed assessments of the location of population and economic growth. Many strategies also rely on scenario-based approaches to consider different possible outcomes. Also, stakeholder consultation usually forms part of the process.

The OECD report recommends a number of “policy insights” regarding the planning of infrastructure development and these include: • Systemic risks can be reduced where projects form part of a broad and long-term strategic plan.

• Strategic infrastructure planning nevertheless carries its own risks, • When it works well, strategic planning can set out a stable set of priorities for future investment with durable cross-party support.

• A successful infrastructure planning process

balances a stable framework with maintaining flexibility.

• The planning process requires clear objectives, a degree of independence and an open, collaborative approach.

• The planning methodology needs to address risks and uncertainties, take into account binding policy constraints and include considerations of pricing the use of infrastructure.

• A top-down approach to infrastructure planning to complement traditional project by project assessment is essential to a strategic assessment of long-term economic infrastructure needs across sectors.

• Infrastructure planning across sectors can help identify the most important systemic risks early.

• Using analytical methods such as a scenariobased approach to analysis can be helpful in future-proofing infrastructure plans.

• It is important to consider how demand for scarce infrastructure can be managed.

• A top-down approach could foster the development of an analytical framework for investment decisions reflecting both demand and supply side considerations The previous 11 policy insights appear to be missing from present infrastructure implementation in Canada as evidenced by the discord among various competing political ideologies, whether it be pipelines, transportation, water and wastewater treatment and the like. The result has been a hit-and-miss approach to infrastructure provision, where decision making is often based on localized political influences and where there is no consistent approach to secure multi-year funding, the role of indigenous peoples, the attraction of skilled labour, and meeting the widely differing needs of Canadian communities.

Given the very large financial requirements, and the impact that well planned infrastructure can have on the economic well being of Canada, it is long overdue that a truly national plan for Canada’s infrastructure needs be developed and implemented. That plan cannot be subject to the whims of political change whether federal, provincial or municipal. Canada’s construction industry is a major employer and economic generator. It needs to be provided with a stable and non-political framework that can attract cross party support, and the confidence of the public.

Jonathan Huggett is a professional engineer who has spent the last 40 years planning and implementing various types of public infrastructure from Halifax to Victoria and all points in between. He works for federal, provincial and municipal agencies throughout Canada.

January/February/March 2019

construction business

23

Infrastructure

Trenchless Tech for Carbon Reduction

By David O’Sullivan

in carbon emissions when using trenchless technology vs traditional open cut. The chapter has been working with Metro Vancouver to have low carbon methods of installing utilities adopted by the Province of B C. The City of New Westminster submitted to the province in 2017 and was the first city in the world to achieve a carbon credit for their trenchless program.

Our utility business

I

n the last 30 years or so, the first world has started to become aware of the effects of global warming. The concept of global warming does not show itself as a very warm summer or cold winter in your local area but as dramatic global changes to overall weather patterns. We know from scientific research that the amount of carbon in the atmosphere has risen from 210 parts per million (ppm) in the 1700s (before the industrial revolution) to 370 ppm in 2010. This combined with water vapour causes the balance between retaining heat and allowing heat back into space to be upset, thus causing the concern about climate change. Did you know that if we did not have the atmosphere we now have, our earth’s surface temperature would be -18 celsius?

We want to change our way of living and reduce our carbon output, right? But, only after our neighbour (read as neighbour or neighbouring country) starts first! Until now we have been told that in most cases it will either cost more or decrease our living standard if we adopt a lower carbon way of living. However, if we can develop methods of lowering our carbon footprint as well as save money then we will have a winner?

The government of France tried introducing this last year with their first carbon tax on fuels.

The next increase was due in January 2019 but the public revolted. That is because they saw personal pain in making the change, and felt that other countries were not making any changes. A good model for the adoption of this change was the B.C. government in 2007 when they traded income tax for carbon tax with little or no pain to the public.

As part of the trenchless industry, the B.C. chapter of the North American Society of Trenchless Technology has developed software that shows a more than 90 per cent reduction 24 construction business

So, what are installed through the trenchless method of construction? The answer is utilities.

Utilities are by definition the entities that supply or dispose of water, power, gas, or information to or from our homes or businesses. They are normally supplied by municipalities or large regulated companies like cable, power or gas providers. They are the lifeblood that allows us to exist. In a recent survey of the readers of the Lancet, a British medical journal, the provision of clean water over the last 100 to 150 years in the developed world is regarded as the main reason for our improved health care and life spans, not vaccines or penicillin or the entire healthcare system that now exists. The importance of good and properly functioning utilities, to our way of life, cannot be over emphasized.

However, they are often forgotten until something goes wrong.

In the last 15 to 18 years all levels of government in Canada as well as other developed countries in the world are looking at their utilities as assets. In B.C., the Waste Management Act requires municipalities to assess and report back to the province on the length/condition and repair/replacement programs they have in place to maintain their utilities and our living standards.

Having established the importance of utilities and the need to maintain existing utilities and install new utilities, we need to develop methods that use less energy and emit low volumes of pollution. In the utility industry, we need to move to reduce our carbon emission levels and offer these new methodologies to the utility owners.

Where are the problems in utility construction?

The biggest problem is where utilities are installed. Nearly all utilities are located in publicly owned land, where we also happen to build our roads.

In the case of sewers, we need to follow gravity and have to install our sewers at depth to allow the liquids to flow downhill. In the case of most other utilities we bury pipes for protection from the elements like weather or to protect them from traffic and later excavations, and then to increase the problems we build a road on top and open it to traffic.

January/February/March 2019

Conventional Construction In all these cases we excavate a trench first to allow the utility to be placed at the required depth, and that is wide enough to allow equipment to be used safely for the workers to install these utilities.

So stop and think about that for a second. We dig and remove material, say 1m wide by 2.5m deep, to install a 200mm wide pipe. We dig, remove and replace 2.5m³ of material in order that we can install a pipe that has a volume of 0.031m³ (per linear meter of trench). That translates to removing 80 units of extra material to remove that one unit of material so the utility can be installed.

How can we improve this?

Trenchless technologies allow us to vastly reduce the removal of extra material in order to access existing utilities or to install new utilities.

It is this reduction in the removal of material that can cause a very large reduction in the use of energy and thus a reduction in the emissions of various gases, including carbon and when this construction reduction is combined with lower traffic reductions, we see carbon emission reductions of more than 90 per cent.

It is changes like this that we need in society to allow us to continue to enjoy our standard of living with little change to quality of life. It is also easier to sell to the populace if the cost differential is very small or negative. Trenchless construction is often cheaper than conventional open cut.

The use of trenchless technology has been known to reduce traffic and excavation for as long as trenchless has existed but we have never been able to objectively measure the results.

Subjective decision making is becoming harder to justify in this modern age and will not generally withstand the tendering process.

With this in mind, the B.C. chapter of the North American Society of Trenchless Technology proceeded to develop a simple computer program to measure carbon emitted from the relative construction processes and associated traffic disruptions. This provided a defined measured quantity of carbon as the program measured both conventional open cut and various types of trenchless construction. The program allows a municipality to measure the carbon reduction involved in installing a utility using both traditional open cut and trenchless. The carbon protocols do not allow the municipality to measure the reduced carbon emissions from what they call third party emitters like the public traffic, therefore the calculations are very conservative. The program has been submitted to the province for approval.

David O’Sullivan is founder of PW Trenchless Ltd. (PWT), a specialty service construction firm in Surrey, British Columbia.

2019 CONSTRUCTION LEADERSHIP FORUM

Building Tomorrow’s Leaders MAY 3-4, 2019 @ FAIRMONT CHATEAU WHISTLER HOSTED BY: VANCOUVER REGIONAL CONSTRUCTION ASSOCIATION

Looking to enhance your leadership skills?

Designed specifically to meet the needs of the construction industry’s middle-management tier, the conference will address current issues, trends and best practices, equipping delegates with the tools to become well-rounded, effective industry leaders.

Featured Speakers: Deliberate Change: Lessons in hiring traditionally disadvantaged groups at YVR

Keynote: The Power of Brand

Craig Richmond President & CEO, Vancouver International Airport

Justin Kingsley

Eyes Wide Shut: We don’t have a fatigue problem

New York Times bestselling author and the Creative Director of NHL superbrand the Montreal Canadiens

Mike Harnett President, Solaris Fatigue Management

Sponsors: Presenting sponsor

Platinum sponsor

Other sponsors: WorkSafeBC Axiom Builders PCL Construction Arc Document Solutions BCCSA

2019 Construction

LEADERSHIP Forum

Pitt Meadows Plumbing & Mechanical Ltd. Northbridge Insurance Journal of Commerce Construction Business Magazine Sponsorships available - Visit our website

For more information and to register visit: www.vrca.ca/clf2019

Infrastructure

Collaboration in Public Procurement

By Katy Fairley

T

he desire for collaboration continues to increase as owners and construction firms seek better ways to build. Gone are the days of pre-qualification solely by bid bond and use of the traditional procurement model of design-bid-build wanes in the face of shared and broad risk transfer models such as construction management, design-build, public private partnerships and integrated project delivery (IPD). Increasingly, industry is looking to other delivery methods to offer opportunities to increase participation by the construction team members (general or trade contractors, and suppliers) with an eye to the building’s lifecycle cost.

As both owners and the construction industry desire more collaboration, how can the concepts of collaboration and partnership be integrated into the procurement of infrastructure projects where fair, open and transparent are the benchmarks of a successful process? The onus is on the owner to create and follow a defensible process where the criteria are clear to the marketplace.

Afterall, they are the stewards of taxpayer money. This lays a foundation of trust from which collaboration is built.

During procurement is the best opportunity to have robust discussions around risk and who is the most capable of identifying, managing and quantifying that risk. This is the critical difference between procurement and purchasing: hand in hand with procurement is the selection of the most appropriate project delivery method. Simply put, the delivery method is a risk transfer model.

The attempt to pass risk to contractors via the “fit for purpose” clause was highlighted at the Canadian Council for Public-Private Partnerships’ annual national conference in Toronto. This shifting exists regardless of the size of project, whether it is a P3 or more traditional

26 construction business

procurement methods. In British Columbia, a public sector owner has supplementary general conditions to the CCDC-5B (i.e. Construction Manager at Risk) that states the contractor is responsible for a $250,000 earthquake deductible. Should there be a significant seismic event, this clause has the potential of hobbling the very firms that will be needed to rebuild B.C.’s infrastructure. The contractor would hopefully catch this onerous clause during procurement, get a supplementary policy and the cost is shifted right back to the owner.

These are examples of owners shifting risk to protect themselves. Instead of an owner doing their due diligence to understand the risk of their program, they shift the risk to the contractor group. This creates tension and a lack of trust.

If the risk cannot be quantified, it will be passed back to the owner in the form of increased costs and a challenging process if the team member attempts to recoup losses incurred.

With the advent of the CCDC 30 standard contract for IPD, there is an opportunity to explore new ways to assign and manage risk. The common risk pool is one of the most innovative aspects of IPD that makes it so markedly different from other delivery methods, wherein risk is shared among team members. The construction industry has the critical role in the success of IPD as a public sector delivery method: acknowledging the importance of trust and disclosing the profit required from the common risk pool. For owners, it will likely be accepting that trade and general contractors require a certain level of profit to be in business.

Beyond properly assigning risk, the opportunity to incorporate collaboration into the procurement process largely exists. Already, sophisticated buyers engage with industry in the

January/February/March 2019

lead up to procurement on major infrastructure projects. These include market sounding exercises to assess delivery methods, risk allocation and timing, fairness monitors and advance procurement notices. The federal government, through Defence Construction Canada and Public Services and Procurement Canada, is a frequent user of the latter, which prepare the market for sizable projects or projects with unique requirements, such as security clearances.

Subjective criteria are also a reality in procurement outside of the hard bid, low bid tendering process: importantly, subjective does not mean biased or unfair. To create an atmosphere of trust between the owner soliciting proposals, this is where a defensible process must be established. A two-stage closing is where the technical or written proposal and the financial proposal are given separately. The criteria and scoring matrix should be clear with broad opportunities for proponents to showcase similar experience. For instance, a contractor may not have experience on an IPD project (few in Canada do), but a contractor may have comparable experience of collaborating and providing innovative solutions.

Interviews are another tool to assess the teams, ask critical questions and they can be an opportunity to discuss innovative solutions in confidence. Debriefs are crucial to building with as much information provided publicly without infringing on the proprietary information given by the proponents. Debriefs should include the scoring as well as comments from the evaluators to justify the points given.

By following established procurement norms and smart risk allocation, owners identify themselves to the marketplace as “owners of choice.” If the market associates an owner with a higher risk to their business, symptoms include less competition, less engagement and most importantly for taxpayers, increased costs. This is not collusion between firms — it is the invisible hand of the market making a collective decision based on the actions of the owner.

Collaboration can only exist where there is trust. Creating a defensible procurement process is the first step to enabling a collaborative procurement process, one that selects the best delivery model for a project, assigns risk to the most capable party and follows established norms.

Katy Fairley was vice-president, business development for a diversified general contractor and construction manager in southern B.C. She serves as a director on the boards for the Canadian Construction Association and the Vancouver Regional Construction Association. She also serves on the Standard Practices Committees for the BC Construction Association and CCA.

Legal File

The ABCs of CBAs

By Charles Bois and Vita Dos Santos

O

n July 16, 2018, the Government of British Columbia announced that key publicly funded provincial infrastructure projects would be using a Community Benefits Agreement (CBA). According to the government, the CBA will ensure “that local people and communities get longlasting benefits from public investments into major infrastructure projects, while maximizing the number of contractors that can bid on major infrastructure projects.”

The CBA is reminiscent of a similar program introduced by the provincial government in the 1990s under the Skills Development and Fair Wage Act. The Act’s goals were to ensure skills training in the construction industry, high quality work standards and fair wages on publicly funded projects. Highway Constructors Ltd (HCL) was created as a wholly owned subsidiary of the BC Transportation Financing Authority (BCTFA) to achieve the goals of the Act. Through HCL, the BCTFA carried out social and economic benefits for the province, and promoted employee training and local hiring.

The CBA forms the labour agreement between BC Infrastructure Benefits Inc. (BCIB) and the Allied Infrastructure and Related Construction Council of British Columbia (Council). The Council is composed of the International Building and Construction Trades Unions (B&T Unions). BCIB, like the old HCL, will act as the employer and will provide the labour workforce for the construction of selected publicly funded infrastructure projects. The CBA requires that all of BCIB’s employees be members of an appropriate B&T Union and successful contractors bidding on a selected project will have their workforce supplied by BCIB.

CBA Objectives The stated objectives of the CBA include: • To develop and maintain a growing skilled workforce for major infrastructure projects.

• To allow any contractor to bid on an infrastructure project.

• To provide hiring flexibility for contractors, allow name hiring for all supervisors and up to four workers (depending upon number of trades and workers required).

• To maximize apprenticeship opportunities and prioritize apprenticeships, skills training and employment opportunities for Indigenous peoples, women, and disadvantaged groups.

• To ensure that local communities benefit from local infrastructure projects.

• To provide good wages, eliminate the potential of a strike or lockout and provide wage escalation of two per cent per year for the duration of the CBA.

Union Membership Exceptions Workers in certain industries will not be required to join unions under the CBA. These industries include, but are not limited to: security, fire prevention and those performing health and safety functions; professional engineers employed in their professional capacity; businesses engaged in relocating municipal sewer, water and other utilities; and businesses engaged in monitoring Indigenous cultural, archeological and environmental works.

Some Practical Implications While there remains a number of unanswered questions regarding the CBA and its potential impact on the B.C. construction industry, some practical implications include: • Concerns have been raised that prior to the creation and negotiation of the CBA, there was inadequate consultation with the construction industry as a whole. The government responded to these concerns by indicating that the CBA only applied to publicly funded infrastructure projects and as a result, its impact on the broader construction industry was not overreaching. The impact on the overall construction industry remains to be seen, but it is likely that there will be impacts on wages, benefits, workforce supply and availability.

• For projects subject to the CBA, the labour workforce must belong to an appropriate B&T Union and be employed by BCIB to work on a project. However, not all of the construction industry workforce is unionized. In addition, the B.C. labour market has been extremely tight for many years and skilled workers are in short supply and highly sought after. Construction industry associations and contractors have expressed concerns about how BCIB will source its workforce in the current labour market and how it will allocate labour risk to contractors and projects.

• The CBA affords contractors some flexibility by allowing limited name hiring. BCIB indicates it will work with the applicable trade unions and contractors to dispatch labour to the project. This new structure means that contractors who have directly employed their workers will now find themselves using a labour force supplied by a separate company made up of individuals not previously known to the contractor. It is not yet clear how the risks associated with labour shortages or reductions in labour productivity will be allocated between BCIB, contractors and government agencies constructing these infrastructure projects. As a result, there could be implications on the contractor’s costs and overall costs on the project.

• Upon completion of the designated project, the labour work force dispatched to that project is

likely to be laid off and possibly available for dispatch to another project. Individuals might return to work for a previous contractor, however, there is no certainty that the contractor will have an available position. If the contractor can’t rehire the individual, then that person could be effectively unemployed and left waiting to be dispatched to another CBA infrastructure or other B&T Union project. In a tight labour market an individual’s employment situation might not be a concern. However, in slow times, a trade worker’s options may become limited.

• A number of construction associations and contractors have expressed concerns that the CBA will result in local construction companies not being able to participate in or bid on major public infrastructure projects despite the stated objectives of the CBA. It remains to be seen whether this will be the case and what, if any, mitigative measures might be implemented to ensure that local companies can participate in these major projects.

• A number of construction associations, contractors and construction workers have commenced a legal challenge in the B.C. Supreme Court regarding the CBA and the requirement that major infrastructure projects be B&T Union projects. The outcome of this proceeding remains to be seen and will undoubtedly have implications for the construction industry going forward.

CBA Infrastructure Projects The government has identified that the first projects to be delivered under the new CBA framework are the new Pattullo Bridge and the fourlaning projects on the Trans-Canada Highway between Kamloops and Alberta. Other projects will likely include the Site C Dam, upgrades to Highway 1 and the George Massey Tunnel replacement. Collectively, the estimated capital budget for these projects is approximately $25.6 billion.

Conclusion While the government’s stated objectives may seem laudable, many of these objectives have been implemented and supported for the past two decades through the BC Industry Training Authority. The government’s decision to proceed with the CBA and to create BCIB means that there will be substantive changes in and challenges for the construction industry. Contractors, regardless of union affiliation or whether they plan to bid on designated infrastructure projects, will now need to consider the impacts of this new labour environment as it develops.

Charles Bois is a partner at Miller Thomson LLP. Vita Dos Santos is an articled student at Miller Thomson LLP.

January/February/March 2019

construction business

27

Legal File

Budgets and Estimates: Are They Binding?

By Grant Haddock

The lesson here is for contractors not to offload their budgeting responsibilities onto the client...

P

reparing budgets and estimates is a routine contractors engage in constantly.

Budgets and estimates are an important part of project development and are used in important decision making processes, such as what can be built, what has to be deleted from the scope or can the project be built at all.

The accuracy and reliability of estimates and budgets really depends on the quality and detail of available drawings, plan and specifications.

Preliminary drawings, plans and specifications create preliminary budgets. Preliminary budgets are generally not that reliable and contractors should carefully advise their clients of that fact so as to not raise unrealistic expectations.

But what happens when a contractor prepares a budget or estimate based on final drawings, plans and specifications and the client relies on the same to authorize a cost-plus contract for labour and materials to complete a project? Of what legal effect is the budget provided to the client? Since it’s a cost-plus contract, should the contractor care? What happens if the contractor specifically sets out a contingency percentage in the budget document?

Contractors should be aware that there is plenty of case law out there that says that budgets can become contractual in certain circumstances and where they become contractual, there is a certain leeway in that budget, generally seen to be between 5 – 20 per cent. So in certain (perhaps most) circumstances, a cost-plus contract where a budget has been prepared based on finalized drawings is not a license to simply build until the client runs out of money.

So what is the test to determine if a budget or estimate becomes contractual? It is as follows:

28 construction business

Did the agreement provide for a percentage of the project cost as a fee to the contractor? That would be a standard cost-plus contract. There is an inherent conflict that contractors and owners need to consider. The contractor makes more money on the project cost fee as the project costs escalate. It would seem to be in the contractor’s best interests to see those costs balloon. That is why this part of the test looks at the fee based on cost aspect which will then surely lead to determining if the contractor produced a realistic budget.

Was price of overriding importance for the owner and was that communicated to the contractor? This is almost always the case, especially in renovation contracts or custom homes.

Owners are often working with a defined sum of money and this is often disclosed to contractors.

Was an estimate provided and did the owner rely on the estimate? Owners are most often inexperienced in construction matters and it would be reasonable to rely on advice from the contractor whom the client would reasonably expect to have some expertise in the matter.

Clients often rely on the estimates provided to obtain financing for the project and to proceed with the project itself.

Did the owner require the contractor to design a project at a specified cost or seek assurances as to what the project would cost? This is a fairly routine occurrence. Owners are often very concerned about the cost and look to complete projects at a defined cost or within the constraints of imposed financing.

Did the contractor pay for the materials and labour and then bill the owner on a regular basis for the work done? Again, this is quite common.

Did the contractor make it clear that it was not assuming any of the risk that the final price would

January/February/March 2019

exceed the estimate? This would be prudent practice for contractors, but not something that is done enough, probably because contractors think that the project would be at risk if they were to disclose that the pricing remained uncertain or that the client could not rely on the contractor’s estimate. An example of this is where a contractor knows that the work cannot be done for the expressed budget, but says it can be done anyway so as to not lose the job and the cash flow. This is an extremely dangerous practice.

Did the contractor provide the owner with information regarding rates for labour and equipment rentals etc.? This is usually the case.

If all of these items are in the affirmative, a contractor may likely get stuck with the budget they produced as a fixed price with a 5 – 20 per cent leeway. A five per cent leeway is likely to be imposed where the drawings and specifications are detailed and the contractor includes their fee and a contingency in the prepared budget. A 20 per cent might be imposed where there is less reliance on the contractor and the drawings and specifications are poor.

The lesson here is for contractors not to offload their budgeting responsibilities onto the client and rely on a cost-plus contract to justify overruns. It might not work if the client pushes back.

Grant Haddock is founder of Haddock & Company Lawyers. His areas of practice are corporate housing law, strata property law, commercial and residential tenancy and construction law. www.haddock-co-.ca This article is for general information purposes only and does not constitute legal advice.

Legal File

Certified and Deemed Substantial Completion British Columbia Builders Lien Act

By Tim M. Sportschuetz

T

he construction industry often struggle with determining when builders’ liens can and must be filed. The British Columbia Builders Lien Act (BLA) imposes “substantial completion” as the statutory milestone that triggers the claim of lien filing period. This article provides an overview of the mandatory timelines associated with the substantial completion triggers and then discusses the often difficult task of determining substantial completion.

Triggering Events Sections 20 and 22 of the BLA set out that the allowable time for filing a claim of lien is no later than 45 days after the earliest of the following triggering events: • issuance of a certificate of completion or performance; • completion (or abandonment or termination) of the head contract, if the owner engaged a head contractor; or • completion (or abandonment) of the improvement, if the owner did not engage a head contractor.

It is important to note that once a triggering event occurs, the 45-day time limit to file a claim of lien starts to run. If or when a second event takes place, the already commenced 45-day time limit is not reset or renewed. Whenever a contract is deemed complete without the issuance of a certificate of completion, confusion can arise because a contractor may have unwittingly lost its legal entitlement to register a valid claim of lien because the 45-day lien filing period has expired. Should that happen, a contractor who missed a lien filing deadline may be able to commence a Shimco action in which it asserts a lien against unreleased holdback funds.

Certified vs Deemed Completion The substantial completion milestone can be “certified” by issuance of a certificate of completion or be deemed complete in accordance with the BLA. The BLA identifies the “3-2-1 formula” and the “improvement completion” as the two approaches for determining whether a contract, subcontract, or improvement can be either certified or deemed complete, in fact.

3-2-1 Formula The 3-2-1 formula is used to certify complete a head contract or subcontract. The formula details are set out in section 1 of the BLA as follows:

. . . a head contract, contract or subcontract is substantially performed if the work to be done under that contract is capable of completion or correction at a cost of not more than (a) 3per cent of the first $500 000 of the contract price, (b) 2per cent of the next $500 000 of the contract price, and (c) 1per cent of the balance of the contract price.

Note that the 3-2-1 formula cannot be used to certify complete cost-plus or unit-rate contracts or subcontracts that lack guaranteed target contract prices, because there is no final “contract price”. Therefore, these types of contracts make determining completion difficult, if not impossible, until the project is totally complete. For example, where a contractor has billed $300,000 on account of work completed pursuant to a cost-plus contract with no guaranteed target contract price, but the scope of work remains incomplete, then the 3-1-2 formula is unworkable because there is no contract price based on which to calculate the three per cent.

Improvement Completion Approach When the 3-2-1 formula is unworkable or a certificate of completion is not requested or issued, the BLA provides for an “improvement completion” approach, which allows for an improvement to be deemed completed “if the improvement or a substantial part of it is ready for use or is being used for the purpose intended.”

The BLA does not define the phrase “substantial part” or when an improvement is “ready for use”. Therefore, in contrast to the 3-2-1 formula, the improvement completion approach is a principally subjective exercise.

Note the improvement completion approach must only be employed if the owner did not engage a head contractor. For example, when the owner contracts directly with various trade contractors there are multiple “head contracts” and no one head contractor can be said to have been “engaged to do substantially all of the work” with respect to an improvement.

Application and Conclusion A real-world example is most effective to illustrate the many difficulties owners, consultants, and contractors may encounter when attempting to certify or deem complete a contract.

Suppose that an owner and head contractor entered into a cost-plus contract for the construction of a condominium tower, with no guaranteed stipulated target contract price.

To date, the contractor has billed $5.6 million on account of the work. The only incomplete scopes of work are the delivery and installation of the elevator cab and installation of some mechanical elevator components.

The 3-2-1 formula cannot be used to certify or deem complete the contract because it is a cost-plus agreement. The only remaining option under the BLA is to assess whether the improvement can be deemed complete using the improvement completion approach, which invites frequent disagreement between parties and, as described in greater detail below, may contravene the strict language of the BLA. The owner may argue that the missing elevator cab and incomplete mechanical components represent a substantial part of the improvement and therefore the “improvement or a substantial part of it” is not ready for use. The contractor may argue that the elevator cab and remaining mechanical components represent an insubstantial part of the overall improvement and therefore a substantial part of the improvement is ready for use.

The language of the BLA could lead to an even greater inconsistency. Read in its grammatical and ordinary sense, subsection 20(2) (b) stipulates that the improvement completion approach comes into play only if the owner did not engage a head contractor. In our example, the owner retained a head contractor, which makes inoperable the improvement completion approach. In the result, the 3-2-1 formula cannot be used to certify or deem complete the cost-plus head contract while the improvement completion approach is not operative because the owner engaged a head contractor.

While this article addresses some of the inconsistencies that can arise out of the provisions of the BLA, owners and contractors can take precautionary actions to safeguard their legal rights, both on-site and in the head office. Construction industry participants are well advised to seek timely legal advice from counsel who focus on construction law and builders’ liens.

Tim M. Sportschuetz is an associate, construction and infrastructure group, at Singleton Reynolds.

January/February/March 2019

construction business

29

Industry News

Loblaw anchors The Post Loblaw Companies Limited is the new grocery partner at The Post, a dynamic office and retail heritage development taking shape at the site of the former Canada Post building in downtown Vancouver.

Located at 349 West Georgia Street in a high-traffic area of Vancouver, The Post includes 1.13 million square feet of state-of-the-art office space in two new towers, surrounded by retail and public spaces.

Set in a pedestrian, bike and transit-friendly location at the convergence of four downtown neighbourhoods, Loblaws CityMarket will provide convenient access to a best-in-class shopping experience for a growing and diverse community. It will offer outstanding service and amenities including a cafe, cooking classes and a variety of fresh meat, produce and bakery items.

The Post is one of the most ambitious heritage redevelopments in Canada’s history. It celebrates the location’s Canada Post legacy through sustainable and adaptive reuse while at the same time prioritizing the needs of Vancouver’s emerging knowledge economy.

Xiqu Centre opens in Hong Kong The Xiqu Centre, Hong Kong’s first performing arts venue dedicated to promoting the rich heritage of xiqu, celebrated its grand opening this month. Located in the new West Kowloon Cultural District, the centre is conceived as a cultural sanctuary, blending theatre, art and public space for celebration and contemplation.

Designed by Vancouver-based Revery Architecture Inc. (formerly Bing Thom Architects) and Ronald Lu & Partners (Hong Kong) Ltd, the Xiqu Centre embraces the cultural richness of East and West by creating a contemporary expression that allows this most ancient art form of Chinese cultural heritage to continue its trajectory as it evolves with contemporary technology.

30 construction business

January/February/March 2019

Construction starts on Eagle Ridge Hospital ER Construction has begun on a new emergency department at Eagle Ridge Hospital in Port Moody, B.C. The provincial government is investing $22.6 million through the regional health authority in the emergency department expansion. The Eagle Ridge Hospital Foundation is providing an additional $5 million.

The expansion will more than double the number of patient treatment spaces in the emergency department from 19 to 39. Construction is expected to be complete in late 2020.

In order to expand the emergency department, health records will move to the basement of the hospital, diagnostic cardiology will expand its functional space by moving to the existing health records area, and rehabilitation services will also relocate to a partially vacant part of the hospital.

The work will include four new isolation rooms to support improved infection-control measures as well as two new trauma resuscitation bays. Walk-in patients and ambulances will have separate entrances. An area will be designated for chemical decontamination.

When Eagle Ridge Hospital opened almost 35 years ago, the hospital’s emergency department had about 20,000 patient visits per year.

Since then, visits have increased to more than 50,000 per year. By 2030, demand is projected to increase to 68,000 per year.

New ACEC-BC CEO Caroline Andrewes has joined the Association of Consulting Engineering Companies of B.C. (ACEC-BC) as the new president and CEO. She assumed the role in January, 2019.

Andrewes is a professional engineer with 20-years of experience in multi-national, hightech companies. Most recently, she served as the president for Engineers and Geoscientists B.C. In addition to being a professional engineer, Andrewes is also a chartered professional accountant. Andrewes is an effective communicator who builds strong relationships with stakeholders, peers, and leaders. Her experience leading teams, formulating strategic plans and developing business processes are valuable skills that she brings to the association.

Andrewes takes over from Keith Sashaw, former president of ACEC-BC, who retired at the end of 2018. Sashaw served in the B.C. construction industry in various association capacities for more than 30 years. Prior to joining ACEC-BC in 2012, he served at the helm of the VRCA for 12 years. He also held senior positions with the Electrical Contractors Association of BC and the Canadian Home Builders’ Association of BC. ACEC-BC is British Columbia’s provincial association of consulting engineering firms.

We’re Proudly Celebrating 50 Years of Caring for Construction Families Through Group Employee Benefits

If we can help with your employee benefit needs, please contact us:

1 800 665 1077 www.bccabenefits.ca info@bccabenefits.ca