CB Jan Feb_2023

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January/February 2023 Vol. 20 No. 2 INFRASTRUCTURE | BONDING, INSURANCE, SURETY PM 40063056
JEFF MUSIALEK, SMITH BROS. & WILSON

January/February 2023 |

06 Connections

Smith Bros. & Wilson has been building in Western Canada for 125 years. With president and co-CEO Jeff Musialek at the helm, the company has grown significantly and is posed for further expansion.

10 Feature Project

The Alberni by Kengo Kuma luxury tower in downtown Vancouver is hard to miss with its striking curved structure.

Industry Focus

14 Bonding, Insurance, Surety

Surety Bonding: 2023 Outlook

Impacts of Increased Costs Take a Proactive Approach to Risks

18 Infrastructure Water Systems: What’s at Stake? Improving Infrastructure Investments Exceptional Transportation Work Departments

04 Message from the Editor

21 The Legal File

First Nations Land: Unique Opportunity Managing Contractor Insolvency Risk

PUBLISHER

MANAGING EDITOR

CONTRIBUTING WRITERS

Dan Gnocato dang@mediaedge.ca

Cheryl Mah

Matt Arruda

Ron Glen Glen MacRae

Patrick Russell

Alexander Spraggs

Duncan Stanage Laney Third

Inside Dan Gnocato Tel: 604.549.4521

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Cover Photo

The new Harry Jerome Community

Centre is the largest capital project in North Vancouver.

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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.
Recreation

What does it take to build a successful construction business and ensure it thrives? The industry is highly volatile and full of risks with razor-thin margins. After speaking with so many industry leaders over the years, I’m still always impressed about how companies are able to survive the cyclical nature of the business. The challenges are not for the faint of heart — just ask Smith Bros. & Wilson.

After 125 years, the company is stronger than ever and poised for more growth, according to Jeff Musialek, president and coCEO. The company today is very different

from the one formed by the Smith brothers in 1897 but the core values remain. With careful succession planning, the future looks bright for another generation.

While many companies are keeping busy, the current market is presenting a number of challenges, namely inflation, rising costs and supply chain issues. In this business climate, bonding, insurance and surety are critical tools for owners and contractors to leverage risk strategies to complete projects. Read about important insights and outlooks in our feature.

For our focus on infrastructure, we take a look at road transportation, water systems,

and award winners of the 2023 B.C. Transportation Association of Consulting Engineering Companies Awards.

Finally, one of the latest and most interesting additions to Vancouver’s skyline is the Alberni Kengo Kuma, a 43-storey mixed use tower that stands out for its unconventional curved form.

CONSTRUCTION BUSINESS January/February 2023 4 Editor’s Note Challenging
Times
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INDUSTRY PIONEER

Smith Bros. & Wilson (SBW) is a pioneer in the construction industry. At 125 years old, the company has played a pivotal role in the development of towns and cities across Western Canada. Under the leadership of Jeff Musialek, president and coCEO, business volume has grown dramatically in the last decade and shows no signs of slowing down.

“I can’t think of a time where there’s been this much work,” says Musialek. “We are very busy.”

There are many challenges and risks to sustaining a construction company. SBW has managed to not only succeed but endure as B.C.’s oldest construc-

tion company. Their quality work can be seen in many historical landmarks such as the Vancouver Post Office, Seaforth Armoury and the Vancouver Art Gallery.

The company today is very different from the one formed by the Smith brothers in 1897 but the core values remain.

“ We started out as a family business and became a business of families,” says Musialek. “We have many long-term, good employees that have been with us for 20-30 years with low turnover. We have lasted as long as we have because we are well-man -

CONSTRUCTION BUSINESS January/February 2023 6
Connections
The West Vancouver Public Services & Municipal Hall

aged and have strong family values, commitment and integrity.”

Musialek has been a part of the leadership team since 2013 when he joined the company as vice president. He was elected to his current position in 2019. Working in the industry, he was aware of SBW’s reputation as a good builder.

“It wasn’t a difficult choice,” recalls Musialek about what attracted him to the company. “SBW is known for its integrity so I came to the partners. I knew I could bring my experience to help. We ended up rebuilding and modernizing all the systems in the company. Bringing in a lot of new people and training them. The volume increase over the period of time I’ve been here is probably more than 10 times growth.”

Musialek grew up in Kelowna and was exposed to construction at an early age through his father, spending his childhood and summers at construction sites. He graduated from the University of Victoria with a BA in 1993 and a certificate in Building Technology from BCIT in 1996.

Prior to joining SBW, he worked in different capacities with Graham Construction, Dominion Construction, and WR Shields Contracting. Over his 30 year career, Musialek has successfully completed projects across B.C. and the Yukon in civil, industrial, institutional, and social infrastructure markets.

“I love the business. I love the people,” he says. “The business is full of challenges every day — never a dull moment. It’s exciting and rewarding to solve complex problems and to meet the needs of our clients.”

Headquartered in Surrey, SBW is active in institutional, commercial, industrial and civil construction. Projects range from SkyTrain stations and bridges to municipal buildings, hospitals and schools. With a team of around 200, the company undertakes about 30 projects at any given time. A special projects group manages smaller contracts.

Musialek notes projects are now predominantly located in the Lower Mainland but the company has worked historically all over B.C., Alberta, Saskatchewan and the Yukon. The company is known, in particular, for their ability to deliver complex projects with a high level of intricate concrete work.

Current projects driving volume include the Harry Jerome Community Recreation Centre, SkyTrain Operations and Maintenance Facility and Dickland’s Biofuel Facility.

“ The new Harry Jerome Community Centre is an exciting project in North Vancouver. It is a large comprehensive project with an ice rink, pool, gym and seniors centre. We built the original in the 60s,” says Musialek. The three year project is on track to complete in 2025.

One of the most complex jobs undertaken by the company was the innovative Surrey Biofuel Facility in 2014, the first and largest of its kind in North America. It was the company’s first major construction management project as well as its first P3.

“ The Surrey Biofuel Facility was an important project for us. It’s the world’s most advanced bio-

fuel public facility, converting waste into renewable natural gas. We’ve built another biofuel since then and we’re looking at several others,” says Musialek.

More sizable contracts followed including the $15-million renovation of Vancouver Central Library, the $42-million upgrade of TransLink’s Commercial–Broadway SkyTrain Station and the $200-million Molson

Coors Brewery in Chilliwack (another project where SBW built the original).

All of these projects helped put SBW on its current business volume trajectory, rejuvenating the company and also earning industry honours along the way with several VRCA Awards of Excellence.

Most recently, SBW was named the VRCA Member of the Year, which recognizes outstanding

January/February 2023 CONSTRUCTION BUSINESS 7
Connections
Above: The Commercial Broadway Station was the largest SkyTrain station upgrade in TransLink history. Bottom: The Molson Coors Fraser Valley Brewery is the newest and most modern brewery for Molson.
SBW was named VRCA Member of the Year, which recognizes outstanding achievements by a company.

achievements by a company. Each year, the VRCA recognizes the finest companies, projects and individuals in the construction industry.

“ We’re very proud to be recognized by VRCA with that award. We have so many good relationships in the construction community and have high respect for the organization,” he says, adding the company was a founding member of the association.

To accommodate their growth, SBW moved from Vancouver to its new, company-built Surrey office in 2020. The three-storey concrete and heavy timber building includes a 5,000 square foot prefab warehouse, storage site yard and parking lot.

“ We’ve already outgrown the space. The building is designed to add another floor and we submitted the building permits to go ahead probably this summer with the addition of the next floor,” he says. “We also have a second office in Langley.”

Musialek anticipates continued strong growth with the company set to look into other markets in the province as well as possible expansion across Western Canada. In the past, SBW had offices in many major cities such as Winnipeg, Calgary, Edmonton, Regina and Victoria.

“ The company is primed and ready to grow. We have the right people and the capacity,” he says.

Careful succession over the years has been key to ownership transitions within the company. The company’s culture and values have carried successfully over five generational transitions.

“ We have young leadership in place and have focused on the succession of great leaders to carry on the practices and values of the company for years to

come,” he says. “We have a robust system to transfer knowledge and experience and offer career advancement opportunities.”

While the construction industry is facing a number of current challenges (inflation, supply chain is-

sues, labour shortage), Musialek is optimistic about the next few years.

“ We’re seeing continued robust expenditures from both large companies and public institutions,” he says.

CONSTRUCTION BUSINESS January/February 2023 8
www.wmbeck.com 1-888-437-1100 info@wmbeck.com We Care. We Help.
Completed in 2017, the Surrey Biofuel Facility was a seminal project for Smith Bros & Wilson.
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Peace Arch Hospital Expansion S M I T H B R O S . & W I L S O N ( B . C . ) L T D . SMITH BROS. & WILSON (B.C.) LTD. General Contractor/Construction
Build 9788 186 Street, Surrey, BC V4N 3N7 T 604-324-1155/ E: sbw@sbw ca/ www sbw ca
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Visually Striking

The distinct form of a new residential tower in downtown Vancouver is hard to miss. Rising 43-storeys into the skyline, the project is defined by a dramatic structural curve, and a moss garden that surrounds the base of the tower.

The unconventional design is by world renowned Japanese architect Kengo Kuma and marks his first large scale residential tower in North America. Known as Alberni by Kuma, the project is a collabo-

ration between Kengo Kuma and local architect of record Merrick Architecture.

When Kuma revealed the design in Vancouver, he said, “I have always wanted to have a project in Canada because of its closeness to nature. Typologically, this is a large-scale project in North America, a dream for any foreign architect. We have done towers, but not to this scale and level of detail.”

The design and construction of the mixed use project is anything but typical.

The curved form of the building, described as two emphatic scoops, is not only visually stunning but was conceived to both capture optimal views and separations from neighbouring buildings. The deep curved recesses also allow for deep balconies with wood soffits and decks.

The overlapping rows of vertical shingle metal curtain wall panels add another unique element, architecturally intended to offer reflections of neighbouring buildings on the lower levels and the sky on the upper levels.

The a mbitious 492,000 square foot tower is comprised of 181 units, eight levels of underground parking and mixed-use space for retailers. Amenities include a gym, pool, sauna, play area, public art, wine cellar, restaurant and more. The project is targeting LEED Gold with the ability to connect to the downtown district energy plant, one of the largest in North America.

Graham Construction was awarded the contract in 2017 and topped off the tower structure in November 2021. Substantial completion is scheduled for January 2023.

Challenges included a tight downtown site, unique floor plates at each level, managing pandemic related issues (procurement delay, safety protocols) and achieving complex design details.

To achieve the innovative and challenging form of the tower, a 20 storey concrete tensile strut was designed by Glotman Simpson Consulting Engineers. The tensile strut acts to support the structural core.

The building’s unique facade features a new and innovative glazing and enclosure system, procured from a manufacturer in South Korea. The complex envelope design required careful technical detailing by RDH.

According to the design vision, the tower aims to be in harmony with its urban and natural surroundings, notably the mountains and the proximity of the waterfront.

Kuma’s inspiration by nature is clearly evident on the ground floor of the building where an extensive Japanese moss garden sits under arching structures surrounding an amphitheatre shaped space. The green space defines the entrance of the building and is meant to be a public amenity to be used for gatherings and events.

Wood is also used throughout the exterior and interior as part of a muted palette of materials. The most striking wood feature is the “kigumi” structure — resembling a large nest of wood sticks — above the main entrance and garden. It flows directly overhead into the swimming pool situated on the second level.

“Buildings should be part of the city, part of the environment. I believe that is the goal of architecture in the 21st century.” said Kuma.

The Alberni tower is a definitive example of the next level of iconic architecture in Vancouver.

CONSTRUCTION BUSINESS January/February 2023 10 Feature Project

Surety Bonding: 2023 Outlook

As we turn the calendar to 2023 the construction industry is holding its collective wallet a little tighter. We are seeing widespread financial struggles from construction clients across the province. Complex projects and difficult owners, lack of work, fluctuating input costs, rising wages and high employee turnover are the main drivers which have led to low profit margins, high competition, and dwindling cash reserves. Bonding companies, facing increased bond claim noise and anticipating contractor defaults are upcoming, are tightening their underwriting. We surety brokers are turning to more creative solutions and leaning on experience and outside the box thinking in order to help contractors get the bonds they require to achieve their business plan.

This was what we expected to see in 2020 in the early stages of the pandemic. Bonding companies held their breath, concerned the unprecedented climate would lead to contractor defaults, delay claims due to widespread worker illness, and legal battles over Force Majeure clauses. None of this transpired in any significant manner. Owners, contractors, and the industry as a whole acted collegiately and collaboratively, problem solving and moving projects ahead despite rising COVID case counts and overstuffed hospitals. Many contractors had ample work and were performing it profitability. For those companies who ran into difficulties or were not obtaining enough work to keep their employees busy, the Canada Emergency Wage Subsidy (CEWS) kept them afloat while also boosting those contractors who were achieving profitable results.

Then, as COVID case counts dropped so did contractors balance sheets. Government budgets constricted leading to limited municipal work, input costs rose dramatically due to worldwide supply chain issues, wage subsidies were wound down, and the industry faced a labour shortage exacerbated by workers reliance on government handouts.

We are seeing projects continue to rise in price, complexity, and length. Project owners push risk down on contractors with onerous contract terms. The $20 million project you performed five years might cost you $40 million now. These rising prices have not been accompanied by a proportional increase in contractors’ financial positions. Leveraging (total backlog divided by working capital or net worth) is being pushed higher and higher. All of these things are risks that bonding companies contemplate and analyze. Underwriting from sureties has become tighter and speaking their language is as important as it ever has been.

It is realistic to expect contractor defaults in the coming year. A lagging indicator, the depleted balance sheets and project losses will eventually catch up and some contractors who have not adapted will fall. Bond claims are likely to increase

substantially so from the 14 per cent loss ratio the Surety Association was reporting last year (14 cents of each dollar of premium paid in claims), which will lead to more stringent underwriting.

In the coming year we are seeing a rocky road ahead for contractors and the industry as a whole. You can expect more questions and stricter underwriting from your bonding company. Inquiries about price escalation clauses, critical subcontractors and suppliers, and comfort with size and scope of projects have become more commonplace. Working with a specialized surety broker is a differentiator for your firm. Someone who understands your business plan is crucial. Those generalists and middlemen will struggle in the current climate and do your firm a disservice. Experienced and creative brokers can find innovative ways to solve the challenging bonding problems the industry is facing. There are solutions out there.

You may want to consider obtaining surety bonds from your critical path subcontractors. The bond you provide to the owner of the project is for their benefit, but if you ask your subcontractors for bonds this will protect you from their potential default and you know they have been prequalified for the job and they have the experience and financial strength to perform their component of the work. We always recommend you look to bonds subs you are either unfamiliar with, are performing a complex or unique scope of work and would be hard to replace should they default, and/or are performing a significant size subcontract.

We have recently seen some changes within the surety market due to some consolidation and purchasing of bonding companies. This happens occasionally as they jockey for market share. New entrants typically push hard for new business, trying to establish themselves as problem solvers and creating their niche in the marketplace. This push for business is contrasting the general hesitancy in the industry due to the economic outlook.

On a positive note, the bonding industry has made some headway on technology. The past couple years have seen the emergence (finally) of digitally signed indemnity agreements, far more frequent acceptance of electronic bonding by owners, and brokerage platforms allowing contractors to request bonds, update tender results and view premium calculations much easier than was previously available.

Despite the challenges, there is light at the end of the tunnel. We are seeing those thoughtful and calculated contractors succeed and post record breaking numbers in seemingly impossible contrast to the market as a whole. There are lots of talented underwriters who continue to understand their clients and help them secure larger bonds and find success, and some new entrants look to push the industry to think outside the box and rethink some of the old ‘we have always done it this way’ underwriting philosophies.

January/February 2023 CONSTRUCTION BUSINESS 11 Bonding, Insurance, Surety
Duncan Stanage is surety account manager at Wylie-Crump. He specializes in working with construction companies to manage and optimize their bonding facilities. The year ahead will be rocky with projects continuing to rise in price, complexity, and length.
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Impacts of Increased Costs

the value you were insured at and the value of a similar unit in the current marketplace. While we always recommend that contractors remain diligent and regularly review these values with their brokers - it is more important now than ever before to maintain these updates.

I HAVE A COURSE OF CONSTRUCTION (BUILDER’S RISK) POLICY IN PLACE FOR A PROJECT I AM CARRYING OUT. WHAT HAPPENS WHEN THE COST OF CONSTRUCTION INCREASES OVER THE BUILD TIME?

Post-pandemic, the effects of global supply chain disruptions, accelerating inflation as well as ongoing labour shortages have created an extremely challenging environment for businesses across all industries.

All those in construction have faced dramatic surges in costs over the pandemic and there continues to be upward pressure on equipment, materials and labour prices. As risk advisors dedicated to this industry, many of our clients have come to us with questions and concerns over the past six to 12 months on the impact of these increases on the insurance they require.

Here are a couple of the most common questions we have been addressing and what you should know about the values you report to your insurer.

MY MOBILE PIECES OF EQUIPMENT ARE OLDER AND MY POLICY VALUES THEM AT ACTUAL CASH VALUE — WHAT DOES THAT MEAN?

In the past, equipment values would be depreciated year over year, allowing for premium reductions due to how insurance companies would determine how claims are paid on said pieces

of equipment. However, the reality that many construction businesses are facing now is that similar to the current climate for used vehicles, shortages are resulting in pieces of construction equipment appreciating in value even when they are older and have substantial hours of usage accumulated on them.

These new circumstances and the required change in expectations among most contractors (and insurance brokers) have caused some potential issues with contractor’s equipment schedules and how values are being reported. Insurers would typically pay you based on the “market value” of a similar piece of equipment (based on model year, hours on the unit, attachments, etc). When searching the used marketplace, a unit you had once valued at a certain amount may have actually increased by 5 per cent, 10 per cent, or even 50 per cent, in cases of highly specialized pieces.

If you are underinsured on those pieces of equipment, the insurer will apply a co-insurance penalty in the event of a claim, which typically means that you share a portion of the loss with the insurer. Those amounts will vary depending on the percentage of the penalty being imposed and how large of a discrepancy there is between

The short answer is that you should be updating your insurance carrier and increasing policy limits where appropriate as soon as possible. Unfortunately, sometimes the potential for cost increases over the policy term is not factored in. Some policies do include some pre-determined increases of cost either through a set percentage of the policy limit or a flat dollar amount. In our experience, those amounts are not nearly enough in the current landscape with ongoing inflation pressures. With that said, you can minimize the potential for cost overruns by keeping a close eye on project progress and factoring potential issues that could drive costs up, as well as maintaining solid relationships with your subcontractors and suppliers to ensure their projected cost increases are included in your budget. The fallout of being underinsured on your course of construction (builder’s risk) policy could be severe. When you do increase the value on the policy, that premium will be backdated to inception of the policy. This can obviously create some additional problems, when it comes to projections that are already in a cost overrun and now have further costs to absorb.

As you can see, underinsurance can lead to unintended consequences when claims arise and added expenses in an already difficult time for many in the construction industry. To prevent this situation, it is critical that you maintain ongoing communication with your insurance broker, keeping them updated on changes to your operations and fluctuations in values that must be reported. This way, your insurance broker can provide recommendations on any adjustments that should be made to your policies, ensuring you are consistently securing adequate levels of coverage.

CONSTRUCTION BUSINESS January/February 2023 14 Bonding, Insurance, Surety
Matt Arruda is a commercial risk advisor and partner at Acera Insurance Services in Kelowna, B.C. (formerly CapriCMW Insurance). Contact him at 250.869.3994 or marruda@capricmw.ca.

Take a Proactive Approach to Risks

Inflationary pressures have heavily impacted the construction industry, and it is increasingly challenging to complete projects on time and on budget. Now more than ever, it is critical for project owners and contractors to leverage risk management tools and strategies to successfully complete projects. Surety bonds and insurance are two effective tools for managing risk and should be a core part of a sound project risk management strategy.

One recent example provides a good illustration of how quickly project costs, both direct and indirect, can escalate. At the bid stage, a 40 foot shipping container from Asia to the West Coast of Canada was estimated to cost $2,400. By the time the contract had been finalized and the contractor was mobilizing on site and ordering materials, the cost of shipping containers had skyrocketed to more than $18,000 — a 750 per cent increase inside of six months. Additionally, rising interest rates significantly increased inventory carrying costs over the same period and the contractor was forced to absorb a significant portion of the cost increases, which had a devastating impact on their bottom line. While this case is a bit of an extreme example that was exacerbated by global supply chain challenges at the time, it does highlight the importance of taking a proactive approach to managing cost escalation risks.

Some practical strategies to mitigate upward cost pressure due to inflation include:

• Recalibrate your assumptions and allow for higher and unanticipated cost increases when building out project budgets.

• Use hedging strategies such as forward/futures contracts for commodity-linked inputs and taking advance deposits to secure pricing and availability of critical project equipment/components that is not manufactured domestically.

• Ask for evidence of bonding capacity or prequalification letters from subtrades and suppliers to ensure they are experienced and have a track record of delivering projects on time and on budget.

• Obtain bonds from as many subtrades and suppliers as possible. Bonds help mitigate both the financial and timeline impact of a subcontractor default.

Surety bonds, more commonly referred to as “bonds” or “bonding,” are strong tools for mitigating contract default risk due to inflationary pressure. Bonds are unique instruments issued by insurance companies (sureties) on behalf of contractors

that act as financial guarantees in the event of a contract default. Bonding a contract creates a stronger commitment and obligation to complete a project as prescribed in the contract, both in terms of cost and timelines. Practically speaking, bonds transfer the risk of cost escalation to the contractor that supplies the bond, create greater accountability, and provide assurance that defaults will be remedied, either by the contractor or surety.

Inflation can also be an issue with insurance. Most construction contracts are bound by the insurance requirements in CCDC 41 — Insurance Requirements that stipulates that project property insurance must be covered for 110 per cent of the contract price. For a decade or more, this never posed a problem as the cost of builders risk or course of construction insurance, as it is known, was relatively inexpensive. But decades of those low rates and premium levels made project insurance unprofitable for most insurance companies. As investors sought better rates of return, money left the insurance marketplace looking for greener fields. Insurance companies needed to increase premiums and lower their risk by demanding higher policy deductibles. In recent years, some deductibles for residential high-rise buildings have skyrocketed and are now in the range of $250,000 or more. Additionally, some premiums have doubled and even tripled from a few years ago. These changes are due to inflationary pressures on the availability of money that backs insurers’ daily operations.

When inflation increases the costs of labour and materials for a project, the owner or general contractor needs to increase the policy limits. However, finding additional insurance at a reasonable price can be an arduous task due to the reluctance of the insurance industry to insure projects at all but the highest premium and rate levels. Insurance brokers are often challenged to find enough capacity to increase the policy limits, which is driven by an insurer’s internal financial management requirements which can only allot a certain amount of money to insure a project. If the owner needs more insurance, they may need additional insurance companies to subscribe to the insurance policy.

The banks that finance the project, often along with the involvement of quantity surveyors, will be closely monitoring the project budget and will not accept underinsurance. To mitigate these challenges, it is important to work closely with a good insurance broker to monitor the construction project, particularly in terms of time and budget. Construction delays can prolong the work and will drive up the final price, causing a cascade of additional challenges that can take weeks to work through. The closer the contractor or developer works with the broker, the better the cost management for the project will be. Overall, a proactive approach to risk management can help reduce the impact of inflation on the construction industry as a whole.

January/February 2023 CONSTRUCTION BUSINESS 15
Bonding, Insurance, Surety

New Zone Control Regulations for B.C. Tower Cranes

In March 2023, WorkSafeBC will implement new regulations for tower cranes in B.C. that will require the use of anti-collision systems.

This development comes in response to newer technology that helps to ensure the safer use of tower cranes by preventing craneto-crane collisions and crane-to-power-line collisions. The systems also provide zone control by creating safe barriers in other vulnerable settings, such as close proximity to existing buildings or to traffic.

“These systems work,” affirmed Ryan Burton, managing director of Bigfoot Crane Company, and former board chair of BC Crane Safety. “They make tower cranes safer.”

Burton witnessed the use of the zoning systems firsthand in the Lower Mainland when they were tested on tower cranes at the

Olympic village site in Vancouver in 2010. He became convinced that it was just a matter of time before the systems would become standard within the local tower crane industry, as they already were in Europe.

After Burton insisted that Bigfoot start upgrading their fleet of tower cranes with the zoning systems, the company saw dramatic results. “Although incidents were rare before, maybe 1-2 collisions per year with powerlines,” said Burton, “within two years of using these systems, we completely eliminated those incidents.”

According to Clinton Connell, executive director of BC Crane Safety, “The new regulations were expected, and they are certainly well intended. I haven’t heard anyone in the industry arguing against the benefits of

using these systems — they are proven safety devices. However, the biggest challenge is the timeline.”

In order for the B.C. tower crane industry to comply with the new regulations, all crane owners and users must ensure that their cranes are not only equipped with zone control systems by March 2023, but that they are fully approved by a professional engineer.

“Brand new cranes are plug-and-play ready for these new systems,” said Connell. “The electrical schematics come fully compatible from the OEM. In that case, the owners just need to find a trusted vendor to install the new system and get sign-off from an engineer.”

However, the process to compliance becomes complicated when cranes are not technically ready for the newer systems.

CONSTRUCTION SAFETY

“It completely depends on the age of their fleet,” said Connell, when considering the preparedness of crane companies in B.C. “Any tower crane built before 2006 would not be compliant with current zone control systems, and a lot of cranes that have been in service for years have undergone modifications that are not necessarily approved.”

“The older the crane, the more convoluted the process,” said owner of Arsenal Engineering, Ryan Stewart, who has been inspecting and certifying cranes in B.C. for 15 years. “Companies in B.C. with newer cranes will have an easier time, but my general sense is that, as an industry, we’re not prepared for these new regulations.”

“Finding a good system and installing it is not the problem,” said Burton. “The challenge is making sure that your crane’s electrical panel is not only compatible with the new systems but that any previous modifications have been approved by a professional engineer.”

According to Burton, the electrical panels on older cranes are the bottleneck. Before they can be fitted with a zone control system, they need to be brought into compliance and approved. “That’s step one,” said Burton, “before you even start talking about adding a new zone control system.”

According to professional engineers in the crane industry, like Stewart, the problem with many of the older cranes is that they have been modified over the years, and changes have not been approved. Perhaps skilled electricians completed field fixes to keep cranes up and running, but the re-wiring did not necessarily match the schematics supplied by the OEM (a regulatory prerequisite for installing a zone control system). Although these older wellmade cranes are working perfectly in most respects, they are not compliant with the newer systems. In some cases, the OEM no longer exists and so the road to compliance is even more difficult.

The practical steps to compliance will be the same for all companies in the tower crane industry. First, they will need to have their cranes evaluated, to determine whether the factory schematics match their current configuration. If the electrical panel is compatible and unmodified, then they can proceed to installation of a new zoning system and subsequent approval from an engineer.

However, if modifications have been made, they will need to be documented and approved. This will inevitably require the work of an electrical engineer. In certain cases, schematics will need to be completely re-drawn to bring them into compliance. Only after the electrical schematics are approved will there be an occasion for installation and final approval of the zoning system.

At this stage, it appears that there are few companies within the tower crane industry that are fully prepared to meet these requirements by March 2023.

“The timeline is tough,” said Stewart, “and some companies will scramble. But it will depend on how WorkSafeBC handles this. What approach will they take? How will they enforce the new regulations?”

Engineering companies like Stewart’s Arsenal will do what they can to assist. “We’re currently learning about how these zone control systems work,” he said. “We will be able to give approval on certain steps to compliance. We can approve installations on newer machines, sort of like a regulatory review. But we are not able to meet the demand of all the electrical engineering that is required for the compliance of older cranes.”

Burton estimated that about half of B.C.’s tower cranes would require significant effort to bring into compliance, which represents a colossal amount of work. He agreed with Stewart’s assessment of the need for qualified personnel. “Finding electrical engineers who know cranes is not easy right now,” he said, “especially those who are willing and ready to go up 500 feet in the air to work on a tower crane that is already in operation.”

Burton has worked hard to secure an electrical engineer that will specifically help Bigfoot with zone control systems. In time, he hopes that Bigfoot will be able to offer a service to other companies to help bring them into compliance.

However, concerning Bigfoot’s ability to meet the March deadline, Burton expressed caution. “We may have a portion of our fleet ready, but we will not be fully prepared. The timeline may be sufficient to get zoning systems installed, but the engineering will take much longer, maybe two to three years.”

As part of the process, Burton also noted that Bigfoot has entered into partnership with one of the world’s largest manufacturers of

zone control and anti-collision systems, AMCS Technologies, a French company that has been a global leader in construction safety devices since 1994 and produces what Burton considers to be the best zone control product for cranes in the market.

From the standpoint of BC Crane Safety, Connell is concerned about ensuring uniform messaging to all industry stakeholders as March approaches. “WorkSafeBC is the regulator,” reminded Connell. “We just want to make sure that feedback from the industry is heard by the regulator, and that everyone has the resources that they need to move forward toward compliance.”

BC Crane Safety will continue to facilitate conversations between the various stakeholders like WorkSafeBC, the crane industry itself, and the engineering community, as well as the vendor community that provides installation of the zone control systems.

“I don’t want to trivialize this process of complying to regulations,” Connell said in conclusion. “This is a challenge. We realize that crane owners are being asked to do something that they haven’t had to do in the past. So, we’re trying to help them through that challenge.”

Connell also reiterated the fact that he was not hearing any negative voices in the tower crane industry about whether these devices were a good idea or not. The consensus is that zone control and anti-collision systems are valuable and necessary. The road to industrywide compliance, however, is yet to be travelled.

Still, industry professionals like Connell, Burton, and Stewart are confident that, in the end, the industry will adjust to these new regulations.

Connell offered the helpful analogy of GPS systems and backup cameras in vehicles. “At first, they were a novelty,” he said, “and they were just an aftermarket upgrade that anyone could do to their vehicle. But now, GPS systems are standard and backup cameras are required by law in new cars.”

If Connell and his colleagues are right, it will only be a matter of time that zone control systems will be standard in tower cranes. According to WorkSafeBC’s new regulations, the time is March 2023. Yet the question remains: Is B.C.’s tower crane industry ready to comply?

Water Systems: What’s at Stake?

British Columbia’s watersheds are facing ever-increasing pressures with climate change destabilizing freshwater sources, adding droughts, fires and floods to the existing threats of contamination and cumulative impacts on the land. In particular, these impacts are having profound consequences for B.C.’s Indigenous communities.

Over the past two years, Healthy Watersheds Initiative (HWI) projects have been launched at more than 200 sites around B.C. to restore watersheds and wetlands.

The projects span thousands of sites within the province’s eight major drainage basins, creating spawning grounds for salmon, and building habitat and community resiliency to withstand sea level rise and climate change events.

As global warming accelerates — resulting in record droughts, wildfires, and flooding disasters — actions taken to conserve and renew watersheds are essential. HWI projects demonstrate a strong path forward for investing in nature-based infrastructure, planning and monitoring that builds community resilience and safety at a fraction of the cost of recovery efforts after extreme climate events.

HWI is supporting the more than 60 projects across the province through $27 million in stimulus funding under the B.C. government’s economic recovery plan.

A recent HWI report highlights the success and cost effectiveness of investing in community-led watershed restoration and stewardship work. One of the successes achieved with the projects was the training and creation of jobs for more than 1200 people and spinoff benefits for local contractors, service providers and businesses.

The report also emphasizes the complex, challenging, and important areas of learning that project teams undertook as they advanced the United Nations Declaration on the Rights of Indigenous People (UNDRIP) through their work.

“We are deeply grateful to all the project teams whose work and insights made it possible for us to see and understand roles, responsibilities, and ac-

tions that are critical to UNDRIP commitments, economic recovery, climate action, and community and watershed health,” said Leanne Sexsmith and Zita Botelho, Co-Directors of the Healthy Watersheds Initiative. “We are thankful to our Indigenous Leaders Advisory Circle, the B.C. government and community partners for working with us to guide, implement, and share in this work, which has resulted in incredible learning, impacts, and returns from one of the most significant investments in water security in decades.”

The restoration of riparian and wetland habitats through HWI projects helped protect important species, increase biodiversity, manage peak water flows and summer droughts, and supported habitat and community resiliency. Work included removing physical barriers to migrating salmon, planting vegetation, building infrastructure, and investing in data collection and monitoring. It also included contributions to longer-term watershed and species sustainability plans.

“Maintaining and protecting healthy watersheds and wetlands are among nature’s strongest barriers against climate change - and will help sustain healthy ecosystems and healthy communities for future generations,” said George Heyman, Minister of Environment and Climate Change Strategy. “The Healthy Watersheds Initiative helps fund local projects that rehabilitate

TWO PROJECT EXAMPLES

Quatse (Gwa’dzi) Estuary Restoration

One of the HWI projects focused on restoring coastal processes and improving fish and wildlife habitat in the Gwa’dzi River Estuary. This project was implemented and delivered in partnership with the Kwakiutl First Nation, The Nature Trust of BC along with all levels of government. The project work focused on enhancing fish and wildlife habitat while ensuring the estuary would be resilient to sea-level rise and climate change.

Chilako

River Restoration Demonstration Project

HWI jobs and training contributed to leadership development, advanced career goals, connected people to community and culture, and supported intergenerational engagement and knowledge sharing. Through the HWI, the Upper Fraser Fisheries Conservation Alliance (UFFCA) restored riparian and floodplain ecosystems along the Chilako River and supported 27 jobs. The UFFCA partnered with Lheidli T’enneh and Saik’uz First Nations to complete this work. The project focused on revitalizing spawning habitats, reducing erosion, and minimizing the effects of climate and land use changes

threatened watersheds and wetlands, restoring these critical habitats so they are healthier and more resilient to climate change.”

ADVANCING IMPORTANT COMMITMENTS TO UNDRIP

With the majority of projects supporting the exercise of Indigenous rights and incorporating Indigenous knowledge in planning, they are advancing important commitments to UNDRIP and providing inspiring examples of what is possible through strong investments in watershed conservation and restoration, community leadership, and relationship building.

“Water is critical for us, for all of us. For myself, as an Indigenous person, it takes me back to my roots, my origin,” said Mavis Underwood, Chair of the Healthy Watersheds Initiative Indigenous Leaders Advisory Circle and Governor for the Real Estate Foundation of BC. “We have a destiny that was here in the hearts and minds of people before us, generations before us that connect us back to the land and the water. Indigenous law in most cases describes a relationship of gratitude, respect and responsibility for air, land, water, and species that are gifts through creation to help sustain all life. It is exciting to see the outcomes from the work of the project teams and it is inspiring to see young people who are leading the way and are making a difference in their watersheds.”

The work completed through the HWI demonstrates the success and cost-effectiveness of working in partnership to resource and bring communities together to improve local watershed security. Overall, the report amplifies the extraordinary co-benefits of the work for ecosystems, economies, community health, and well-being.

The HWI projects were supported through a $27 million investment from StrongerBC — a $10 billion COVID-19 economic recovery plan. To deliver the funding, the province partnered with the Real Estate Foundation of BC (REFBC), who administered the Healthy Watersheds Initiative (HWI), in partnership with Watersheds BC.

CONSTRUCTION BUSINESS January/February 2023 18 Infrastructure

Improving Infrastructure Investments

TRADE-ENABLING INFRASTRUCTURE NEEDS TO BE PRIORITIZED

Canada West Foundation’s (CWF) “From Shovel Ready to Shovel Worthy” report, published in 2022, found that disjointed, politicized approaches to funding our trade infrastructure is harming Canada’s global reputation as an investment destination and trading partner.

Governments are too often tempted to invest in “shovel ready” projects that lack strategic value and ignore routine maintenance on roads that thousands of Albertans rely on every day. The CWF report concludes that ad hoc infrastructure funding tied to annual budget and/or election cycles is a poor infrastructure investment strategy.

With Alberta now in its election year, the Alberta Roadbuilders and Heavy Construction Association (ARHCA) is urging government to heed the warnings, and advice, contained in this report.

In our submission to the Alberta Government’s Budget consultation, we asked government to abandon its ad hoc funding approach and commit to predictable and sustainable investments in Alberta’s public infrastructure. Our association believes this is essential to not only support our economy, but also to protect our highways from further deterioration.

Albertans support investments in highways because they create jobs and benefit the economy. And yet, the province’s own data shows that a decade of deferring repairs has created a costly infrastructure deficit that looms large for the taxpayer and threatens our road network’s economic and safety performance.

What needs to happen is simple: government must publish a transparent list of improvement projects, commit to appropriate predictable funding, and hold administrators accountable for meeting their goals. Funding decisions ought to be tied to clearly stated objectives.

PROCUREMENT MUST BE FAIR

One other change must be made. And that is to fix the government’s broken procurement model. Over the past decade, governments have become overly sensitive to criticism of reasonable cost escalation. This has resulted in an increased reliance on procurement models that provide cost certainty, such as design-build-finance-operate-maintain (DBFOM) public-private procurement mode. However, shifting the owners’ risk to the design engineer and contractors comes at a premium price. Governments must be prepared to pay this premium cost... or stop, retool programs, and accept the oft stated goal of allocating risk to the party most capable of managing each specific risk. Including maintenance and financing in procurement can work well in some circumstances, but as Alberta found out last summer on the Deerfoot Trail Free-

way Program, it can predictably fail when owners ignore warnings of cost premiums due to the design of the RFP.

Albertans deserve a more nimble, efficient, economical, responsible, and transparent system of approving, budgeting and procurement that will ensure that failures, such as the Deerfoot Trail Freeway Program cancellation, will not be repeated. We need to return to a business model of partnership where all parties invest in communication and relationships so that government decisions are fully informed.

FINDING SOLUTIONS

In addition to highlighting issues that need addressing, the ARHCA has spent considerable time and effort contemplating solutions.

Our research paper called “The Case for an Alberta Highway Trust Company” not only documents the problems, but also offers a solution. In our proposal, the Trust Co. would have funding guaranteed by contract with the government and sufficient scheduling and procurement independence to achieve outcomes based on engineering determinants rather than annual budget surprises and election cycles. The Trust Co. would strive to be a superior, preferred client. One that is a knowledgeable owner, understanding and accepting owners’ risk, provides reliable vision, and plans that incentivizes appropriate industry investment in people and equipment.

ARHCA is proposing the creation of the Trust Co. as a vehicle to provide financial stability necessary for efficient management of Alberta’s the $70 billion highway asset. This arms-length provincial corporation would create and deliver on a transparent highway improvement plan and project list based on engineering determinants. The current procurement and project management employees

from Alberta Transportation could staff the new corporation to ensure knowledge transfer. The Alberta Highway Trust Co. would publish a priority list, as well as a long term 20-year strategy with a rolling three to five year detailed plan.

What makes our proposal unique is that the Trust Co. would have a contract with government as “owner” for annual payments to fund the plan approved by government. Guided by a board appointed by government, The Trust Co. would be accountable to the owner but keep politics out of its day-to-day decisions. This model will allow procurement methods and schedules that encourage industry to invest, innovate and compete for the privilege of building Alberta.

Lastly, as a business with a long-term contract, the Trust Co. could issue bonds to Albertans who want to invest in Alberta’s infrastructure. Government could also invest intermittent resource windfall revenues in the Trust Co. to protect Albertans from future tax increases to pay for future repairs. Too often, public discussion of funding roads gets sideswiped by talk of toll roads. There are other options, and Albertans are proven leaders in developing innovative financial approaches to problems.

This approach addresses the key concerns of ARHCA members in providing: reliable and consistent funding, transparently communicating a list infrastructure projects, and offering a fair procurement process.

Albertans deserve better than deteriorating roads and projects that can’t pass go because of procurement red tape. But to do better, serious change must lie ahead.

Ron Glen is president of the Alberta Roadbuilders and Heavy Construction Association. The ARHCA Alberta Highway Trust Co. policy paper is available at fixourroads.com.

January/February 2023 CONSTRUCTION BUSINESS 19
Infrastructure

Exceptional Transportation Work

The importance of transportation infrastructure was never more evident than after B.C.’s devastating 2021 floods. The province’s November floods cost billions in damage, losses and shut down highways and a railway for weeks. Engineers and construction crews are instrumental in the repair efforts, which are expected to continue into late 2023.

Exceptional work and technical excellence to improve transportation infrastructure in the province is recognized annually with the B.C. Transportation Consulting Engineers Awards. This year’s winners include Stantec Consulting for design repairs and flood response to Highway 8 between Merritt and Spences Bridge.

Working with the Ministry of Transportation and Infrastructure, and other contractors and consultants, Stantec repaired existing bridges, built two temporary bridges, and provided other support. Starting work immediately after the flood, the team reconnected the high-priority route.

Stantec earned the award in the design and contract preparation — structures category. Another winner in the same category was the team of Hatch Ltd., Charter Project Delivery Inc., and T.Y. Lin International Canada Ltd. They won for repairs to the Taylor Bridge between the north and south Peace

regions. Using computer models and inspections of thousands of structural elements, the team detected and repaired a weak gusset plate, while keeping one lane of the bridge open for several consecutive nights during the repair.

Other transportation infrastructure award winners:

DESIGN AND CONTRACT PREPARATION – ROADS

For widening more than one kilometre of Highway 97 and making intersection improvements in Quesnel, Urban Systems won the design and contract preparation award for roads. This project’s worksite included heavy summer traffic, nearby frontage roads and local businesses, multiple utilities, flat surfaces and environmentally sensitive creek-side slopes.

ALTERNATIVE TRANSPORTATION

R.F. Binnie & Associates won the alternative transportation award for launching RapidBus routes R1 through R5 in the Greater Vancouver area. Working with the ministry, eight municipalities, one health authority and four contractors, it oversaw a complex and fast-paced project that included road widening, intersection improvements

and new multi-use pathways, bus stops and bus priority infrastructure.

CONSTRUCTION MANAGEMENT AND SUPERVISION SERVICES

The award for construction management and supervision services went to Associated Engineering (B.C.) Ltd. for the resurfacing of nearly 11 kilometres of Highway 14, a primary access road for the SookePort Renfrew area. The project between Otter Point and Woodhaven roads included paved shoulders, slow-moving-vehicle pull-outs, geosynthetic reinforced soil repairs, and drainage systems to minimize road flooding. Clearer sight lines improved safety at Tugwell Creek, where slides and rocks previously affected the road.

SPECIALIZED ENGINEERING SERVICES

PBX Engineeri ng Ltd. won the specialized engineering services award for rehabilitating the Lions Gate Bridge reversible lane-control system. This project resulted in increased safety, highway capacity and reliability, better cybersecurity controls and less traffic congestion. PBX’s work required only a single weekend evening closure, allowing normal traffic to continue during the day.

CONSTRUCTION BUSINESS January/February 2023 20
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First Nations Land: Unique Opportunity

Currently in Canada, there are more than 3,000 reserves collectively holding roughly 3.8 million hectares. Much of this land is ideally located for development and often overlooked by developers. This presents a unique opportunity for those willing to invest time into understanding First Nations land ownership and developing the necessary relationships with appropriate stakeholders.

TYPES OF LAND OWNERSHIP

The land ownership model that most people are familiar with, despite perhaps not knowing the name of, is fee simple. Homes that are not located on a reserve or leased land are likely owned in fee simple. Land owned in fee simple confers significant rights to the owner, such as the rights to use the land, sell it to anyone, rent it out, or mortgage it.

Reserve lands, on the other hand, are held in trust for bands by the federal government. Bands have exclusive use and occupation rights to these lands. These lands are communal and must be used in a way that benefits the entire band. Leases are the most common way that developers partner with First Nations bands or individuals. There are two types of First Nations land that a third party may obtain a leasehold interest in: lands held under a certificate of possession (CP) and designated lands.

Portions of reserve lands are often owned by individual band members who hold CPs. A CP is similar to a fee simple deed; a CP gives the holder the right to occupy the land, lease the land, sell the land to another band member, and bequeath the land in their will. The distinct difference between CP land and fee simple land is that a CP holder cannot sell the land to a non-band member or apply for a

conventional mortgage. CP land typically does not qualify for a conventional mortgage because it cannot be foreclosed upon by a bank in the same way that fee simple land can be. This creates challenges for CP holders seeking to develop their own land and may require external investors.

A First Nation band may choose to designate community lands for long term leasing. To designate land for leasing, the band must hold a referendum of its membership. Some bands will broadly designate lands for industrial purposes; others will designate lands specifically for a predetermined development project.

LEASING FIRST NATIONS LAND

If a developer is interested in receiving a leasehold interest in any land located on reserve, the developer should approach the First Nation band or CP holder to discuss the status of the land. If both parties are interested in proceeding, the developer should begin doing due diligence to ensure the land is suitable for the intended purpose.

During the due diligence phase, the developer should review the First Nation’s land code, if one exists, as well as any bylaws that may impact potential development, subleasing, mortgaging, or assigning. The developer should further consult with the First Nation band to determine the applicable building code, as reserves do not automatically fall under federal or provincial building codes. It is common for leases to specify what building code must be adhered to. Several bands have created their own building code that applies to all projects on reserve. Prior to a lease being granted, the prospective tenant must obtain an appraisal of the land and environmental assessment.

Leases on designated land are restricted to a term of 99 years. Leases of CP land are typically limited to 49 years unless the First Nation band approves a longer lease.

Governance of First Nation lands varies greatly. As a starting point, the Indian Act requires that a lease of designated land is negotiated with the First Nation and Indigenous Services Canada (ISC) and granted by ISC on behalf of the First Nation. If the lease is for CP land, the CP holder will apply to ISC and then ISC will confirm approval with the applicable First Nation band and draft the lease.

There are some exceptions to ISC’s involvement, including: (i) bands with delegated authority under s. 60 of the Indian Act; (ii) bands that have adopted their own land code under the First Nations Land Management Act; and (iii) self-governing nations with a negotiated treaty or agreement in place. If the lease is not approved by ISC and the band is not exempt from this requirement, the lease will be void and any party who occupies the land may be in trespass.

Once a lease is entered into, the tenant may mortgage, assign, or sublease its leasehold interest, subject to the terms of the lease; some leases require that a tenant receives consent from ISC and/or the First Nation.

This area of law is very complex and specific to each individual First Nation band, and for this reason, any developer seeking to develop lands on reserve should consult with a lawyer who is familiar with First Nations land law.

Laney Third is an associate lawyer at Forward Law LLP in Kamloops. Visit www.forwardlaw.ca.

January/February 2023 CONSTRUCTION BUSINESS 21
Legal File

Managing Contractor Insolvency Risk

One of the greatest risks to construction projects is the insolvency of one of the parties involved. This risk is exacerbated when rising interest rates make borrowing more expensive while inflation makes construction more expensive.

The Bank of Canada’s objective of increasing downward pressure on inflating prices is acutely felt in the construction industry. Struggling contractors and subcontractors who see fewer and fewer projects down the road will bid lower in an aim to win a project and keep cash flowing. At the same time, owners facing lower sales revenue and limited borrowing power will put intense pressure on contractors to stay within budget. Projects with multiple struggling parties involved will be on a knife’s edge, and the insolvency of one trade can trigger the whole construction pyramid to come tumbling down in a wave of defaults.

One of the best ways to protect your business from insolvency risk, whether you are a developer, contractor, or trade, is to bond your project or seek out bonded projects.

HOW BONDS WORK

Two types of bonds relevant to this risk are Performance Bonds and a Labour and Material (L&M) Bonds. There are three parties to these bonds, the obligee, the principal and the surety. If a prime contract is bonded, the owner is the obligee, the general contractor is the principal and the surety company is the surety. In the case of a bonded subcontract, the general contractor is the obligee and the subcontractor is the principal.

For a Performance Bond the surety ensures, for the benefit of the obligee, that the bonded contract

will be performed, up to the penal value of the bond (typically half the value of the bonded contract). In the case of an L&M Bond, the surety ensures that all parties providing labour and materials to the principal on the project will be paid in full.

Beyond these fundamental protections against insolvency that bonds are intended to provide, there are several other aspects of bonding that help to mitigate the risk of insolvency.

UNDERWRITING THE RISK

The insolvency of a principal is the fundamental risk that a surety takes on. Accordingly, when a surety is asked by a contractor to bond a contract, they will underwrite that bond by analyzing the contractor, the contract and the contract price to ensure the risk of contractor default is low. Further, once a surety begins a relationship with a principal, they will often bond all that principal’s projects. Sureties will use their ongoing relationship with and knowledge of a contractor to constantly assess risk. A prudent bonding company will refuse to bond a project where they see that a contractor may have stretched themselves too thin or bid too low.

Further, bonding companies secure themselves against a principal’s risk of insolvency by requiring indemnities from the owners of that principal. This ensures that the people responsible for the business of a contractor have skin in the game.

Finally, bonding companies have significant expertise in the construction market. Where a principal begins to flag, sureties are able to use their experience in the industry to step in and either ensure that the principal finishes the contract or smooth the transition from the principal to a completion contractor.

COMMON MISTAKES

Having bonds in place on a project is not the same as having insurance on a project. Sureties have certain rights which insurers do not.

One common mistake made by obligees when a principal starts showing signs of going sideways is to start working outside the express terms of a contract to help nudge a struggling contractor along to completion. Even something as innocuous as making an advance on a contract can prejudice a surety’s rights and potentially nullify a bond. It is critical when working on a bonded contract to work within the terms of the bonded contract and, when in doubt, confer with the surety when a principal is flagging.

Further, a bond’s terms must be strictly adhered to. There are critical provisions regarding notice and deadlines for making claims that may void a bond altogether if breached.

Knowing how to navigate a bonded contract, make claims against a bond, or communicate with a surety can make all the difference between getting paid or getting in line with all the other creditors. It can also make the difference between keeping a project on the rails and on budget, or watching it grind to an expensive halt. When in doubt, don’t hesitate to reach out to a legal professional with knowledge of the surety business to ensure you take full advantage of your rights on a bonded project.

Alexander Spraggs is an associate at Pihl Law in Kelowna, practicing primarily in the areas of construction law and commercial litigation. He has a particular interest in construction insurance coverage claims and bonding disputes and has represented sureties and bond holders in a variety of complex construction projects across British Columbia and Alberta.

CONSTRUCTION BUSINESS January/February 2023 22 Legal File
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