Open Mind Alberta Eddition 2012 by Venture Publishing

LEGALLY SPEAKING: DEFINING OWNERS’ AND SUBCONTRACTORS’ RESPONSIBILITIES

A FORUM ON OPEN SHOP CONSTRUCTION

Volume 20 • Issue 1 • Spring 2012

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LEADING VOICES Alberta’s politicians answer Merit’s questions

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Contents Volume 20 • Issue 1 • Spring 2012

26 5

Executive Editor’s Column

By Stephen Kushner

Clause and Effect

36 Something’s Got to Give Immigration reform determines Canada’s future By Bill Stewart

Creative thinking by a subcontractor pushes boundaries of the law By Corbin Devlin

10 What the Leaders Have to Say Q & A with Premier Alison Redford, Wildrose leader Danielle Smith and Liberal leader Dr. Raj Sherman By Ben Freeland

ON THE COvEr

makes the jump from its parent .com site Illustration by Janet Freysholdt

See full interview on Merit’s website meritalberta.com

16 Job Targeting Revisited Legislative progress with union subsidy schemes gains ground in North America By Bill Stewart

22 Laggard to Leader Canadian construction industry poised to embrace Building Information Modelling (BIM) By Ben Freeland

26 Merit Goes National Open-shop movement battles regulatory construction burdens By Terrance Oakey

32 Easy as 1 2 Digital media tool Jobsite123 takes construction industry by storm By Ben Freeland

36 42 Recognition within Alberta 2012 Contractor of the Year Awards acknowledge top performers By Alix Kemp and Michelle Lindstrom

48 Don’t Blame the Workers Time-wasting management flubs get analyzed By Bruce Buckley (reporting by Jonathan Barnes) from original 2011 article posted on ENR.com

54 By the Numbers Latest Canadian construction statistics

OPENMIND SPRING 2012

Executive Editor’s Column

Publisher

Ruth Kelly

Executive Editor

Stephen Kushner

On behalf of Merit Contractors Association, welcome to the 20th anniversary edition of Open Mind magazine.

Associate Editor

Ben Freeland

As always, Open Mind focuses on unique issues

Editor, Contract Magazines

Michelle Lindstrom

Production Co-ordinator

Betty-Lou Smith

Production Technician

Brent Felzien

Circulation Manager

Heather Morrison

Vice-President Sales

Anita McGillis

Advertising Representative

Angela De Leon

Sales Assistants

Karen Crane, Kassie Mitchell

Volume 20 • Issue 1 • Spring 2012

Art Director

Charles Burke

Associate Art Director

Andrea deBoer

Assistant Art Director

Colin Spence

Contributing Writers Bruce Buckley (ENR.com), Corbin Devlin, Alix Kemp, Terrance Oakey, Bill Stewart Contributing Illustrators and Photographers Steve Adams, Isabelle Cardinal, Curtis Comeau Janet Freysholdt, Kevin Ghiglione, Leanne Kroll, Heff O’Reilly, Chris Pyle Open Mind is published two times per year by Venture Publishing Inc. for Merit Contractors Association. Venture Publishing Inc. 10259 -105 Street, Edmonton, Alberta T5J 1E3 Tel.: (780) 990-0839 Fax: (780) 425-4921 admin@venturepublishing.ca www.venturepublishing.ca Merit Contractors Association 103-13025 St. Albert Trail, Edmonton, Alberta T5L 4H5 Tel.: (780) 455-5999 or 1-888-816-9991 Fax: (780) 455-2109 meritedm@meritalberta.com www.meritalberta.com Merit Contractors Association is a non-profit organization that offers human resource services to the open shop construction industry. Printed in Canada by Transcontinental LGM Graphics The opinions conveyed by contributors to Open Mind magazine may not be indicative of the views of Venture Publishing Inc. or Merit Contractors Association. While every effort is made to ensure accuracy, neither Venture Publishing Inc. nor Merit Contractors Association assume any responsibility or liability for errors or omissions. Canadian Publications Mail Product Agreement #40020055 Copyright © 2012 by Merit Contractors Association No part of this publication should be reproduced without express permission of Merit Contractors Association.

facing the open shop construction industry in Alberta and across Canada with the aim of promoting the free enterprise principle that construction work – and the employment and compensation of personnel – should be awarded based on merit regardless of employee labour affiliation. It was a momentous year in 2011, both for Merit and the construction industry as a whole. Merit’s 25th anniversary year coincided with its establishment of a national advocacy office, Merit Canada, in Ottawa just steps away from Parliament Hill and the Prime Minister’s Office. Last year also saw the Canadian economy – Alberta’s in particular – make a strong recovery with most sectors of the construction industry showing impressive results after several years of recession. Nevertheless, a still-fragile world economy coupled with a looming labour shortage in the construction industry (results of an expanding economy and aging workforce) means that full-fledged optimism in the industry is still in short supply. This issue of Open Mind examines the labour issue on several fronts. Immigration reform aimed at attracting skilled tradespeople is going to be an absolute must in the coming years, which the article “Something’s Got To Give” explains. Moreover, any immigration reforms must be coupled with a focus on managing labour costs, an issue dealt with in “Job Targeting Revisited” and “Don’t Blame the Workers.” This issue also looks at two technological innovations that are reshaping the industry, namely the growing phenomenon of Building Information Modelling (BIM) and Jobsite123, a cutting-edge digital media tool that has already made waves in the U.S. and now looks to change how Canadian construction contractors do business. On a celebratory note, we are also excited to announce the finalists and award winners of the second annual Contractor of the Year Awards presented by Merit, the Alberta Roadbuilders and Heavy Construction Association and Alberta Venture magazine. These awards give us the chance to celebrate companies and contractors that have scaled new heights in an industry where people seldom have time to sit on their laurels. We hope you enjoy this 2012 issue of Open Mind, Canada’s only magazine dedicated to the open shop construction industry. As always, we encourage you to give us feedback and suggestions on future topics. From all of us at Merit, we wish you the best for 2012!

Stephen Kushner PRESIDENT MERIT CONTRACTORS ASSOCIATION OPENMIND SPRING 2012

OPENMIND SPRING 2012

ILLUSTRATION BY: HEFF O’REILLY

By Corbin Devlin, PaRtNER Of McLENNaN ROSS LLP LEGaL cOuNSEL

Typical construction contracts encourage a divide between owners and subcontractors regarding liability ... that was until a recent case blurred the division of responsibility

n a typical general contract scenario, a construction owner has no contractual relationship with subcontractors or suppliers and, therefore, no contractual liability to those parties. The grounds upon which an owner may be liable to a subcontractor for unpaid fees and services are very narrow. However, a recent case in Newfoundland and Labrador illustrates the creative efforts that subcontractors sometimes use in an attempt to attach liability to construction owners. The legal doctrine of privity of contract provides that only the parties signing a contract are bound by that contract. As such, a subcontractor who signs a contract with a general contractor has no privity of contract with the construction owner. As a general rule, the construction owner cannot sue the subcontractor for breach of the subcontract and the subcontractor cannot sue the construction owner for non-payment. OPENMIND SPRING 2012

Clause and Effect

The most obvious exception to this general rule is found in provincial lien legislation. Lien legislation exists to protect subcontractors by providing a form of security for payment. In practical terms, lien legislation makes the construction owner directly liable to lien claimants– but only to the extent of the statutory holdback or lien fund. Outside of provincial lien legislation, the potential liability of an owner to a subcontractor for unpaid services or materials is very narrow indeed. This does not preclude creative attempts to attach liability to a construction owner through the courts. The recent court case Air-Tite Sheet Metal Ltd. v. N.D. Dobbin Ltd. provides such an example. Defence Construction, which is the construction arm of the Department of National Defence, contracted N.D. Dobbin Ltd. to construct a large airplane hangar. N.D. Dobbin Ltd. subcontracted Air-Tite Sheet Metal Ltd. to supply and install the hangar’s heating system. A significant payment dispute arose as a result of problems with the heating system. Dobbin terminated Air-Tite’s contract and hired another subcontractor to complete remedial work to the heating system. However, at trial, the court concluded that Dobbin wrongfully terminated Air-Tite’s subcontract and Air-Tite was entitled to payment. Air-Tite claimed not only against Dobbin as general contractor but also against Defence Construction as construction owner. The creative basis for this claim against the owner was an allegation that Defence Construction negligently administered the prime contract with Dobbin. In particular, the prime contract contained a fairly standard provision giving the owner the authority to disallow the general contractor from substituting subcontractors. Defence Construction did not exercise its authority to prevent Dobbin from terminating the Air-Tite subcontract and Defence Construction did not make any investigation into whether Dobbin was justified in terminating the subcontract. In a decision that seems truly remarkable,

the trial judge found Defence Construction directly liable to the subcontractor on this basis. Fortunately, the Court of Appeal exists as a forum for sober second thought. Defence Construction appealed the trial

someone who is not a party to a contract, without more, is simply not accepted in the law in Canada. This Court of Appeal decision illustrates that a construction owner is not generally liable to a subcontractor for unpaid services and materials (subject to the requirements of provincial lien legislation). However, the Air-Tite trial decision shows that the situation is insufficiently clear inasmuch as a construction owner cannot necessarily escape going to trial – or even suffer an adverse trial decision – before escaping liability. Creative subcontractors and their legal counsel may find ways to implicate construction owners where circumstances permit. As the old adage goes, you don’t necessarily go to court for justice; you go to court for a decision. Of course, prudent construction owners will not assume that these legal concepts (privity of contract and pure economic loss) exclude them from all potential liability to subcontractors. As mentioned above, construction owners can be directly liable to subcontractors for some forms of pure economic loss, such as claims for negligent misrepresentation or injury to persons or property causing relational economic loss. Further, the unpaid subcontractor may be the driving force behind a multi-party construction claim, in which case a construction owner must often deal with a subcontractor directly, as a matter of practical necessity.

Outside of provincial lien legislation, the potential liability of an owner to a subcontractor for unpaid services or materials is very narrow indeed.

OPENMIND SPRING 2012

decision that it was directly liable to Air-Tite. The Court of Appeal, making reference to the doctrine of privity of contract, overturned this aspect of the trial judge’s decision. The Court of Appeal noted Air-Tite was making a claim outside of the law of contract (i.e. alleging negligence) for a pure economic loss (as opposed to a claim for injury or damages to property). Even if Defence Construction was negligent, the law in Canada does not recognize claims for pure economic loss outside of contract, except in certain specific cases. For example, pure economic loss is recoverable in cases of negligent misrepresentation (e.g. if a construction owner made a false representation to a subcontractor resulting in a loss) or in cases of relational economic loss (e.g. if a construction owner caused injury or property damage that in turn resulted in financial loss to a subcontractor). A claim effectively seeking compensation for unpaid services and materials from

Leaders WHat tHe

Have to Say

Alison Redford Premier of alberta

Danielle Smith Leader of the alberta Wildrose Party

alison Redford, Danielle Smith and Dr. Raj Sherman share their views on union transparency, proposed labour code changes and strategies for ensuring competitiveness in alberta’s construction industry By Ben Freeland With files submitted by Michelle Lindstrom

B Raj Sherman Leader of the alberta Liberal Party

OPENMIND SPRING 2012

y the time this magazine goes to print, the date for the 2012 Alberta election will most likely have been announced and the leaders of Alberta’s provincial parties will be on the campaign trail. Before all of that in early February, we had a chance to speak with three of Alberta’s political leaders to discuss some of the more pressing issues facing the open shop construction sector in Alberta, including MERFing, spending of compulsory union dues for political purposes and strategies for making Alberta’s construction industry more competitive. Here is what Premier Alison Redford (Progressive Conservatives), Danielle Smith (Wildrose) and Dr. Raj Sherman (Liberals) had to say.

Question #1: Several proposed changes to Alberta’s Labour Code would improve the competitiveness of Alberta’s construction industry, which recently has fallen behind neighbouring B.C. and Saskatchewan. These include ensuring that Division 8 provisions (project carveout agreements) under our labour code are not considered unconstitutional; removing unions’ right to fine members for working for non-union or non-affiliated union firms; allowing newly certified construction firms flexibility on completing work under the terms they bid the work rather than having to abide by a provincial agreement in which they had no say; and directing our Labour Relations Board to recognize all employee bargaining units. As party leaders, where do you stand on these policy positions?

It’s important to have labour mobility. I don’t think it’s appropriate for union members not to be able to make decisions about their employment. Minister Hancock (Alberta Minister of Human Services) is looking at that issue. (As for the rights of newly certified firms) that becomes part of carve-out agreements and what we’ve seen is there have been agreements put in place to deal with some of these issues without having to put legislation in place with respect to carve-out agreements. Again, Minister Hancock is looking into this and we will continue to work with employee associations in this regard. dAnielle smith: The idea of carve-out agreements, where you have agreements in place for the duration of a contract for

government as creating a climate where there are jobs for everyone. We’re constantly working to create and maintain a balanced and fair labour environment in Alberta. I acknowledge this is a very delicate balance. Listening to both sides of the debate, between Merit Contractors Association and organized labour, they both have their interests and both seek to gain concessions from government. Our role as leaders is to be completely independent and impartial. I fully understand and appreciate Merit’s approach. They agree that we need jobs, labour and protection for the oil and gas industry. But their approach might be a little bit different. I do not favour any changes that will significantly upset that fine balance. I prefer to look at the win-win scenario. Both sides have their respective points of view. Most of the time they will agree and in other instances they will disagree. Government’s job is not to pick winners and losers. Unions have their rules, just as political parties have theirs. And it’s not for me to say what their rules should be. Individuals make decisions. It’s a free province and a free country.

“We believe in freedom of association and part of that means freedom not to associate. ”

Alison RedfoRd: The first thing I want to say is that I don’t actually agree with the first part of the statement that we’ve fallen behind in terms of competitiveness. There’s no doubt that as our economy gets hotter, it’s more expensive to do things here. But from the perspective of overall profitability of projects as well as salaries of members for organized trade unions or employee associations, it’s good economics for them. Regarding Division 8, I think we’ve found ways to deal with the issue without having carve-out agreement provisions in the labour code. That doesn’t mean that we won’t do it, but it means that before we do it we have to have better discussions between employers and employee associations and unions. It’s been a conversation that’s been going on for about a year. I’m very open to continuing that. I’m looking to have much better stakeholder engagements before we move ahead with that because in Alberta we’ve had some examples of carve-out agreements that I think have started to lead us down the path of better relationships without actually needing them to be carve-out agreements. We’ve made some progress. We can make some more progress, but there needs to be a different dialogue around that.

- dAnielle smith all the employee groups impacted by that, makes some sense. I think there’s been a practice where we have seen these projects go ahead and they can be completely derailed if you don’t end up having the initial agreement abided by throughout the full course of the contract. We believe in freedom of association and part of that means freedom not to associate. So if you actually have the opportunity to work in an environment that’s non–union, we don’t think that member should be punished for that. (Regarding the recognition of multiple bargaining units within construction projects.) If you’re referring to the Christian Labour Association of Canada (CLAC), which allows for the representation of multiple trades under a single bargaining unit, we see no reason that wouldn’t be recognized by the labour board. But if they’re referring to something else then I would have to do more consultation with them to understand the nature of the problem. RAj sheRmAn: I see the role of provincial

Question #2: Should construction unions be permitted to use monies collected from large industrial projects to subsidize uncompetitive union commercial contractors to help them win more work – a practice known in the industry as “MERFing”? AR: From our perspective, we passed some original legislation in 2008 to stop this practice. We think MERFing is not good public policy and that it’s not appropriate for unions to be able to do it. But I understand that as a result of our legislation, it has now been identified that there may still be a few gaps that are allowing for it to continue and our minister is working very closely with Merit to make sure that we close these loopholes. ds: My understanding was that the government passed legislation in 2008 saying that this practice would no longer OPENMIND SPRING 2012

What the Leaders Have To Say

be permitted and that we already have legislation to limit this practice. If thereâ&#x20AC;&#x2122;s a need to take another look at it weâ&#x20AC;&#x2122;re more than happy to do that.

â&#x20AC;&#x153;We need to ensure that there are structures in place so that members can hold associations accountable. â&#x20AC;&#x153;

RS: I was in the legislature when Bill 26: The Labour Relations Amendment Act 2008 was passed. I know that Merit is very supportive of restricting these practices, which it views as a major problem within the construction industry. I appreciate their concern. Government should not take the approach of punishing or rewarding anyone. We have to be neutral here. I know Merit sees this as a major problem and organized labour has a different perspective. QueStion #3: The use of mandatory union dues to finance social and political causes has become a major issue at both the federal and provincial level recently. Bill C-377, introduced in the House of Commons, seeks to amend the Income Tax Act so as to require that all labour unions publicly disclose their financial statements. Meanwhile, the Workersâ&#x20AC;&#x2122; Dues Transparency and Rights Act tabled recently in the B.C. legislature would limit the use of union dues for purposes related to collective bargaining and grievance administration. As leader, would you support similar legislation in Alberta?

- AliSon ReDfoRD AR: There are two ways to try to stop unwarranted political action by trade unions. One is that you can pass this sort of legislation. The other is you can put in legislation that prohibits their activities. I believe that associations and Albertans need to be able to be involved in political action but only if their members believe that itâ&#x20AC;&#x2122;s appropriate for the association to do that. We need to ensure that there are structures in place so that members can hold associations accountable. And if thereâ&#x20AC;&#x2122;s work that we need to do with respect to that, we will. Historically in Alberta we have taken the alternate approach with respect to how to control unwarranted political action by any organization, not just trade unions, which is to limit campaign contributions and to ensure that there are restrictions on third-party election advertising both for corporations and trade unions. Weâ&#x20AC;&#x2122;ve taken that approach, but if there are ways that we can strengthen the power of members to hold their own associations accountable, thatâ&#x20AC;&#x2122;s the question that we need to ask.

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DS: Labour unions are given the power to collect their dues off of the pay cheques of their employees so there is a level of accountability. Thereâ&#x20AC;&#x2122;s a level of power theyâ&#x20AC;&#x2122;ve been granted through legislation. And with that kind of power comes accountability. We know that governments have to have their books opened and scrutinized, as do corporations. Labour unions should also have to have the public disclosure of their financial statements. I donâ&#x20AC;&#x2122;t have a problem if workers choose to direct their union dues to purposes other than collective bargaining and grievance administration. Putting a limit on it and saying they donâ&#x20AC;&#x2122;t even have the choice of supporting any other activities is probably going too far. But union members should be permitted to opt out of any portion of their dues that support political advocacy or political parties that they donâ&#x20AC;&#x2122;t agree with. I agree with their intention of making sure that union members arenâ&#x20AC;&#x2122;t made to pay for causes they donâ&#x20AC;&#x2122;t support but I think thereâ&#x20AC;&#x2122;s another way to do it. And that would be allowing union members to opt out of that portion of dues that would go towards political advocacy. Continued on page 14

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Silver Memories

What the Leaders Have To Say

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Congratulations to all 2012

“Suddenly at the peak of the boom the (PC government) woke up and said, ‘oops, we’ve got to build highways and bridges.’“

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RS: What you’re really talking about is transparency. I have no problem with requiring greater transparency on the part of organized labour so that transparency and accountability apply equally to all persons that finance any social or political cause. Unions have their democracy. You vote and the people are democratically elected. If you use or misuse funds, the members can democratically remove their leadership. I believe when you’re democratically elected you’re held accountable by the members who elect you; they have a genuine say in your activities. That’s how democracies work. Absolutely I believe in greater transparency for everybody including government, unions, corporations and Merit as well. QueStion #4: Current infrastructure expenditures in Alberta stand at around $7 billion per year. What can we expect over the next two to three years? AR: We believe that infrastructure investment is critical. It’s frustrating for me to hear some political parties say that we need to cut back on capital spending and capital projects because if we do that, two things happen: one is that we lose the long-term benefit of making the right decisions of having enough schools and hospitals. The other is that it impacts the economy and people’s ability to find jobs. We are committed to a continuing infrastructure build that is very similar to what we’ve seen in the past three years. I’m not sure exactly what the numbers are but the point is, we are not cutting back on infrastructure spending because we think it is irresponsible to do that. DS: We’ve provided an alternative budget for the past two years in a row and we know that $7 billion per year is not sustainable when we’re running record deficits. We 000Om.ARHCA_1-6V.indd 1

3/7/12 9:36:29 AM

proposed a level of infrastructure spending last year that we do feel is sustainable. It’s based on the per capita amount that’s being spent in other large provinces – Ontario, B.C. – and it’s in the $4.1 to $4.2-billion range. We think that amount of money would allow us to ensure that we’re clearing our infrastructure deficit, staying ahead of strategic investments but also maintaining a level that we can sustain in the long run. We would also make sure that this kind of spending is increased relative to a reasonable inflation rate so we’re not falling behind in our investments. RS: The current government’s penchant for building buildings and public infrastructure for which we have no operational funding is ridiculous. It’s absolutely shameful that maintenance for the buildings we do have has been deferred. They all have leaky roofs. Rule number one is you’ve got to make sure the roof isn’t leaky and your foundation is good. When you build it, you’ve got to maintain it, right? I’m a guy who builds houses. I’ve got a construction company. The government has deferred all the maintenance and over the course of the years we’ve had a massive infrastructure deficit. Suddenly at the peak of the boom they woke up and said, ‘Oops, we’ve got to build highways and bridges.’ These should have been built when the economy wasn’t booming, when Alberta needed jobs and things could have been done better for onethird the price. The complete interviews had eight questions we posed to each leader but could not print due to space constraints. For the complete, original interviews and questions, such as outsourcing apprenticeship training to building trade unions, the impact of the proposed Keystone XL Pipeline on Alberta’s petrochemical industry and the proposed new arena in Edmonton, visit meritalberta.com

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TargeTing By Bill STewarT

Revisited

The legislative progress of dealing with union subsidy schemes is gaining ground in Canada and the U.S.

ILLUSTRATION BY: ISABeLLe CARdINAL

ince the early ’90s, Canadian and U.S. open shop contractors

have had to deal with a variety of unfair yet legal building trade union “market recovery” schemes. Variously known by terms such as Job Targeting Funds (JTFs), Stabilization Funds (STABs) or Market Enhancement Recovery Funds (MERFs), they are all, in the words of the International Brotherhood of Electrical Workers (IBEW), “Part of a strong organizing program aimed at securing monopoly of local labour markets.” How effective were these schemes? In Portland, Oregon, it reportedly took only six years for IBEW Local 48 to increase its market share from 40 to 85 per cent. Dealing with this potential threat to fair and competitive construction markets is one reason why North American contractors could ultimately be helped by groundbreaking changes in Alberta and Idaho. On June 5, 2008, the Alberta government passed Bill 26: The Labour Relations Amendment Act 2008. The act brought in specific labour law amendments to curb the use of bid subsidy schemes called MERFs.

OPENMIND SPRING 2012

Job Targeting Revisited

Fuelled by high energy prices, Alberta’s economy expanded rapidly over the past two decades. In parallel to this expansion, building trade unions such as the IBEW and the United Association of Plumbers and Pipefitters Union (UA) convinced a number of major oilsands project developers to grant them labour supply monopolies for the building of the province’s largest construction projects. The projects provided the financial means for exploiting blind spots in Alberta’s Labour Relations Code. In Alberta, these schemes emanated from collective bargaining agreements and amounted to cross-sectoral transfers of economic rents from a group of industrial construction owners and contractors to contractors and owners in the institutional commercial sector. Essentially, this occurred because some large oilsands developers willingly paid a premium on their multibillion-dollar construction projects to gain access to pools of unionized tradespeople. Why would major oilsands owners turn a blind eye to paying higher costs for labour? The answer lies seemingly in Alberta’s royalty regime, which mitigates higher costs by

allowing developers to pay lower royalties to Alberta’s treasury until they recover their capital construction costs. The unions involved in orchestrating these schemes successfully used the funds to subsidize the labour costs of unionized contractors working in institutional and commercial construction, wherein the prevailing industry custom is to award contracts based on having projects built on schedule for the lowest price. In practice, MERFs are a tax on the economic rents that unions extract primarily from the energy sector being redistributed to commercial construction projects where similar economic rents do not exist because of competition from open shop contractors. In Alberta, the schemes were initially outlined in collective bargaining agreements stipulating that contractors were required to remit part of the total wage package (up to $2.32 per hour) into the union-controlled fund, which other unionized contractors could apply for subsidies on a project-byproject basis. In certain instances, the hour rate subsidy was estimated to be as high as $15 per hour multiplied by the total estimated hours of labour required for the project.

WHY WOULD MAJOR OILSANDS OWNERS TURN A BLIND EYE TO PAYING HIGHER COSTS FOR LABOUR? POSSIBLY BECAUSE OF ALBERTA’S ROYALTY REGIME? In passing Bill 26, Alberta legislators intended to ensure that the labour code was not used to promote, sanction or provide a legal haven under the guise of collective bargaining for this type of unfair activity. Accordingly, Alberta’s law sought to restrict how MERFs were collected and disbursed. Payments from employers to unions – and unions to contractors – aimed at undercutting the bids of more competitive contractors were prohibited. And although unions and their members were legally permitted to establish lawful subsidy funds, the law stipulated a transparent and voluntary process, which was a first in Canadian labour law. 18

OPENMIND SPRING 2012

The legislation also specified that for a MERF to lawfully operate, employees must authorize deductions in writing and the deduction amount and purpose must be separately shown on both employee and employer payroll records. The law also made it an unfair labour practice for a union to expel or suspend a person from membership or take any other disciplinary action against anyone who refuses to contribute to such schemes.

If it waddles and quacks like a duck … Despite the intent of Alberta’s legislators to end this practice, the respective Building Trades Unions (BTUs) wasted little time in developing new schemes to circumvent the law. Indeed, within six weeks of the royal assent of the amendment act, one BTU business manager reported to members that it would be “business as usual” and that the union would “have in place an alternative way of ensuring that [unionized] contractors will be competitive for this work.” Some unionized contractors also mentioned anecdotally that relief was being provided under “something we don’t call MERFs anymore.” Legal counsel for unionized contractors also noted, “They [BTUs] know how to read legislation and have the ability to change their tactics to accomplish their objective of seeing more construction work done by contractors bound to their respective collective agreements.” This change in tactics was evident when efforts were made to have unions comply with the act and the related Market Enhancement Recovery Fund Distribution Regulation in 2009. The collective agreements for each of the respective unions continued to include specific references to MERFs. In April 2009, the Alberta Labour Relations Board (ALRB) received notification that none of the MERFs identified in six current collective agreements had complied with S.2 of the regulation requiring the filing of disclosure reports. The ALRB did not initiate an investigation as contemplated by the act but accepted written arguments. As part of their submissions, the union legal counsel raised numerous issues challenging whether any Continued on page 20 party outside their

Job Targeting Revisited

bargain had the legal standing to raise this issue and that there was no lawful basis for their clients to disclose any information whatsoever. In turn, the board ruled that it could not determine whether the MERFs referred to in the same collective agreements that were in force before and after Bill 26 provisions and related regulations came into effect “All cuRRENt AND futuRE were regulated by the MERF cOMMERcIAl wORk MAy, At Distribution Regulation. In time, the various thE EMPlOyER’S DIScREtION, collective agreements were bE ENAblED by wAIvING thE amended and the picture became clearer. While the EMPlOyER’S OblIGAtION tO names of the MERFs were cONtRIbutE ON bEhAlf Of ItS changed, the sums that contractors were required EMPlOyEES tO thE hEAlth AND to pay into newly created wElfARE AND thE PENSION PlAN.” funds remained the same. For – Insulators union example, the collective agreeletter of understanding ment between the Electrical Contractors Association of Alberta and the International Brotherhood of Electrical Workers Local 424 prior to the 2008 statute was referred to as the Market Target Recovery Trust Funds (MTRF) and the amount contractors were required to contribute to the fund was $0.93 per straight time hour worked by each journeyman. In the subsequent collective agreement, the formerly referenced MTRF became the Membership Development Fund and the amount contractors remained obligated to remit continued to be $0.93 per straighttime hour worked by each journeyman. How is the money being spent? The answer is likely similar to the solution reached by Construction Labour Relations – An Alberta Association (CLR-A) and Local 110 of the Heat & Frost Insulators and Allied Workers Union. In a fashion similar to the other collective agreements, the previously named MERF was renamed the Promotion of the Insulation Trade Trust (PITT). The hourly contribution rate remained unchanged at $0.50 per straight-time hour worked. What did change, however, is found in the Letter of Understanding attached accompanying the revised collective agreement. After agreeing that “non-signatory contractors operating in the commercial/institutional sector do not offer Health and Welfare and Pension packages to their workforce equivalent to those contained in the collec20

OPENMIND SPRING 2012

tive agreement,” the parties acknowledged that “the added cost of maintaining the added cost [had] a negative impact on the ability of signatory contractors to compete, secure work and offer gainful employment opportunities to members of the union.” This problem is then dealt with in the final paragraph stating, “All current and future commercial work may, at the Employer’s discretion, be enabled by waiving the employer’s obligation to contribute on behalf of its employees to the Health and Welfare and the Pension Plan.” In the case of the Insulators, the value of this relief is equivalent to $6.50 per hour worked. This raises concerns about other similar arrangements with other union locals because charges for vacations, pensions and other funds are approximately 30 to 33 per cent of the basic negotiated hourly “wage rate.” Under normal bidding conditions, these costs are added to the hourly charge a contractor would include in a bid estimate. From an open shop perspective, the legislation passed in 2008 was clearly intended to end “subsidizing the bids, tenders, fees and prices” of unionized construction contractors. A subsidy is a subsidy is a subsidy. To put it another way, if it waddles and quacks like a duck, chances are it is. This and other information was presented to a panel of lawyers who submitted an initial confidential report to the responsible minister in March 2011. A second report was commissioned and at the time of writing the contents of their report remain confidential.

Idaho also passed legislation addressing job targeting funds In 2011, the State of Idaho passed the Fairness in Contracting Act (FCA) to promote fairness in the construction bidding process in that state. This legislation is a further indication of how union bid subsidy schemes are being viewed by other jurisdictions as a matter that needs to be addressed in order to properly protect the public interest. The significance of this law cannot be overstated, as it sets the precedent for other states trying to become more competitive. This concise one-page law addresses the issue directly so as to ensure that labour unions do not attempt to circumvent it in the same way that their Alberta counterparts have.

The FCA is the first piece of legislation in the U.S. that deals directly with construction union bid subsidy schemes. Unlike Alberta’s amendments, the Idaho legislation made it illegal for a contractor or subcontractor to “directly or indirectly receive a wage subsidy, bid supplement or rebate on behalf of its employees, or provide the same to its employees, the source of which is wages, dues or assessments collected by or on behalf of any labour organization(s), whether or not labelled as dues or assessments.” The bill also prescribed fines of $10,000, $25,000 and $100,000 for violations. Given the high stakes involved, it is hardly surprising that this act, as well as another Idaho act related to project labour agreements, are currently before the Idaho courts. Initially, the union legal counsel used the existence of a national labour relations code in the U.S. to successfully argue that the legislation was outside the state of Idaho’s jurisdiction, as it is related to labour rela-

tions. However, the Inland Pacific Chapter of the Associated Builders and Contractors (ABC) of the United States intervened and is making the case that it is within Idaho’s jurisdiction to adopt and implement the legislation based on the fact that Idaho is a Right-to-Work State. The ABC is asserting that the FCA directly serves a broad state interest by prohibiting unfair bid subsidy programs that undermine the right of Idaho citizens to choose to not be represented by a labour union and that “job targeting activity, by its very definition, is aimed at unduly coercing and restraining Idaho’s non-union employees in their decision not to join a labour organization, by undercutting their employers’ ability to get work.” The ABC also asserts that “the loss of available non-union work based upon artificially lowered bids by union contractors funded by their employees is a far more compelling state interest than the right of union employees to engage in such activity

for the preservation of their jobs.” The court’s initial ruling, they argued, “was based upon a decision that compulsory unionism trumps the right to choose. Existing right-to-work laws in Idaho very specifically protect Idaho citizens from compulsory unionism and give them the right to choose.” Given the high stakes involved, it seems likely that there will be considerable and lengthy litigation around this legislation. Efforts by the Alberta and Idaho legislatures to end unfair union subsidy schemes are groundbreaking developments that could dramatically rebalance the construction industry across North America. Open shop contractors now have two examples of significant government responses to the unique labour relations challenges in the construction industry. While there may be delays and setbacks in achieving legislative justice, it seems apparent that the door is now opening wider and wider to end these abusive job subsidy schemes.

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OPENMIND SPRING 2012

Laggard to

Leader The Canadian construction industry is poised to move into a role of prominence, embracing Building Information Modelling technology

By Ben Freeland

ILLUSTRATION BY: LeANNe KROLL

eople often say that Canada is not a nation of early adopters.

In actual fact, this clichéd view holds little water. Canadian business was well ahead of the curve in harnessing the power of social media and the evolution of the Smartphone was in large part a Canadian story thanks to RIM and its BlackBerry. However, when it comes to Building Information Modelling (BIM), there is more than a grain of truth to this cliché. While a number of countries (notably in Europe) have raced ahead to implement BIM, Canada’s construction industry has shown some reticence in embracing this innovation. Nevertheless, the last few years have seen substantial growth in BIM use in Canada. An increasingly prominent role in the creation of international industry standards for BIM promises to catapult the country from laggard to leader in the field.

OPENMIND SPRING 2012

Laggard to Leader

BIM is, in broad terms, the process of generating and managing building data in parallel with the life cycle of the building. It involves 3-D, real-time, dynamic building modelling software aimed at increasing productivity in the design and construction process. However, BIM goes well beyond the parameters of established 3-D design techniques in its inclusion of geometry, spatial relationships, light analysis, geographic information and quantities and properties of building components. As such, BIM is an industry paradigm shift that requires unprecedented collaboration between architects, contractors and building owners for effective use. “BIM can’t be seen just from the perspective of a contractor, an architect or an owner. They become mutually inclusive – that’s the key to it,” explains Dave Pelletier, president of D&G Mechanical Inc. in Kelowna. Mr. Pelletier is the current chair of the Institute for BIM in Canada (IBC), a consortium set up to lead and facilitate the co-ordinated use of BIM in design, construction and management of the Canadian-built environment. Determining levels of BIM use is a far from straightforward matter as statistics often do not differentiate between companies making full use of the technology and those who use it just as a f lashy 3-D modelling sales tool. Nevertheless, the latest findings show that BIM use worldwide is highest in

northern Europe (with Finland using BIM in an astonishing 93 per cent of its new projects) and parts of the Asia-Pacific region. North America – and Canada in particular – has trailed behind the rest of the industrialized world. Speaking at the CanaData Construction Industry Forecasts Conference in Toronto late 2009, Daily Commercial News reporter Will Koroluk expressed dismay at the reluctance he saw on the part of Canadian construction firms to embrace new technological developments such as BIM. “The future has a nasty way of rising up and biting you

Pelletier. “The larger construction firms are ahead of the curve. It’s the smaller firms that need help.” He notes that in certain sectors in Canada, most notably the oil and gas industry, BIM has been in full-fledged use for many years now but that it is still relatively new to most of the vertical building in the industrial, commercial, and institutional (ICI) sectors. There is also widespread interest across the industry. “We have a lot of contractors and other industry partners who recognize its value but need help implementing it,” he says. “That’s exactly what the IBC was set up to do.” In addition to helping small- and medium-sized contractors with the BIM learning curve, IBC works to establish industry standards and best practices for the technology together with its sister organization CanBIM. The latter organization made considerable progress in building bridges between academia and industry in the quest for best practices, particularly regarding the handover of buildings from contractor to owner within the context of the BIM process. “BIM is more than a technology, it’s a process,” says Allan Partridge, CanBIM’s vice-president and executive director of Group2 Architecture in Edmonton. “Any really diffusive change in the industry goes from being ad hoc to managed, to integrated, to leveraged. We’ve definitely moved out of the ad hoc phase here in Canada and are well into the managed, and touching on the integrated.

BIM is, in broad terms, the process of generating and managing building data in parallel with the life cycle of the building.

OPENMIND SPRING 2012

unless you pay attention to it,” he says, adding that Canadians generally aren’t very good at paying attention to the future. Fast forward to early 2012, however, and the picture appears to be changing. While Canada has yet to become a world leader in BIM, the construction industry in this country has made significant progress to adopt BIM. A 2010 IBC survey showed that 60 per cent or more of commercial and institutional projects in Canada were employing BIM, with use in the commercial and residential sectors approaching the 50-per-cent mark. “We’re at a transitional stage,” explains

We’re not at the leveraged stage yet, but that’s the goal.” The potential for bona fide international collaboration in building design that the technology promises has yet to materialize due to a lack of international standards. This, according to Partridge, is an area in which Canada has the potential to emerge as a world leader. CanBIM is already working with leading BIM software designers Nemetschek (producers of Vectorworks) and Autodesk (designers of Autodesk Revit Architecture) in establishing global standards. “We are currently working on developing standards with Australia and the U.K.,” he explains. “We are also working with our partner buildingSMART alliance in the U.S. on the National BIM Standard (NBIMS) V2. This is being set up as an eventual ISO standard for BIM and CanBIM is becoming a major conduit for this. We were pleased to see the recent announcement by buildingSMART International that NBIMS V2 will be adopted as a global standard of standards related to utilizing BIM-enabled technologies.” With BIM technology approaching the maturity stage in some markets and the high-growth stage in others, evidence of its benefits are widespread. A recent McGrawHill Construction survey indicates that BIM users are seeing overwhelmingly positive payback from its implementation. The survey found that two-thirds of U.S. BIM users reported positive return on their investment in the technology. Among expert users, that figure rises to 87 per cent, with a further 93 per cent of users believing in the potential to gain more value from BIM in the future. Among specific business benefits, the most commonly cited was reduced rework. Others include reduced conflicts and changes during construction as well as better multi-party communication and understanding from 3-D visualization and improved project process outcomes, such as fewer RFIs and field co-ordination problems. While a sense of immediacy surrounding BIM has yet to fully permeate Canada’s construction industry, a growing chorus of Canadian contractors is urging the rest of the industry to get on board. “Contractors really need to start looking at modelling,” says Russell Bridgeman, senior construction manager at PCL Builders in Edmonton. “As of now, there aren’t many owners who are requesting it but there’s nothing to stop designers from using it to improve productivity.” Bridgeman adds that BIM is already gaining considerable traction in eastern Canada as well as in the U.S. while the western provinces trail behind. He anticipates that this will soon change. He also says that companies not looking into BIM as a design tool are doing themselves a disservice. “The cost of using it is far outweighed by the efficiency and productivity that is gained through it.” The challenge ahead, most experts agree, is the human challenge, namely the recasting of relationships that this new process requires. Fortunately, the range of BIM educational resources now available far outstrips what existed just a year ago. Merit Contractors Association introduced an online BIM awareness course in 2011 as part of the Merit College of

Construction’s expanding suite of e-learning courses while CanBIM now provides extensive BIM educational resources tailored to the needs of architects, engineers, builders and owners. “With any major change there’s human resistance,” says CanBIM’s VP Partridge. “It’s a disruptive change and CanBIM is working to break down those fears through best practices and our regional sessions.” IBC’s Pelletier agrees, adding that the most pressing issue for the next few years will be educating the industry so that contractors and other stakeholders are not ambushed by the technology once it becomes universal. “We don’t want anyone to feel that they’re being forced to adapt overnight,” Pelletier says. “We want everyone to be well-informed ahead of implementation.” Slow but steady – this aptly characterizes the state of BIM in Canada’s construction sector. While other jurisdictions remain ahead in terms of implementation, BIM has made impressive strides in Canada in recent years. This is largely due to the educational and advocacy efforts of CanBIM and IBC and Canada is poised to emerge as a world leader in the technology over the course of the coming decade. Moreover, Canada’s slow-but-steady approach to the technology and the efforts of organizations like CanBIM and IBC to lay the groundwork should make for a relatively smooth process whereby BIM becomes a universal ingredient in Canada’s construction industry.

000Om.Urban Scaffolding-1_4.indd1 1

3/5/12 11:24:54 AM

ILLUSTRATION BY: KevIN GhIGLIONe

The open-shop movement battles regulatory burdens in construction that no other industry has to face

OPENMIND SPRING 2012

By Terrance Oakey, the first full-time president of Merit Canada

anada’s open-shop movement marked a significant milestone in 2011 because

that was when the vision of the eight provincial open shop construction associations became a reality, with the establishment of a national voice for Merit’s member companies. Merit Canada is needed because federal government policy, legislation and consultations continue to disproportionately reflect the views of union leaders. Consequently, the narrow interests of organized labour are reflected in federal legislation and policies, despite that an overwhelming majority of Canadian workplaces operate on a union-free basis. Merit Canada now has an office steps away from Parliament Hill and the Prime Minister’s Office and we have met with key decision makers to discuss the issues that impact our members. While Merit Canada became operational as recently as June 2011, its impact is already being felt in Ottawa.

OPENMIND SPRING 2012

Merit Goes National One tangible result for open shop contractors has been the defunding of the old Construction Sector Council (CSC). The board of the CSC was not reflective of the industry, with the vast majority having ties to the building trade unions. Merit Canada has long called for a rebalancing of the Board of Directors of the CSC in order to reflect the reality that the open shop sector compromises more than 70 per cent of the industry. Merit also raised concerns about the CSCâ&#x20AC;&#x2122;s approach, methodology and focus on the needs of the unionized sector of the industry. Given the Boardâ&#x20AC;&#x2122;s inability to address any of these concerns, Merit Canada supported the governmentâ&#x20AC;&#x2122;s decision to phase out its core funding by 2013. It also participated in an announcement with the minister of human resources and skills development to develop a new grantsand-contribution program. Merit Canada is now participating in a construction stakeholder group to keep those elements of the CSC, that were of value to the industry (e.g., Labour Market Information or LMI) while ensuring the open shop has appropriate representation. This was an important step for Merit Canada as provincial government policy makers used to use the results of the LMI surveys to develop programs and services without input from the open shop sector. The ability to compete for work in an open and fair manner is at the heart of what Merit Canada members believe. Only

a business environment in which construction contracts are awarded on the basis of corporate merit ensures that taxpayers receive the best possible service at the best possible price. Therefore, construction projects financed in any way with federal funds must be tendered without any precondition requiring that contractors be signatory to any union or abide by the terms of a specific collective agreement. Providing equal opportunity for all contractors to submit their best bids will ensure that Canadian taxpayers receive the best value for their money. Canadian taxpayers expect that their hard-earned money is being spent in the most cost-effective manner, particularly now that the country is beginning to emerge from one of the worst economic crises in our history. Studies in Canada and the U.S. indicate that taxpayers can save between 12 and 18 per cent on projects that have more inclusive tendering approaches that do not favour union or non-union firms.

All Canadians pay for federally funded public works projects equally. It stands to reason that all Canadians should have an equal opportunity to provide the services for which these funds pay. There are many jurisdictions in Canada where open-shop contractors – more than 70 per cent of the entire construction industry – are excluded from bidding on public works projects, even though these contractors would be able to provide the same or better services at a significantly lower cost. This unfair practice must end. Merit Canada also played a public and private role in ensuring that unions provide greater financial transparency to everyone who pays union dues as well as those who may be considering joining a union. MP Russ Hiebert introduced a Private Member’s Bill (C-377) that would require unions to publically disclose detailed financial information. This will be of particular benefit to the open shop contractor community, as the way unions spend dues will become another factor in the certification process by providing valuable information to employees who are considering joining a union. Merit Canada will continue to work with members of parliament from all parties to ensure the passage of this important piece of legislation. Another issue that impacts the open shop contractor community at the federal level is immigration. Over the next decade, Canada’s

Over the next decade, Canada’s construction industry will have to attract at least 320,000 workers or face serious shortages in the labour supply.

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Merit Goes National

construction industry will have to attract at least 320,000 workers or face serious shortages in the labour supply. While the industry is dedicated to training and recruiting Canadians into the construction industry, it has become clear that this strategy by itself will not suffice. Continued economic growth depends considerably on the maintenance and improvement of Canadaâ&#x20AC;&#x2122;s infrastructure and capital projects. Labour shortages in the construction industry will lead to delays in critical infrastructure and capital construction projects. These delays will directly undermine the ability of Canadian businesses to compete in a global market, reduce foreign investment in Canada and limit economic growth. Current immigration regulations disproportionately favour immigrants with high academic qualifications and give insufficient weight to professional skills and achievements. As a result, less that 0.2 per cent of immigrants admitted each year into Canada are skilled construction workers or construction industry professionals, even though the construction industry employs more than eight per cent of Canadaâ&#x20AC;&#x2122;s labour force. Merit Canada is asking the federal government to increase the point system recognition for technical and/or tradesâ&#x20AC;&#x2122; skill training and experience in occupations where long-term trade skills shortages are anticipated under the Economic Immigrant Class Program. Merit is also calling the government to streamline its immigration procedures and ensure adequate resources

are in place at embassies and consulates throughout the world to improve efficiency of applications intake. In addition, the federal and provincial governments need to streamline and bolster the Temporary Foreign Worker program and the Provincial Nominee program in order to alleviate regional differences in labour requirements. The federal government also needs to streamline its work visa and

we are at a loss to understand why the federal government chooses to single out the construction industry and impose regulated minimum wage rates across an industry that consistently pays workers 25 per cent more than the Canadian industrial average. Why, for example, is it necessary for the federal government to regulate minimum wages for elevator constructors in the Metro Toronto area at $43.53 per hour? This type of regulatory oversight burdens no other industry and construction workers are one of the best-paid classes of employees in the country when operating in a free market. As such, this policy is completely unnecessary. These are just some of the issues on which Merit Canada will focus over the coming months to ensure that open shop contractors will operate on a level playing field.

Merit Canada members believe that wages and working conditions should be determined through direct dialogue between employers and employees.

OPENMIND SPRING 2012

foreign credential recognition processes for journeymen and update its labour market opinions. Another pressing issue for Merit Canada is the regulated minimum wage policy for construction workers. Merit Canada members believe that wages and working conditions should be determined through direct dialogue between employers and employees. If not that way, then through collective bargaining processes, as freely chosen by the parties, within the boundaries of the law. For this reason, Merit Canada has called on the government to repeal the Fair Wages and Hours of Labour Act, which creates a national system of regulated minimum wages for the construction industry with work undertaken in relation to public works and contracts. Given the relatively high wages of construction workers,

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000Om.Nait-FPi 1

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ILLUSTRATION BY: JANeT FReYShOLdT

By Ben Freeland

OPENMIND SPRING 2012

t started out as a simple idea. A group of construction contractors in

south Florida were examining the possibility of creating an easyto-use online directory to help them find the resources necessary for jobsite mobilization – quickly and within their geographical area. At the time, the only resource available for this purpose was the Blue Book Building and Construction Network, which contractors did not find particularly user-friendly given that it divided Florida into two geographical zones (north and south) and provided no company information beyond names and numbers. Clearly something better was required. The result was Jobsite123.com. It is currently the fastest growing online tool for the commercial construction industry with over 500,000 companies in its database and it appears to be taking Canada by storm, too. “In the beginning, we focused on building a directory of jobsite mobilization resources,” explains Coty Fournier, Jobsite123.com’s founder and CEO. “There was nothing on the web like it and it started to take off. Before long, contractors and other suppliers had begun asking, ‘Why not put the whole industry on it?’

OPENMIND SPRING 2012

Easy as 1 2 3

“That’s when we knew the potential for Jobsite123.com was even bigger than we had originally envisioned and we set out to take the free online community concepts started by web titans like LinkedIn and Facebook and customize the company profile content so that each company had the ability to showcase the answers to 95 per cent of the most commonly asked questions in the marketplace. Investors jumped in and version 2.0 of Jobsite123.com was developed and launched in summer of 2009,” says Fournier. Since its inauguration, Jobsite123.com has established itself as the gold standard for digital communication tools in the construction industry in the United States, where it is quickly gaining ground as the commercial construction industry’s counterpart to Facebook or LinkedIn. The service caters equally to the buy and sell sides of the equation. It provides buyers with qualitative and quantitative data on prospective contractors or suppliers while simultaneously giving firms an easy way to showcase themselves online. “The name comes from the expression ‘Easy as 1 2 3’,” says Fournier. “We’ve built a tool that anyone with rudimentary

OPENMIND SPRING 2012

computer skills can use. If you can type, you can build a phenomenal company profile inside Jobsite123, that when fully completed, will rival the look and feel, and most importantly, the useful content of most construction company websites out there. It literally solves the problem of how to get effective content about your company onto the web. And – it’s completely free.” The notion of creating a free online hub for the industry gained early support from Fournier’s industry backers. While the site does derive revenue from profile upgrades and other additional forms of marketing exposure (known as “freemiums”), continued industry support has allowed the site to remain free of charge. However, the freeness of the site would ironically prove to be an obstacle at the outset. “Free is not a word you hear very often in the construction industry,” the site’s CEO notes. “One of our challenges early on was convincing contractors that this service actually was free and that there weren’t any catches.” However, the timing of Jobsite123’s genesis was at the height of the worst recession in postwar U.S. history, which meant that once companies overcame their initial hesitations, they wasted no time getting on board. “In some ways the recession made it easier,” says Fournier. “Most companies needed more work and were looking for new, cost-effective ways of marketing themselves. The fact that our customized profiling platform is free meant that companies had nothing to lose by trying it out.” Jobsite123’s rapid expansion has been facilitated in large part through

connectivity with vital industry software providers with company databases inside their user platforms, such as project management and invitation-to-bid software programs. These technologies can now connect their database to the Jobsite123’s database for auto-feeds so that companies’ Jobsite123 profiles can be viewed or accessed within various software platforms. The first partnership of this kind was launched in October of 2011 with SmartBidNet, one of North America’s leading providers of construction bid management software with well over 200 major general contracting clients across the U.S. and Canada. These and similar connections link prospective buyers directly to the Jobsite123 database when additional resources are needed for any given project bid, while Jobsite edits appear automatically in the linked databases. In late 2011, a three-way partnership was established between Jobsite123.com, Merit Contractors Association and the Calgarybased JuneWarren-Nickle’s Energy Group to create the Canadian version of the site. Jobsite123.ca was officially launched in Alberta in October 2011 and in its first four months drew some 5,000 companies. Plans are underway to make the service available to contractors and all other construction professionals nationwide this year. Meanwhile, back at Jobsite123.com’s head office in Fort Lauderdale, Fournier and her colleagues are already looking beyond North America for future expansion possibilities. “We’re looking at possible expansion into South America and Europe,” she notes. “There’s nothing confirmed yet but it’s our intention to expand further.”

Anticipation over the Canadian version is already running high. “It’s a fantastic tool,” says Bill Whitelaw, JuneWarren-Nickle President and CEO, whose firm is overseeing marketing, digital advertising and integration solutions for Jobsite123.ca. “It builds on the way the construction industry has always done business while also giving people a range of extra tools. Companies can cover all the prequalifying elements – insurance coverage, bonding capacity, client relationships, project portfolios, safety records – and build themselves a very compelling prequalifying story for buyers. And from the buyers’ standpoint, it’s a very powerful search tool.” Whitelaw sees few obstacles to the site’s spread in Canada and further expects the free access aspect of the service to be a plus in today’s social media-saturated marketplace. “It’s expected now,” he says. “You can’t put a tool like this out there without a free component.

000Om.Jobsite123-1_2h.indd 1

There are many purchasers and general contractors in this sector who require free access to this type of website to find the services they need.” What began as a simple solution to a local need evolved quickly into a standard construction industry tool across the United States and has altered the industry. “I’ve already noticed an evolution in how contractors behave,” says Fournier. “At first contractors were hesitant to display their credentials out in cyberspace. That

has changed completely.” Fournier notes that Jobsite123, like LinkedIn, has a built-in performance rating request function, allowing contractors to request reviews of their work from buyers following the completion of a project, which they can then display on their profile. Also, they can allow companies to connect their profile to companies they enjoy doing business with and would readily recommend. “What this tool has done is create a much greater emphasis on managing content and online reputation management,” she says. “In the construction industry, we have all too often lingered at the trailing edge of technology and innovation, but we are working hard to change that, as times have changed irrevocably. Our industry needs to step up our game.” The Canadian version of Jobsite123 is now a reality, and judging by its success south of the border, it shouldn’t be long before this digital media tool is industry standard in this country.

3/13/12 11:47:08 AM

oPenmind sPrinG 2012

illustration by steve adams

Something’s Got to

Give

Canada’s future depends on immigration reform

By Bill Stewart

n the near future, Canada’s construction industry

will be plagued by labour shortages as will any others reliant on workers with trade skills. The single largest factor leading to this shortage is our aging workforce. In 2005, the proportion of Canada’s adult population 55 years or over was 29 per cent and is estimated to grow to 35 per cent by 2015. Between 2005 and 2015, an estimated 3.8 million workers are expected to retire. Specifically in the construction industry, 210,000 workers will likely retire from the 1.2 million-strong industry over the next eight years. According to a 2011 study released by the Construction Owners Association of Alberta (COAA), the gap in Alberta’s construction industry could be as great as 40,000 workers. Such shortages in needed trade skills will result in an industry unable to respond to owners’ needs for on-time, on-budget projects. While this impending demographic tsunami has been known for years, solutions are complex and clouded by politics.

OPENMIND SPRING 2012

Something’s Got to Give

Top 20 Trades Canada - permanent residents (skilled Worker - principal applicant only) 2005-sept. 2010* Trade

2005

2006

2007

2008

2009

7242 - industrial electricians 7246 - Telecommunications installation and repair 7241 - electricians 7271 - Carpenters 7265 - Welders 7311 - Construction millwrights 7312 - heavy-duty equipment mechanics 7313 - refrigeration and a/C mechanics 7251 - plumbers 7281 - Bricklayers 7219 - supervisors, other Construction Trades 7272 - Cabinetmakers 7243 - power system electricians 7215 - supervisors, Carpentry Trades 7217 - supervisors, heavy Construction equipment 7252 - steamfitters, pipefitters & sprinkler system 7263 - structural metal and platework Fabrication 7261 - sheet metal Workers 7253 - gasfitters 7282 - Cement Finishers sub-total: Top 20 Trades others Totals

155 85 45 35 45 35 30 15 5 15 15 15 20 *** 5 5 5 *** *** *** 530 20 550

150 50 35 35 40 25 30 25 10 10 15 15 20 5 *** 10 5 10 5 *** 495 30 525

105 90 65 45 45 35 30 20 20 10 15 25 5 5 10 10 *** *** *** *** 535 20 555

60 75 55 80 30 30 30 35 25 25 20 20 20 5 10 *** 5 *** 5 *** 530 60 590

65 55 65 75 40 50 25 30 20 35 25 15 15 10 15 15 10 10 10 *** 585 80 665

Jan-sept 2010 85 50 80 60 55 40 40 30 40 20 15 10 15 35 20 15 10 10 5 15 650 70 720

Total

avg.

620 405 345 330 255 215 185 155 120 115 105 100 95 60 60 55 35 30 25 15 3,325 280 3,605

108 70 60 57 44 37 32 27 21 20 18 17 17 10 10 10 6 5 4 3 578 49 627

Source: Citizenship & Immigration Canada

What is clear, however, is that a variety of strategies are needed to combat the problem. Apprenticeship and training programs are important to pursue, along with outreach initiatives to attract youth and others from traditionally under-represented communities. Such efforts are making good headway. According to Statistics Canada, three of the largest construction-related apprentice trades involve carpenters, electricians, plumbers, pipefitters and steamfitters. In 1991, the number of apprentices registered in these trades across Canada totalled over 83,000. Despite the recession, the numbers of registered apprentices increased by 86 per cent to almost 155,000 in 2009. However, developing new resources takes time. Canada’s apprenticeship systems are based on a combination of time accumulated in on-the-job training supplemented by technical in-class training. The normal timeline from initial intake to obtaining a journeyperson’s credential is about four years. Despite the best efforts of governments, business associations and contractors, various forecasts indicate that there will be a significant shortfall in domestic resources to meet demands. For example, the COAA estimates that almost 160,000 offshore construction workers will be needed within 38

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the next eight years to satisfy all the projected workforce needs. Unfortunately, Canada’s immigration system is extremely inefficient. It also does a poor job of targeting immigration for high-demand construction occupations, particularly for people seeking to come to Canada permanently under the Skilled Worker Program (SWP). During the last construction surge, many contractors attempted to use the federal Temporary Foreign Worker (TFW) program after finding that all domestic supply sources had been exhausted. Unfortunately, contractors that availed themselves of this program found it expensive, cumbersome and time-consuming. Moreover, contrary to assertions from the federal government that it has improved the program, new regulations and procedures introduced in 2010 in fact made using this program even more convoluted than before for construction contractors.

permanenT immigraTion under The skilled Worker program The diff iculties that underemployed immigrant professionals such as doctors, accountants and engineers face are well known due to the extensive media attention

that they have received. Have you heard or read about an underemployed or unemployed immigrant with a construction trades background? This is unlikely given the fact that Canada’s immigration system is heavily biased in favour of universitytrained applicants and against applicants with construction trades skills and training. Our system simply does not permit many tradespeople to immigrate, and the few who do gain entry are quickly absorbed into Canada’s construction industry. The federal government’s selection criteria under the Skilled Worker subcategory are intended to aid in selecting immigrants “more capable of adapting to the evolving Canadian labour market.” Changes in legislation in 2002 established selection criteria based on a “human capital model.” In the words of the government of the day, the new criteria were intended to help “select skilled workers with a range of flexible skills needed in Canada’s new economy” rather than workers whose skills qualified them for employment in a single occupation. The basic premise was that the more education an immigrant has (as opposed to specific occupational skills and training), the more likely he or she is to succeed in settling in Canada.

RBC Dominion Securities Inc. To be admitted as a skilled worker, the principal applicant must score at least 67 assessment points out of 100. Up to 25 points are awarded for educational achievement; 24 points for language proficiency in either English or French; 21 points for prior work experience; 10 points for age (ages 21 to 49 are preferred); 10 points for having a job offer waiting; and six points for being “adaptable” in terms of having prior work experience or relatives already living in Canada. Prior to the 2002 amendments, points were awarded for “specific vocational preparation” and being part of a targeted occupation or occupational group. In an ostensible effort to streamline the system, the points for these criteria were rolled into broader categories. In 2000, however, the auditor general of Canada noted that the government had not updated its list of “occupations in demand in Canada” in the previous seven years. The maximum 25 points in the educational component requires a PhD or master’s degree and at least 17 years of full-time study. By comparison, an applicant with apprenticeship training and at least 12 years of full-time study is only awarded 12 points. This emphasis on educational achievement means that gluts of immigrants are being admitted to Canada to work in professional occupations at the expense of high-need occupations that require trades training and skills. In fact, according to a Citizenship and Immigration Canada (CIC) evaluation published in 2010, 46 per cent of admissions under the SWP held a master’s or PhD, while less than three per cent were trade apprentices or holders of formal trade certification.

This is evident in the table on page 38, which shows that, on average, only 627 tradesmen with trade training and experience have been admitted to Canada annually over the past five years.

AlternAte ImmIgrAtIon ProgrAms Overall dissatisfaction with the Federal SWP has led the federal government to develop other programs and initiatives intended to be more responsive to labour market requirements – particularly outside Quebec, which manages its own immigration program. These include various Provincial Nominee Programs (PNP), the Experience Class managed by CIC and the TFW program, which is managed jointly by CIC and Human Resources and Skills Development Canada (HRSDC). Through joint agreements, the PNP programs allow the provinces to nominate potential immigrants for permanent admission based on selection criteria established by the province (i.e. the federal point system is waived). According to a 2010 CIC evaluation study, “Provincial governments prefer the PNP, citing perceived advantages such as greater responsiveness to immediate labour needs and provincial priorities, the ability to attract workers who wish to settle in destinations other than major urban centers and shorter processing times.” However, as the provinces move to increase their PNP numbers, CIC needs to reduce the number of immigrants admitted under the SWP because of annual limits on total immigration set by parliament. With the ongoing backlog of immigration applications that by law it must process, the federal government is understandably reluctant to allow the provinces to select too many potential immigrants. Consequently, in 2010 almost 14,000 provincial nominees along with almost 23,000 family members were admitted to Canada. To provide permanent immigration opportunities to workers or students who seek to remain in Canada following the expiration of a temporary work or study visa, the federal government introduced the Experience Class category in 2008. While the program was resoundingly welcomed by the business community, the number of admissions it targeted was relatively small. In 2010, only 2,500 appli-

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Something’s Got to Give cants along with 1,400 spouses and dependents obtained landed immigrant status through this program. Given the disproportionately low number of immigrants with trade skills entering Canada under the SWP, is it any wonder that construction contractors find the need to resort to short-term employment solutions through the TFW program? While this is perhaps the most important last resort in a contractor’s recruitment tool box, it is also the most maligned. At the height of the construction surge in 2005 to 2008, reports by employers attempting to supplement their workforce through the TFW reflect a litany of complaints and frustration. Part of this frustration is attributable to the program being jointly administered by two different federal departments. Prior to offering temporary employment to a foreign national, the employer must obtain a Labour Market Opinion (LMO) from HRSDC. HRSDC’s role is to certify that the employer has first made reasonable efforts to recruit within Canada and that the terms and conditions of employment are not fraudulent and are in accordance with prevailing local wage rates and employment standards. Once the LMO is obtained, the employer and prospective employee must then satisfy both CIC and the provincial regulatory authorities responsible for accreditation that a candidate is eligible to work temporarily in Canada. For some, overcoming the bewildering array of regulatory requirements caused them to abandon their attempts. According to Canada’s auditor general, the number of LMO applications increased by 124 per cent between 2002 and 2008,

with the largest increase (26 per cent) occurring between 2007 and 2008 at the height of economic surge. Much of this surge was due to oilsands developments in Alberta and the preparations for the 2010 Winter Olympics in Vancouver. And while the auditor general applauded HRSDC for establishing pilot projects, such as the expedited LMO (a process that has since been disbanded), she also delivered a scathing critique of the manner in which the LMO process was administered. In particular, she noted that, “We found that directives on how to assess whether employers meet some or all of the factors outlined in the regulations are not clear or incomplete; interpretations vary from one regional office to another and even within the same office. For example, directives on determining prevailing wages do not provide specific guidance and are not well understood. Furthermore, each regional office uses labour market information differently to assess and determine prevailing wages.”

The Challenge ahead

In Alberta, the most recent inventory of major projects lists $191 billion in construction investments across various construction sectors over the next few years. While oilsands construction dominates the investment picture, billions will also be spent on residential, commercial, institutional and infrastructure related projects. This construction is taking place as demographic and workforce demand/supply forecasts have consistently pointed to persistent and ever-increasing shortages of skilled construction workers. Alberta is not alone. Saskatchewan and Newfoundland and Labrador – long vital sources of construction workers for Alberta – are currently experiencing record levels of construction activity. According to recent news reports, Newfoundland and Labrador is in the midst of an energy boom that is “straining the province’s ability to keep up.” Indeed, according to one Globe and Mail report, “Finding enough workers to complete some $43 billion worth of major projects underway and planned is proving to be a monumental challenge.” In light of all this, how is it possible to reconcile the fact that only 55 steamfitter/pipefitters – a trade vital to industrial process construction and maintenance on energy related projects – were permitted into Canada under the SWP from 2005 to 2010? Furthermore, why were LMOs authorizing up to 4,300 steamfitter/pipefitters to be brought into Canada from 2007 to 2009 under the TFW program?

Is Canada’s ImmIgraTIon sysTem PrePared for ImPendIng shorTages?

It is important to recognize that shortages of skilled workers have occurred and will continue to be experienced despite record levels of apprenticeship training taking place across Canada. It seems abundantly clear that the current immigration system is ill prepared to handle the impending storm of skilled worker shortages in the construction industry and that dramatic and decisive reforms are needed to address this problem.

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2012 Contractor of the year Awards acknowledge top performers his year’s Contractor of the Year Awards, presented by Merit Contractors Association, Alberta Roadbuilders and Heavy Construction Association (ARHCA) and Alberta Venture magazine, puts a spotlight on the companies and people that have taken innovative and successful strides in the construction industry. Eligible entries had to include public or private companies that sold construction services, employed trades people, and/or contract out labour supply in the industrial, commercial, institutional, residential, civil, road building or oilfield construction sectors. Also, these companies had to have a regional office in Alberta. This year had six award categories: general contractor under $50 million, general contractor over $50 million, trade contractor under $15 million, trade contractor over $15M, heavy civil and construction person of the year. Read on to learn more about the winners and finalists chosen by this year’s adjudication panel.

OPENMIND SPRING 2012

By Alix KEMp And MiChEllE lindsTroM

General ContraCtor Under $50 Million WINNER Emcee Construction & Management Ltd. takes advantage of being smaller, although it recently needed to expand into a larger office. With only 36 employees, Emcee is doing well since everyone knows one another but the company is still big enough to tackle various building projects. Some projects include environmentally friendly building practices, such as the Alberta Municipal Place that was outfitted with a windmill and solar power. Emcee’s new west-side Edmonton office is even aiming for silver LEED certification. Emcee was previously called Ernest Construction and specialized mostly in residential home renovations until Mark Lindquist, Emcee’s current CEO, bought half of the company in 2004. That’s when he and partner Ernest Blouin renamed the company and pursued commercial construction. Lindquist purchased the rest of the company in 2007. A successful Emcee Construction project for Mill Creek ATB Financial, Edmonton.

2ND PLACE Home builder Willowbrook Homes Inc. specializes in the design and construction of custom luxury homes in and around Calgary. It just expanded its business into Invermere and Fairmont, B.C. The company founder, Cecil Jenkinson, decided in 1993 to build quality instead of quantity and that methodology continues today. Willowbrook sets itself apart by working closely with clients to design their dream home using software that allows customers to easily keep track of changes, costs and scheduling. 3RD PLACE Glen Armstrong Construction Ltd. serves northern Alberta with a range of general contractor services from bridge building to pipeline excavation and oilfield construction. The company’s strong commitment to its employees means 90 per cent of them have been with Glen Armstrong for over 10 years. Thanks to an experienced workforce and excellent safety program, the company has gone eight years without a lost-time injury and was acknowledged as a “2008 Best Safety Performer” by Work Safe Alberta.

2ND PLACE Clark Builders has been specializing in largescale infrastructure projects across Alberta for 38 years. A company partnership interest was recently sold to American behemoth Turner Construction Company, allowing Clark Builders to expand its project scope and increase its production rate. Recent projects include Calgary’s Atlantic Avenue Art Block and the new Go Community Centre on the University of Alberta campus in Edmonton. 3RD PLACE Graham Group Ltd. is Canada’s sixth-largest construction company. They are environmentally conscious with extensive experience in general contracting, design-build, construction management and P3 projects. They’ve announced the retirement of their current CEO, Bill Flaig, to be succeeded by Grant Beck in July of this year. They worked on the Anthony Henday ring road in Edmonton, the Chinook Regional Hospital Parkade in Lethbridge and the Mitchell Business Centre in Calgary.

trade ContraCtor Under $15 Million WINNER Danijel Slisko, a second-generation painter, went into business for himself at 21 and founded United Decorating Inc. by taking any project he could get. His company now employs 74 people compared to 12 in 2009 and revenues have more than doubled since. Company efficiency comes from its custom-built software that is a cloud-based project management program called United Decorating System. The company’s first industrial bridge project, Schooner Landing Bridge in Calgary, established a good reputation with the city due to United’s innovative solution to lack of construction site space. United Decorating is one of the top 10 painting contractors in Calgary, and the next goal is to be top three in the province.

U of A’s Centennial Centre for Interdisciplinary Studies by PCL.

General ContraCtor over $50 Million WINNER Paul Douglas, PCL Constructors Inc. CEO and president, employs 3,400 employee owners and he credits them with helping the company survive 2008’s economic downturn. With offices across Canada, the U.S. and now Australia, PCL’s decentralized, employee-driven approach allows independent units to react to their own marketplaces without blind orders from Edmonton’s head office. Another part of PCL’s strategy was the move into public-private partnership (P3s), actually leading Alberta’s first P3 project: southeast leg of Edmonton’s Anthony Henday ring road. P3 partnerships have become an enormous part of the company’s business across North America. In 2011, PCL donated $2 million to United Way of the Alberta Capital Region as it considers community building as part of the company’s structure.

Bell Dental Group in Calgary had its office worked on by United Decorating.

OPENMIND SPRING 2012

Recognition within Alberta

2ND PLACE LSM Lee’s Sheet Metal Ltd. has grown in its 48 years of business from four employees in a 2,000-square-foot shop to 100 employees in a combined 27,000-square-foot shop and office. The company now provides commercial, residential and industrial sheet metal. It also does heating, cooling, air conditioning, powder coating and custom manufacturing. Recent projects include the Grande Prairie Airport and major renovations of the city services building in Grande Prairie. 3RD PLACE When CMN Electrical Systems Ltd. first opened in 1989, it specialized in basic residential electrical needs: plugs, switches and appliance hook-ups. In the past few years, though, CMN has expanded to become a full-service electrical needs provider, installing home theatres, security and central vacuuming systems. This has led to an unprecedented level of success for the family-owned business, which has established itself as a leader in the Greater Edmonton residential construction market.

Trade ConTraCTor over $15 Million

Alberta Glass installed the Unitized Curtain Wall on Calgary’s Eighth Avenue Place.

WINNER A bird is the symbol of Alberta Glass Company Inc.’s 50/50/50 initiative: an audacious plan to land 50 projects in 50 months and become a top50 employer. The initiative was launched in October 2011, and by early January, Alberta Glass already had f ive construction projects done. For CEO Paul Heyens, it’s part of a plan to keep the company moving forward in a sustainable way. The company has certainly been growing with around a dozen people working in the new Edmonton office and the home-base in Calgary taking on projects like hanging the glass on the Bow’s iconic inside curve. For employee motivation, at the end of the 50-month plan, if the company accomplishes its three goals, all employees will be treated to a Las Vegas excursion.

2ND PLACE With offices located throughout Alberta, B.C. and Saskatchewan, Wrapex provides industrial insulation, scaffolding and building systems to Western Canada. Wrapex is unlike competitors who offer only one type of building service. Its more than 30 years of experience and all-in-one approach have allowed the company to grow as a successful general contractor and subcontractor and work on projects for big names like Suncor, Cenovus and MEG Energy Corp. 44

OPENMIND SPRING 2012

3RD PLACE Dynamic Concrete Pumping Inc.’s emphasis on maintaining good client relationships has paid off – the concrete leader boasts a 95 per cent rate of return business. It is also dedicated to remaining environmentally friendly. The company installed a slurry reclaiming machine in its new facility, and uses fish-friendly oil in its pumper trucks. Most recently, it worked on the base of Calgary’s Bow Tower, setting the record for longest continual concrete pour in Canadian history at 36 hours, using over 1,000 trucks’ worth of concrete and involving 500-plus workers.

Heavy Civil WINNER The Calgary office of Flatiron Construction Corp. only employs 12 full-time staff, but backing from its U.S.-based, larger parent company has allowed it to compete and thrive in Alberta’s construction market. Flatiron’s Canadian division had two projects named “2011 Top Projects” by Alberta Construction magazine and it is building three of “Canada’s Top 100 Projects” according to Renew Canada magazine. Also in 2011, the company was recognized by the ARHCA for clocking over 200,000 hours (2.8 million hours actually in Canada over three years) without a lost-time injury.

Flatiron constructed Fort McMurray’s Athabasca River Bridge. Its 108-foot wide by 1,548-foot-long deck is Alberta’s largest.

2ND PLACE Sureway Construction Group Ltd. is one of Alberta’s largest privately-owned civil construction contractors. It includes Sureway Trucking, Yellowhead Aggregates and other companies under the umbrella of Sureway Construction Group of Companies. Founded in 1973, Sureway specializes in urban land development, infrastructure and industrial construction and received an award from the Consulting Engineers of Alberta. Sureway recently worked on Highway 727’s realignment west of Spirit River (northwest Alberta), which turned out to be a $37.9-million project. Continued on page 46

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Recognition within Alberta

ConstruCtion Person of the Year

2ND PLACE Les LaRoque has been president of Botting & Associates Alberta since 1989 and has grown the company from a small business with only 10 employees to one of the largest mechanical contractors in Western Canada. He’s known for his commitment to health and safety and advancing the workplace through innovative technology and human resources. LaRoque is also involved with a number of community organizations, including Kids Up Front, the Alberta Children’s Hospital and the Calgary Zoological Society. 3RD PLACE Bill Knight, founder and CEO of B &B Demolition (based in Edmonton), has been instrumental in building the reputation of demolition as a trade and business. Knight’s active role in the Edmonton community and construction industry has gotten B&B involved with several local organizations, such as the Entrepreneurs Organization and the Edmonton Regional Safety Committee. As an individual, Knight has supported a number of charitable organizations from the Edmonton Humane Society to the Youth Emergency Shelter Society. 46

OPENMIND SPRING 2012

ROBERT WALKER, northern Alberta vice-president of Ledcor Construction

Merit, the Alberta Roadbuilders and Heavy Construction Association and Alberta Venture thank the adjudication panel for their assistance with the Contractor of the Year Awards: Dr. Aminah Robinson Fayek, University of Alberta, Robin Kotyk, Alberta Construction Safety Association and Carl Knowler, Canadian Western Bank.

PHOTO: CURTIS COMEAU

WINNER Robert Walker, northern Alberta vice-president of Ledcor Construction, joined the company 14 years ago. He has paved the way for some of Edmonton’s most controversial projects such as City Hall, which was completed in 1992. Walker followed up on City Hall by working on the Rexall Place renovation, Telus Field, River Cree Resort and Casino, the Art Gallery of Alberta and the Epcor Tower – downtown’s first high-rise office tower in 20 years. Most recently, his company won the contract to build the new Royal Alberta Museum. When he’s not causing a furor with his projects, Walker helps other organizations do some building of their own. He’s on the board for the Kids with Cancer Society as well as The Banff Centre and he’s also involved with the City of Edmonton’s business advisory committee, among others. These are positions he’s happy to fill and also why he has been recognized by all three levels of government for his community contributions and why co-workers say his positivity has been a good influence on them.

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Don’t Blame the

OPENMIND SPRING 2012

Workers

How measurement-minded companies attack time-wasting management flubs that frustrate workers and slow production by Bruce Buckley (wIth REPORtING by JonatHan Barnes)

raig DeFinis enjoys watching a craftsperson lose 15 minutes of work time

about as much as he likes discovering that he just left his wallet in the back seat of a taxi. As the owner of Pittsburgh plumbing and HVAC contractor DeFinis Mechanical Contractors, he grants his union plumbers a quarter-hour morning break, even though his contract doesn’t require it, and hopes the workers don’t stretch it the way the half-hour lunch break sometimes goes to 45 minutes. Because each worker costs about $60 an hour in wages and benefits, extra minutes add up over the long run. “Multiply that by eight guys, five days a week, for six months – that’s a lot of money,” he says. DeFinis does more than gripe about breaks. He holds meetings with foremen every week to ensure timely delivery of tools, materials and information to his crews. Further, he stays alert to errors in the plans his crews work from. “Some engineers are better than others,” he says. Overall, DeFinis reflects both the old and new ways of thinking about wasted work time. From the 1960s through the 1990s, owners, contractors and academics noted with frustration and alarm a steady lag in productivity within the construction industry, especially in periods of inflation. While technology had driven increased non-farm productivity ahead by 200 per cent from 1964 to 2003, one controversial study showed, construction in the same period actually slipped by nearly 20 per cent. Years ago, fingers may have pointed to union work rules and contract terms as factors, but a decline in trade-union market share in the last 30 years has changed that argument. With a few exceptions, new research on productivity is giving managers the tools to maximize “wrench time.” Equipped with stopwatches and PCs to crunch their data, big owners, contractors and university researchers have turned to measuring and charting disruptions that can hit a jobsite daily. By drilling into the workday minute by minute, gauging output with new precision and zeroing in on ways to turn downtime into wrench time, researchers are cutting through the fog of confusion over what takes place on jobsites and, in the process, dispelling myths about lazy workers. Now, a major question is what to do with the rich harvest of activity data and how to exploit it consistently. A few measurement-minded companies are learning how. OPENMIND SPRING 2012

Don’t Blame the Workers

In 2009, the Construction Industry N.C. “You’re going to have your exception an implementation plan that reduced total Institute based at the Cockrell School of here and there, but the vast majority want travel time for employees of an EPCM firm Engineering at The University of Texas to be productive. If we can take away the by 16 per cent and cut operator idle time by at Austin, launched the most ambitious barriers for them to produce, they will take 49 per cent by taking downtime and using study of craft productivity in its 28-year the reins and go.” it for inspections of rigging equipment, history. The five-year Craft Productivity Buck is among a small group of cleaning of cranes and other machinery, and Improvement Program aims to compile productivity professionals engaged in planning for lift co-ordination during the a comprehensive collection of innovative the emerging technique of “activity shift, says Beck. analysis techniques, common metrics and analysis.” When it is hired by an employer PER then analyzed personal delays by best practices for craft productivity. or owner, Buck’s firm is sent to a site to the hour, showing a spike in the second half The new research team, of the shift when called RT 252, determined temperatures were that project teams lacked higher, he adds. “Crafts guys want to be produCtive,” a sufficient understanding So Beck advised of the issues that keep supervisors to – Chris Buck, president of Productivity Enhancement Resources (PER) crafts workers off their plan and schedule tools. activities in the Workers already had been polled on make thousands of detailed observations shade provided by existing structures, the subject. As part of a 2006 CII survey, about how crafts workers spend their time. moving from one side of the project to 1,996 crafts-persons listed what kept them While parsing the data and comparing another during the day. waiting around: no forklift to move the it with historical norms, Buck looks The concept of observing direct and Sheetrock, no reply from the engineer about for unusual spikes in non-direct work. non-direct work rates isn’t new, but activity unclear plans and specs, fixing prefabricated He then goes back and interviews workers analysis represents an evolutionary step items and looking for tools, among other to find out why so much time is spent in productivity science. In the 1920s, responses. off-task. Once issues are identified, PER Leonard Henry Caleb Tippett developed Productivity engineers argue that most develops strategies to optimize the time of the “snap reading” method, which calculates contractors fail to investigate fully how crafts workers. the ratio between production and delay these types of shortages and idle time The on-site observations produce based on observations of work activity. disrupt production. mountains of data. Between March 2009 Over time, some contractors began to “Crafts guys want to be productive,” and February 2010, PER made 74,000 gravitate towards the work-sample method, says Chris Buck, president of Productivity observations open-shop crafts labour on a which splits a worker’s time into direct work, Enhancement Resources (PER) in Simpson, Gulf Coast refinery project. The study led to support work and delay.

Categories of Work Through activity analysis, productivity engineers take sampling several steps further, breaking work into multiple layers that allow for more focused study. In July, CII’s RT 252 team released a comprehensive “Guide to Activity Analysis.” The guide suggests seven prime categories of work: direct work, preparatory work, materials handling, waiting, travel, personal, and tools and equipment (see above). Each category can be broken into subcategories to add detail. To date, activity analysis has developed largely in silos in which companies have developed definition sets to meet their specific needs. Faithful + Gould, Seal Beach, Calif., established its own work-sample methodology, dubbed Time on Tools, in 2003. Dan Leng, vice-president at the cost-management consultancy, says the system breaks non-direct work into nine main categories as well as smaller subcategories. Although activity analysis appears laborious, Leng maintains that it is necessary in order to root out specific problems. Processing of permits, for example, can be broken down into many separate activities. “We break it down into type of permit, time waiting for someone to sign a permit, the signing process and so on. Eventually, you discover that a key person on the permitting process is constantly running 30 minutes late to sign a permit, for example.” The payoff for micro-level information can be significant. Leng says his system saved $1.7 million by cutting logistics delays in half on a major turnaround job at a refinery, saved $835,000 by reducing breaks to 30 minutes from 55 minutes, and saved $330,000 by reducing by 10 minutes the owner “pep talk” during all-hands meetings. “To me, it’s the most basic thing,” Leng adds. “If you have a project with 30 per cent direct work, why would you spend time and

money improving that direct work when you can try to fix the 70 per cent [not spent on task]?” Identifying issues is only the first step, notes Steve Toon, productivity engineer at Bechtel. Toon says activity analysis needs to be an ongoing process of assessing problems and applying solutions. “The thing that is not addressed with traditional work sampling is what to do with the data,” he says. “We need to identify solutions, implement those solutions and follow up with another study to either validate that those solutions addressed the issue and increased productive time or [find ways to improve].” In a typical two-day period on a Bechtel site, Toon says, he might collect 2,000 observations to serve as indicators of possible problems. He then surveys workers and foremen in the field to identify common restraints that cause delays. Armed with that data, he crafts solutions and presents them to the site manager and the project superintendent. “You’d be surprised how many times we sit down and I’ve seen [managers] have an epiphany,” he says. “Often, I come in with a set of data that validates everything they thought, but now they have the data.” Not everyone likes being watched. Mark Stofega, principal construction support engineer at Fluor, says workers think he is “checking up on them,” when, in fact, he usually seeks managementbased problems. “When you explain the process, there

are very few things you can blame on the [crafts workers] other than late starts or early breaks,” he says. “What you find are management issues—the materials aren’t there, designs aren’t there, equipment is not there. All of a sudden, the [crafts workers] see what you’re doing, and they open up.” Just as researchers hope to get better at identifying productivity issues, work is under way to develop a framework for applying effective solutions. As part of the first phase of CII’s project, the RT 252 research team is investigating the relationship between craftsperson productivity and best practices. For example, CII maintains a benchmarking and metrics database that is used to identify possible best practices. In the first of the project’s five phases, the team focused on the mechanical trades. It reported a significant relationship between improved productivity and best practices in materials management, safety, team building, front-end planning, and automation and integration. Research showed that projects that were “advanced implementers” of these practices experienced as much as a 50 per cent average productivity advantage over “weak implementer” projects. OPENMIND SPRING 2012

Don’t Blame the Workers

“CRaftS wORkERS kNOw hOw tO DO thEIR jObS bEttER thaN aNyONE. I tRy tO SEt thEM uP fOR SuCCESS RathER thaN tRy tO avOID faIluRE.” – Chris Heger, Turner Construction project superintendent The team’s analysis of electrical crafts produced similar results, indicating that the more productive projects are associated with a high level of safety-program implementation, automation and integration of information systems, materials management systems, team building and constructibility. The practices are proven, and CII acknowledges that many have been known for years, such as short interval planning and work packaging. Still, the team says those solutions are rarely “implemented completely or consistently from project to project.”

Index of Best PractIces Instead of supplying a laundry list of practices, the team is developing an index of best practices with weighted scores based on the relative influence of each on improving productivity. Dubbed the Best Productivity Practice Implementation Index, the system is designed to help determine which practices or combinations of practices might help drive productivity. General contractors may find there are limits to productivity gains for contractors, owners and others that use subcontractors. The common approach among productivity experts is for each party to focus on its own part of the equation. Rather than using activity analysis to identify issues for managers, Chris Heger, a Turner Construction project superintendent, tries to remove barriers for subcontractors. Some strategies are basic, such as keeping materials on wheels for easy transport. Other strategies require extra effort. At a lab project site at which portable toilets weren’t allowed in clean spaces, a portable toilet was placed on three-story staging outside the facility to reduce travel time. “Those are the types of things we can do to help [crafts workers] spend more time on task,” he says. A steel erector working at Manhattan’s One World Trade Center is taking a similar approach. DCM Erectors, New York City, has arranged for a Subway sandwich shop to operate from a platform that is jacked to rise with the skyscraper’s steel frame, thus helping the ironworkers avoid a trip of as much as 30 minutes down to the street to find lunch. Heger’s primary tool is tracking performance through the development of detailed work “breakdown structures” for subcontractors. The team focuses on the most predictable aspects of the job and breaks tasks into short intervals to help stay on top of issues. If performance begins to slip, the team can quickly investigate and work toward solutions. 52

OPENMIND SPRING 2012

Although it is a team approach, Heger says crafts workers can be left to themselves to improve their productivity. “Crafts workers know how to do their jobs better than anyone. I try to set them up for success rather than try to avoid failure.” Just as with safety, top-down pressure, rather than bottom-up initiatives, may be needed to force change, says Paul Goodrum, associate professor of civil engineering at the University of Kentucky and a member of RT 252. “In the end, it will take some leadership from government agencies to push this forward,” he says. “We’ll begin to see good breakthroughs on productivity once we get some reliable measures on it. I don’t think [the challenge] is as difficult as people think.” Originally published in the Engineering News-Record (ENR.com) June 1, 2011 and reprinted with permission.

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NUMBERS

BY THE

New housing price index

Construction price index

($ thousands)

for apartment buildings in: Calgary

Edmonton

% change Calgary

% change Edmonton

2007

156.8

152.0

19.2

17.8

2008

174.4

168.6

11.2

10.9

2009

160.7

148.4

-7.9

-12.0

2010

156.6

150.9

-2.6

1.7

2011

160.1

156.1

2.2

3.3

3,742.9

3,851.7

4,470.7

16.1

19.4

Non-residential:

1,911.5

2,311.6

2,376.9

2.8

24.3

Alberta total:

5,654.4

6,163.4

6,847.6

11.1

21.1

Bank Benefit Plan: 2006

58,264,783

2007

69,743,223

2008

77,595,931

2009

74,140,547

2010

79,583,013

2011

87,908,004

100.0

2008

100.6

101.0

2009

93.9

89.7

2010

95.6

89.0

2011

95.5

89.9

Nov-Dec 2011 Dec 10-Dec 11

Residential:

Total manhours worked under the Merit Hour

100.0

in Alberta ($ millions)

% change

Dec. 2010 Nov. 2011 Dec. 2011

2007

building permits

â&#x20AC;&#x201C; Seasonally Adjusted

Edmonton:

Yearly value of all

Value of building permits (monthly) in Alberta (in $ millions)

Calgary:

2007

15,729.7

2008

13,141.2

2009

11,276.9

2010

11,425.4

2011

12,716.9

Capital expenditures for construction in Alberta (in $ millions):

2008 65,155.2

2009 44,707.2

2010 61,026.3

2011P 69,736.8

2012 (est.) 78,072.4

Average number of employees covered under the

Merit Hour Bank Benefit Plan: 2006

2007

2008

2009

2010

2011

28,291

33,875

38,314

38,187

39,371

43,089

(Source: Merit Contractors Association)

Wholesale merchantsâ&#x20AC;&#x2122; sales by industry unadjusted ($ millions) across Canada 2007

2008

2009

2010

2011

Building material and supplies

76,635.5

77,235.9

66,932.4 73,935.3

78,723.3

Electrical, plumbing, heating and air-conditioning equipment and supplies

23,295.1

24,163.6

21,783.2

23,245.9

25,161.1

Metal service centres

17,619.4

18,972.7

13,163.1

15,022.7

17,750.4

Lumber, millwork, hardware and other building supplies

35,721.0

34,099.6

31,986.1

35,666.7

35,811.8

Machinery and equipment 54

OPENMIND SPRING 2012

108,813.6 115,358.6 103,460.8 110,411.2 123,235.0 (Source: Statistics Canada)

THE WAY WE WORK: no.

IT MEANS OUTWORKING THE OTHER GUY.

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