AON’s Gerry Russ, left, led a panel on industry challenges.
By Simon Blake
Construction challenges and new technologies are at the forefront as the Mechanical Contractors Association of Canada holds its annual conference in Nashville, Tennessee.
On Thursday morning, breakfast speaker Graham Sherman, co-owner of Calgary-based Toolshed Brewery, took the audience on an adventure that started when he met his future business partner as a “high-level geek” working for the military in Afghanistan to his garden shed in Calgary where he started brewing beer, to fighting the government and being mocked by his banker on the road to establishing a successful business.
The first major hurdle was learning that any new brewery in Alberta had to guarantee the production of 500,000 litres of beer per year. As a result, there were 120 breweries in B.C. and only two in Alberta at the time.
“I’d quit my job to do something illegal.” A long media and internet campaign finally forced the Alberta government to remove the minimum production quota in December 2013.
Graham Sherman told a wild tale of his experiences in starting a brewery.
But that was just the beginning of Sherman’s troubles. His banker thought starting a brewery was an “adorable” idea and wouldn’t loan money. Nor would any other bank. Through re-mortgaging homes, borrowing from friends, the partners finally raised enough money to rent a building and buy equipment – and were left with no operating capital and all borrowing opportunities exhausted. They resorted to selling memberships at $5,000 each with a promise of free beer for life. It wasn’t easy but they sold three in the first month, eight in the second – just enough to keep going. But it eventually worked out and the Tool Shed brand can now be found across Western Canada.
The company soon found it had a lot of competitors, but rather than fight them, they bought more beer canning equipment and offered that service to competitors to help them grow. “We’re not competing for a piece of the pie. We’re trying to build a bakery to make more pies,” he said.
It’s all about getting paid!
If building a brewery was difficult, it pales compared to some of the issues voiced by mechanical contractors at the Contractor Challenge Panel Discussion that followed. Led by Gerry Russ of AON, he noted that slim margins and difficulties in getting paid continue to be major challenges. There are a record number of disputes – Ontario alone has been averaging $1.6 billion a year in construction liens for the past three years.
Wolseley’s Kevin Fullan, left, received the Associates Council Doug Crawford Memorial Award from council chairman Mike Miller of Taco.
Many projects are not bonded, and even if it is bonded the contractor may have difficulty getting the bond agreement if they need to make a claim. Russ noted that contractors need to be more diligent about obtaining documentation ahead of time rather than trying to get it when there’s a dispute. “Somewhere in the process, you have to figure out how you are going to get paid if there’s an issue.”
Risk is being downloaded to sub-trades. Indemnification agreements are getting broader. When there’s an incident caused by the general contractor, the sub-trades’ insurance won’t cover it because they didn’t cause it.
Choosing the wrong design-build partner can be a disaster. Changing government regulations and procurement practices are causing difficulties.
There are new foreign competitors from the UK and Spain that are coming into the Canadian market as construction slows in their home countries. And the list goes on and on.
AON has been conducting a challenges survey – Russ urged contractors to participate – to create a database to help fight some of these issues. “The more we dig, the more we dislike what we are hearing,” he added.
Or as one contractor said, “We’ve been in business 85 years. but we are always just one contract away from closing our doors.”
“The business you’re in is making a margin. Never be ashamed to make a proper margin,” said Russ.
There are no easy solutions. MCAC has been working on these issues for years and continues to do so, participants heard.
MCA-BC’s Dale Miller, right, gets a lesson in mixed reality at the UA demonstration.
“Things have slowed down significantly,” remarked Bob Collins of BuildForce Canada as he gave his economic forecast for the non-residential sector. Much of that reflects the winding down of mega projects in some parts of the country, particularly in the West and Newfoundland. However, the industrial, commercial and institutional (ICI) sector remains steady if not busy in much of the country.
And B.C. and Ontario continue to be very busy. B.C. has “a long list of projects across the board” but faces a serious manpower shortage. However, he expects the B.C. industry will pull workers from elsewhere. “You’ve seen it before; the industry gets it done.”
But one of the biggest challenges going forward is the number of highly experienced workers expected to retire in the next decade. “Many of those are supervisors and project managers – your most skilled workers.”
Every sector of the Canadian economy, not just construction, is facing the same problem, he added. And while construction as a whole will see 22 percent of its workforce retire over the next ten years, the mechanical (pipe trades and HVAC) will see only about 18 percent retire because of the industry’s training efforts. “We have been keeping an eye on what we need to do. We need to continue that,” he added.
The other challenge for contractors is adopting some of the new construction technologies like virtual reality, augmented reality and mixed reality. “We need people, but if you can’t get people, you need a better way of doing business,” Collins noted.
The United Association of Plumbers & Pipefitters Canada demonstrated some of these technologies at the event. The union is also building a training centre – the UA Innovation Centre – in Ottawa specifically to train workers on them. “We want to deliver training and deliver it to everybody,” said Larry Slaney, UA director of training. The union is currently developing ‘train the trainer’ programs.
The Innovation Centre will be able to offer new technology training anywhere in Canada that “you can plop a satellite dish,” he added.
The new technologies are designed to substantially improve productivity and “you will not be able to compete if you don’t have that in place,” said Slaney.
It hasn’t been all hard work and serious issues at the conference. The Welcome Event Wednesday evening saw gather outside for a barbecue and evening of entertainment with Australian all-girl country band Dozzi. Associates Council members, identified by their cowboy hats, handed out drink tickets to everyone. Associates council chairman Mike Miller presented the Doug Crawford Memorial Award to Wolseley’s Kevin Fullan, recognizing his work with the Council and MCAC over the years.
Next year’s MCAC annual conference will take place in Napa Valley, California. For more information, please visit www.mcac.ca.
AON’s Gerry Russ, left, led a panel on industry challenges.