January 25, 2012

Ontario General Contractors Association reacts to Construction Sector Council profile

KELLY LAPOINTE

staff writer
Link to originating article

The Construction Sector Council’s (CSC) profile about Ontario general contractors reconfirms what members have been saying, says the OGCA.

“It identifies a couple of major trends that are important to the industry,” said David Frame, Director of Government Relations, Ontario General Contractors Association (OGCA), pointing to the ongoing concern of skilled trades availability and the industry’s shift in focus on where work comes from. “The bottom line is there is nothing in this report that surprised us.”

The CSC profile, Understanding Contractor Capacity — Ontario general contractors profile, highlighted that more than 6,400 construction establishments identify themselves as general contractors in Ontario. More than 5,000 are small owner/operators or branches of larger businesses.

Total Ontario revenues are $20 billion and almost two-thirds of sales ($12 billion) are concentrated in 1,300 establishments. Just over 120 large firms with more than $20 million in sales provide at least 25 per cent of the total sales.

Frame noted that since 2008 there has been a project delivery shift and government projects have been important and will continue to be. In Ontario, Alternative Financing and Procurement (AFP) is becoming more important to the industry and more common.

“What we’ve seen is pressure on the industry,” he said. “A number of the larger contractors have been in a position and have structured their business to be able to bid on AFPs, participate in AFPs.”

He said many of the medium-sized contractors are not large enough and don’t have the financial resources to make such a shift. If they do get involved, they often have to do so as a sub-contractor.

“This is seen as a permanent shift that is happening in the industry and it’s going to affect general contractors going forward,” said Frame.

“Public sector opportunities through public-private procurement (or AFP in Ontario) were mentioned as a key process for new work in several sectors. Survey results show that these opportunities go to the biggest firms with access to capital,” reads the profile.

The shift to AFPs creates some opportunity for the medium-sized contractor, said Frame. As larger companies are focused on government work, it allows the medium-sized companies to fill the gap because there might be more privately funded opportunities.

“One of the great strengths of our industry and general contractors is that they structure themselves to change and adapt as the demands change,” he said.

The profile said firms attributed the emergence of structural changes to several factors, including owner preferences and competition.

The most often mentioned factor impacting a firm’s capacity to bid was the availability of skilled trades and this was mentioned more than 30 times by the 50 respondents in the profile report.

Thirteen other factors were identified and included pre-qualification requirements and availability of qualified supervisors.

The top three factors impacting capacity to build were availability of skilled trades, government regulations and price variability for key materials, supplies.

The profile said that by 2018 Ontario markets will grow by 30 per cent from their peak in 2007.

Frame said the industry does not currently have the capacity to meet the demand and will be made worse by the massive predicted retirements over the next five to 10 years.

“It’s not just the shortage, but the fact that there’s going to be a lot of retirements in the industry over the next five or 10 years and the need not to just ramp up for growth, but to replace people who are leaving the industry,” he said.

“The skilled trades is a major ongoing focus of the industry to make sure that we’re promoting the trades, that the training resources are there and that we have the people.”