Under the Hard Hat

Tag: Contractors

  • B.C. construction labor shortage good for workers

    B.C. construction labor shortage good for workers

    A construction labor shortage in British Columbia is increasing workers’ wages, but it may also slow contractors’ ability to start new projects. Regardless, the province’s construction sector is still robust, as it has been for several years, according to the BC Construction Association (BCCA).

    Activity is high but slower

    The Spring 2024 BCCA Construction Industry Stat Pack and BCCA’s annual BC Construction Industry Survey Report (published in April) say demand for construction projects is still high in British Columbia, with $160 billion in major projects underway. That’s a hike of $3 billion in work over the past six months and a 39% increase in activity over the past five years.

    Still, it’s a lower level of activity than a year ago. In the Spring of 2023, B.C. had $221 billion in proposed construction projects—a 30% decrease from the $160 billion in current construction activity.

    The shortage of skilled construction workers may be partly responsible for that gap, but other factors, including late payments for contractors and even delayed return of project liens, also seem to be squeezing growth.

    Wages up and increasing

    Wages are increasing for B.C. construction workers due to a labor shortage, but not as much as they should be, given mandated minimum wage pay rates. Construction wages continue to trend up as they have for years and may continue in that direction for a while.

    About three-quarters (77%) of employers reported increasing wages in the past year. This ongoing trend has been a boon for workers, with the average annual wage in the province’s construction sector jumping 21% over the past five years to $74,853. Even so, the average entry-level wage for construction workers is still only $22.11/hour. However, the average wage of tradespeople with a decade or more of experience is $42.71/hour, according to the survey.

    While that wage might seem rosy to some in various parts of the continental U.S. and Canada, it’s not a great wage, especially in B.C. The province’s minimum wage, while seemingly high compared to minimum wages in many U.S. states, is currently $17.40 per hour. That means the physically demanding and often emotionally straining work of construction is being remunerated at just 25% above B.C.’s minimum wage.

    Even so, it’s a movement in the right direction for workers struggling to stay afloat due to low wages.

    In recent years, Canada has been instituting increases in its minimum wage. So, it’s possible that increases in starting hourly rates for construction workers are moving up in relation to wages generally—i.e., wages are adjusting to a new low threshold mandated by law and might continue to adjust as the construction labor market tightens due to increasing wages and competition for workers in other sectors.

    According to some sources, some construction workers in the U.S. make as little as $24,000 annually.

    Prompt payment laws needed

    While more than nine of ten B.C. construction employers are small businesses with less than 20 employees, industry players are messing with their money and likely impeding growth in construction.

    Most contractors surveyed reported being paid late for completed work, and three-quarters said they hadn’t gotten their 10% lien holdbacks promptly. Disturbingly, 62% of contractors reported not being paid on at least one occasion for work completed in the past year.

    These payment problems are resulting in contract disputes. Overall, more than a third of construction companies—17% of small, 36% of medium-sized, and 42% of large companies—said they’d been in a contract dispute in the past year.

    B.C.’s small and medium-sized construction companies are worried about permitting and inspection timelines and the lack of prompt payment legislation.

    The provincial government continues to fail to deliver on prompt payment legislation, BCCA said in a press release. “As BC’s contractors wait months for payment, they experience significant financial risk and take on the increased cost of debt, which can put them in danger of bankruptcy. They are put in the position of “financing” construction projects, including the housing BC desperately needs.”

    “We have asked the Eby government time and time again to respect the hard-working people and small business owners of BC’s construction industry by ending payment uncertainty through Prompt Payment Legislation,” states Chris Atchison, BCCA President.

    The construction industry still projects a deficit of 6,600 skilled workers by 2033, but that shortage has improved over the past five years. A decade ago, a projected shortfall of 26,100 workers was estimated for 2023.

    Despite 9% growth in the number of B.C. construction companies in the past five years (28,014), the number of tradespeople in the industry has dropped by 7% (167,300). The average company size shrunk by 15% over the previous five years to an average of 5.97 skilled trade workers, the BCCA report states.

  • Ontario contractors expect robust growth in 2024

    Ontario contractors expect robust growth in 2024

    The Ontario Construction Secretariat (OCS) 2024 Contractor Survey found plenty of ongoing and future projects have Ontario contractors hopeful for a busy year ahead. 

    While increasing materials and labor costs are still a big concern for Ontario contractors, about two-thirds of those surveyed expect positive business growth this year.

    “There is a massive project pipeline in Ontario that is fueling positivity,” OCS chief executive officer Robert Bronk said. “Power generation, transit, and healthcare facilities are leading the list of projects currently under construction or slated for construction over the next few years in every region of the province.”

    Sixty-five percent of respondents surveyed said hiring workers will be more challenging this year. About half of them (48%) said their biggest worry this year will be getting skilled workers on the job.

    Nonetheless, 34% of those surveyed expect their workforce to grow in 2024.

    “Despite a mostly positive outlook for ICI construction in 2024, the rising costs we are all facing remain a concern,” Bronk said. “But it is encouraging that despite this worry, there are still strong expectations for growth and expansion over the coming year, with many contractors implementing new technologies to help create efficiencies and support business success.”

    More than eight in ten (83%) of respondents expect that adopting new tech will help them improve their businesses in the future. About 44% of respondents said they use BIM, and 43% use job site data collection apps.

  • 7 money saving tips for contractors

    7 money saving tips for contractors

    Profits in the construction industry can be thin, which means taking steps to maximize profit is important. Avoiding lags in activity, choosing local suppliers, assessing materials usage and storage, and streamlining processes with technology are easy ways contractors can cut costs and save money.

    Why contractors need more savings

    Profit margins in the construction sector are thin, meaning every penny a contractor spends should be accounted for. If a contractor fairly critiques a company’s operations, there will likely be many areas where the company can cut back on spending. 

    Evaluating and upgrading areas like materials suppliers, team communications, equipment rentals, scheduling projects, and the company safety program are just a few places where contractors can find savings.

    7 tips for contractors to save

    1. Schedule the job to avoid lags in activity

    A penny saved is a penny earned. A job that proceeds fast—or at least on schedule—will save on labor and equipment costs. Subcontractors should be scheduled so that there is no break in activity in the build, so they logically follow one another.

    That said, staying on track is also a matter of subcontractors adhering to the schedule to ensure a streamlined schedule—and that job is up to the general contractor, owner, or manager. 

    2. Broaden your supplier list—and choose local when possible

    Supply chain “issues” that have caused wild fluctuations in materials and shipping costs (sometimes from month to month) are avoidable to some degree. Local and regional suppliers may be less affected by international supply chain issues, meaning you may be able to avoid price gauging by shopping locally.

    Working with more suppliers also allows a buyer to negotiate better prices and take advantage of deals due to oversupply.

    Pro tip: To avoid sky-high prices, negotiate fixed prices for materials months ahead of the project to support better profits.

    3. Institute a better safety program

    Paying closer attention to safety is an easy way to save your company money. 

    Attentiveness to safety means fewer workplace incidents and accidents, less downtime, fewer fines, and on-time project completion.

    If you lack the means to improve your safety program on your own, safety consultants and an enhanced construction business management platform might help. 

    4. Document and issue change orders to avoid scope creep

    Scope creep is when a project’s requirements tend to increase over its lifecycle, and it’s an easy way to rack up extra costs. Managing scope creep boils down to controlling changes through a change control process.

    Here are a few ways to manage scope creep and avoid additional costs:

    • Monitoring the project’s status and baseline scope
    • Comparing actual work performance measurements with the baseline scope
    • Determining the cause and extent of the changes noted in your comparison
    • Decide on the appropriate course of action for changes (i.e., is corrective or preventive action needed)
    • Manage change requests and recommended actions

    5. Assess materials usage and storage

    Keeping track of material use and storage is critical to cutting back on unnecessary spending. Take inventory of your materials, how much you’re using, and what it’s costing you in time or space to store them. 

    6. Evaluate heavy equipment use—and use it more effectively

    Expensive equipment sitting idle at a job site throws money down the toilet. Depending upon the amount of use a company may have for a piece of equipment, leasing (instead of renting) or buying it might be considered. But, a company needs to know how much it uses equipment and how effectively it does so.

    7. Streamline document management with technology

    End-to-end construction software offers many benefits for contractors, including centralizing email and communications and simplifying document sharing, safety protocols, financials, tracking employee hours, and every other task a contractor needs to manage.

    A central platform handling all business management tasks reduces employee error and labor time.

  • Price escalation clauses protect contractors and homeowners

    Price escalation clauses protect contractors and homeowners

    The impacts of the recent pandemic linger for many companies in volatile materials prices. Costs for lumber and other construction materials—in addition to costs for shipping—can fluctuate wildly from month to month. Price escalation clauses protect contractors from increasing job costs. 

    Competing needs in construction bedevil completion

    Contractors work on deadlines, and getting off course due to material or labor shortages has become a recurrent issue due to post-pandemic impacts on the supply chain. These types of problems can mean big trouble for a project’s progress and a contractor’s profitability—they can even result in a contractor filing for bankruptcy due to excessive losses resulting from unplanned surges in materials costs.

    By sharing the burden of unexpected cost increases with project owners, contractors can better understand such price fluctuations and ensure timely project completion.

    The problem: Many owners want all possible risks absorbed by consulting teams and contractors and often insist on fixed-price contracts that don’t have labor or material price escalation clauses. 

    While this sounds like a good idea in theory, it can often backfire on owners. When a contractor is forced to absorb costs it can’t afford, the contractor might be forced to cut corners or, worse, abandon the project.

    Still, contractors need to be able to control their costs even with price fluctuations. Ignoring this could end up being a big hassle for the owner and contractor, resulting in work stoppages and disputes, abandoned projects, bankruptcy, or lengthy and costly litigation.

    Both parties want a project that’s well-constructed and completed on time, but they need to find a middle ground to do it. That’s where price escalation clauses come into the picture. 

    How price escalation clauses help projects

    Owners want to mitigate risks when contracting a project, and in most cases, the solution is to have a contractor absorb unexpected costs. However, even if the contractor agrees to this, it isn’t a practical approach. 

    The reason: While some contractors typically want the burden of escalated costs placed on owners, that’s not realistic, either. 

    Instead, a collaborative approach must be taken to tackle this problem.

    The solution: A price escalation clause.

    While the benefits of a price escalation clause for the contractor are obvious, they can actually be beneficial for the owner, too. They serve to mitigate the risk of disputes down the road and, in turn, preserve amicable relationships between all parties involved.

    Price escalation clauses should include the following:

    • Material and labor that apply to the clause
    • A price index to quantify the escalation
    • Date, quantity, and value subject to adjustment
    • The method of price adjustment, meaning how the price index will apply to escalate the base price, including thresholds
    • Stipulations on which parties will accept risk of an increase

    If there is a seemingly fair allocation of risk, an owner may be more apt to accept a price escalation clause. So in some cases, a contractor or consultant team might want to share potential cost risks with the owner. They can also give the owner the benefit of getting a break on price costs if material prices fall below a certain threshold.

    Bottom line

    Creating a successful construction project that’s delivered on time is, in part, a question of managing many moving parts and moving targets. It’s also a matter of clear communication to ensure work is done properly and safely. 

    That’s why it’s important for all parties involved in a project to work together to ensure prices don’t torpedo the build. Price escalation clauses can help avoid negative outcomes for everyone involved with the project.