As 2023 begins, we are aware of the challenges owners, general contractors, and subcontractors have faced in the last few years. With issues like increasing material costs, a fragmented and unpredictable supply chain, inflationary and interest rate pressure, disconnected teams, project productivity, thinning profit margins, continuing safety concerns, and a labour shortage - now is the time for new growth and boosting productivity.
As contracting firms continue to adjust to the above problems, most companies seem to be moving ahead as strong backlogs of work are providing a level of resiliency that is not present in all segments of Canada's economy.
On-Site states that even if recession hits as some are predicting, there is a decent likelihood that the ICI and infrastructure segments would be spared the worst, going into a lower level of growth rather than a contraction.
"We have seen a bearish outlook from the general contractors that I have spoken with. There is a reduction in the number of tenders being issued, and that is a definite red flag for ICI construction that should not be ignored. In the ICI realm, infrastructure projects are needed, and must continue, although increases in interest rates may stave off subsequent phases of building out a project in lieu of a more favourable economic climate."
President of the Ontario General Contractors Assn. | Giovanni Cautillo
Even in light of red flags, there continues to be interest in Ontario for new institutional and transit infrastructure.
Major projects like the transit projects in Ontario and the building of new highways like Ontario's Highway 413, are highly unlikely to stop, despite the risk of cost inflation.
Labour and supply chain challenges continue to be the major impediments to taking on new work. The construction industry has been trying to attract new entrants into all of the possible construction roles. Existing workers are either retiring or departing from the industry and the workforce required greatly exceeds those entering the field according to Cautillo.
From the Ontario Line subway to new highways and LRT systems and, of course the Gordie Howe Bridge, Ontario is the land of the multi-billion project. The provincial government has a 10 year $61.6 billion plan to improve public transit, and recently broke ground for the Ontario Line, which will provide rapid transit between the exhibition grounds near Ontario Place and the Ontario Science Centre by 2030. The province also has several hospital projects in various stages, including the Gilgan Family Queensway Health Centre in Etobicoke and a new Mississauga hospital. Also on the docket are Highway 413, a $36 million Confederation GO Station in Hamilton, a $540 million biomanufacturing facility in Hamilton, an $800 million laboratory research centre in Deep River, northwest of Ottawa, and Nokia Canada's $340 million plan to build a research and development campus in Kanata.
Canadian Construction Association president, Mary Van Buren, shares her insights into what to have on our collective radars as the next 12 months unfold:
- Investing in infrastructure makes economic and social sense. As Canada and other countries seek to curb inflation, there will be more pressure on governments to continue to invest. There are new highway and light rail developments, climate resilience retrofits, and vital maintenance projects underway as part of the nation's growth plan.
- The federal government’s 2021 invitation to consult on Canada’s National Infrastructure Assessment was highly welcomed by the Canadian Construction Association (CCA) and our industry. We jumped on the opportunity to provide a national vision for infrastructure resilience, recommending a strategy that would identify needs and priorities based on independent expert advice. The consultations appeared to be a step in the right direction yet little concrete action has taken place since.
- Canada’s reputation as a trading nation is in steep decline. In just 10 years, the country has fallen from 10th position to 32nd in terms of its trade transportation infrastructure. The 2022 Federal Budget made some modest investments to improve supply chain infrastructure and support the existing National Trade Corridors Fund, but more is needed for Canada to remain globally competitive, expand into new and emerging markets, attract investors, and boost employment.
The industry has recommended a path forward, identifying and investing in Canada’s key trade gateways and corridors across the country that will link resources to industry, people to jobs, and products to market. It’s time to show that Canada can deliver the goods through a strategic trade infrastructure program.
- Canada is facing its most severe labour shortage in over 50 years. The situation is especially acute for the construction sector and its 81,000 open yet unfilled jobs. Immigration and temporary foreign labour can help alleviate the choke points, but to get there we need to modernize Canada's immigration policy.
- After years of relegating skilled trades to a career of last resort, governments and educational institutions are reinvested in promoting these careers. The projected demand for skilled workers is far outweighing the number of people who are choosing to pursue a career in the trades.
- Developers are being forced to rethink their project plans. Rising interest rates, taxes and debt financing are particular concerns, delaying or slowing down projects. Availability of bonding and insurance may also tighten. Contractors will continue to face unpredictability in supply availability and costing. It will be important to influence and monitor policies to secure a more resilient and green supply chain.
- Green building has taken a strong step forward. Over 120 countries, including Canada, are setting targets to limit emissions and decarbonize economies. Canada's Green Building Strategy is looking to the Canadian construction sector to make a real impact on annual carbon dioxide emissions. This requires mobilization of both private and public sectors, and all levels of government. Developing a buy clean policy, incenting businesses, mandating change through building code amendments and including climate resilience in the project scope at the tender process.
- Increased use of technology is becoming essential. Some companies are looking at robotics and new technologies, like exoskeletons and drones, as tools to increase productivity, growth and safety. As more technology is adopted in the industry, new types of jobs will be added within the sector and will attract new talent.
- The value of involving contractors earlier in the project is gaining steam. Owners are recognizing that early engagement and collaboration can produce a more informed project plan, resulting in better pricing for risk and potentially identifying more efficient and effective ways of delivering projects. Canada's current procurement system needs to be updated to support fair competition, long-term value and sustainability over low-cost bid, and shared risk. Too often contractors take on the majority risk of project costs and delays due to the shortage of workers, materials and supply chain disruptions.
See DataBid Blog titled - Canadian Construction Industry Outlook for 2023