sitemap

Context

The construction industry has been a major force in the development of Canada’s cities and industrial facilities. The traditional relationship between technical consultants/ designers such as Dillon and contractors has been close … we design for an owner; they retain a contractor to build; we represent the owner during construction to ensure the owner receives what was designed. This tradition goes back hundreds of years. But new models of project delivery have emerged recently to address owner demands for greater price certainty in project delivery, to tap into private sources of financing and to access private-sector specialized expertise in operations of facilities and services. These new models extend the traditional design-bid-build model to design-build and public-private partnership models. Governments are realizing they are often better at “steering, not rowing”, and are turning to private sector organizations such as the construction industry to take on the primary role in project delivery. While the phenomenon has not yet established itself as the primary delivery mechanism for public-sector capital projects and facility operations, it is growing in importance. Transportation, water and wastewater, health, security, power generation, waste management, recreation and judicial facilities are now being delivered under these new models, both for project development and operations. The construction industry has been drawn to the centre of this trend, in both its traditional role, and in a more entrepreneurial capacity as developers and operators.

Drivers

The construction industry is a barometer for the level of economic expansion in a region. Responding to business demand for new facilities, consumer demand for housing, or government demand for infrastructure, the Canadian construction industry rises and falls with investment in capital projects by these groups. And while each follows its own cycle, the lag between business, consumer and government spending has somewhat dampened that cyclical tendency and created a sustainable capacity in Canada to build, maintain and replace all facets of the built environment. Those involved in larger projects, design-build and public-private partnerships tend to be the larger firms, with balance sheets more accommodating of the increased risks associated with these newer delivery methods.

The near-term outlook for the construction industry in Canada is positive. There is some expectation that housing construction may soften with rising interest rates, but the resource sector and the backlog of infrastructure needs are expected to counter that. For individual firms, the ability to adapt to the demands of these new delivery methods will, to some extent, determine their near-term success.

Outlook

At this time, the outlook for the construction industry engaged in P3 projects is regionalized. Initial enthusiasm to engage this model in Ontario and the Atlantic provinces has waned recently, however there is indication that new governments in these jurisdictions are again prepared to utilize public-private partnerships for major provincial projects. The municipal level appears less committed. BC and Alberta are currently experiencing higher levels of activity, after lagging eastern jurisdictions for a number of years. Activity is spread between both provincial and municipal level jurisdictions. Opportunities also exist internationally, less in the direct delivery of construction activity (which is often more effectively done by local firms) than in the developer role. Canadian firms have good, exportable experience in this capacity.

Changing Client Needs

Under these newer delivery models, the traditional arms-length relationship between project designer and project constructor changes significantly. Rather than each being engaged separately by an owner, with the designer maintaining oversight on the constructor, P3 models see the designer being fully integrated into the project delivery team, and engaged by the constructor or developer. This change in relationship requires a new perspective … maintaining the integrity and public accountability that is associated with being licensed professionals, but being more creative and responsive to the constructor’s needs for buildability and schedule. At Dillon, we learned early how to adapt to these priorities, being one of the first to be involved in a major capital project delivered under a different model (Highway 407 near Toronto). And we have refined that expertise on numerous other assignments since then.