April 9, 2010

FEATURE | General & trades contracting

Friction grows between general contractors and trades during recent downturn

BRIAN MARTIN

correspondent

It’s no secret that there has never been a whole lot of love lost between trade contractors and general contractors. Vancouver’s current brutally tight construction market has, however, made those relationships even more strained.

The purchasers of construction are well aware of the over capacity in the industry and they’re on the hunt for bargains, serious bargains. Every aspect of the industry is feeling the pain.

Although he feels things are bound to get better, Mike Zaine used “desperate” to describe the current state of the industry. He is the B.C. manager of Lockerbie & Hole, one of Canada’s largest and oldest mechanical contracting firms.

“We are facing desperation in the marketplace” he said. “That’s what I call it, anyway. Prices are almost out of sight. The number of bidders on projects is higher than I have ever seen in the 30 years I have been in the business.”

Zaine said contractors from other sectors of the construction industry – primarily the residential sector – are now bidding commercial jobs.

When looking at bidders lists for many jobs, Zaine said he’s never even heard of some of them. There are still pockets of activity, he said.

For example, Lockerbie & Hole has been able to find what he calls significant work in the Victoria region.

The Lower Mainland, however, remains extremely quiet and his company has been forced to lay off about 50 per cent of its workforce. Most other trade contractors are facing similar situations.

Trade contractors across the industry are dealing with general contractors, who in most cases, are acting as construction managers and subcontracting virtually all of a project. This commonly results in general contractors downloading a considerable amount of a project’s risk onto the shoulders of the trade contractors.

“The contracts we are being asked to sign are more onerous than ever,” said Zaine. Another common complaint from trade contractors is that they are being asked to work from drawings and documents that are becoming ever more incomplete.

Zaine said this is the result of a rush to get projects up and finished, as well as from design fees that aren’t adequate to get the complete job done.

He said it’s a recipe for problems.

A similar picture is painted by Rick Parliament, operations manager of Comren, a long-established Lower Mainland wall and ceiling firm. Like Lockerbie & Hole, Comren has had to lay off a considerable number of its tradespeople.

The company is encountering a market, where prices continue to be driven lower by a constantly increasing number of bidders.

Parliament said he is aware of local construction projects that have recently been awarded at prices between 20 per cent and 30 per cent below budget.

He too has discovered a large numbers of bidders migrating from the slow residential sector into the commercial sector.

“We are losing work we would normally be getting from our regular general contractors,” he said.

“They’re going with the lowest price. Some of those other trades, I don’t think have really earned the right to get the work.

For example, they might not be able to get bonding. They might not know their legal rights, so they can get walked on by the generals.

The generals are also feeling the pinch, as they have to take the lowest price to get the job.”

He said there is an increasing trend by general contractors to not approve or put much effort into change orders – a long time issue in the industry.

He’s also heard of some general contractors being overly picky and that sort of behaviour isn’t sitting well with some contractors.

These issues are moving through the trade contracting community and could come back to haunt some general contractors, when the market returns to normal and the number of trade contractors bidding on jobs drops.

Parliament guessed that it's only a small portion of generals that are involved in that type of behaviour.

“It’s not always going to be tight like this,” he said. “It is important for all to maintain a high level of courtesy and respect for our fellow tradesmen. Strong relationships are the key to long-term success.”

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