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September 17, 2012

Industry leaders looking for changes in government procurement

FILE PHOTO

Partnerships BC determined that the Surrey Memorial Hospital Redevelopment and Expansion: Emergency Department and Critical Care Tower should be delivered as a public-private partnership.

Some B.C. construction association executives have taken issue with provincial government procurement practices and what they claim is a changing mandate for Partnerships BC.

However, Sarah Clark, president and CEO of the provincial Crown corporation, disputes the assertion.

She said the mission of her agency hasn’t changed substantially since it was established in 2002.

“Partnerships BC was formed to provide advice and leadership services on procurement management to the government and its agencies,” she said.

“The core business hasn’t changed since the organization was formed, although the specifics can change from year to year, depending on the government’s particular requirements.”

Clark said the focus of the provincial government is to ensure the highest level as possible of fairness, transparency and robust competition for its procurement of major capital projects.

“Partnerships BC is a Crown agency that was structured to assist the province in achieving those goals,” she said.

“We work within the government team, at the request of government and its agencies. We have always worked that way. There have been no changes.”

Philip Hochstein, president of the Independent Contractors and Businesses Association, said there are some troublesome issues related to the B.C. government’s construction procurement.

He cited three different issues: growing mandate creep at Partnerships BC; the bundling of smaller projects into single, large projects; and a move to use design-build rather than design-bid-build model on relatively small projects such as schools.

“Partnerships BC was created to assess projects’ suitability for public-private<0x000A>partnerships (P3s),” he said.

“But, that’s grown to managing construction projects outside the P3 realm and collecting fees to do so. It raises questions about the objectivity of their analysis of projects because they have an incentive to recommend that they themselves manage the projects.”

He added that the services provided by Partnerships BC amount to project management.

“So a government-subsidized entity is in direct competition with the private sector providing the same service,” Hochstein said.

He said an example of mandate creep is Partnerships BC’s taking on a project management role in the Lakes District Hospital in Burns Lake, after recommending a design-build procurement model for the facility.

Vancouver Island Construction Association (VICA) CEO Greg Baynton agreed that the mandate of Partnerships BC has shifted.

“Partnerships BC definitely has a role to play in public procurement,” he said.

“But, it’s been rolling out project delivery services in direct competition with the private sector. There are many private companies that can provide that service.”

Baynton said his association met with the Ministry of Finance in April and June 2012 and spoke to the deputy minister and representatives of the Treasury Board about the matter.

“They acknowledged the possibility of a conflict of interest on the part of Partnerships BC,” Baynton said.

“They are looking into the matter as we speak.”

Clark defended her agency’s role.

“Partnerships BC works alongside, and collaboratively with, many private sector companies that are part of the government (or owner’s) team in project planning, delivery and oversight. Partnerships BC works on approximately 20 per cent of provincial capital projects in B.C. and with a staff of approximately 40 people, and therefore, has a comparatively small role in construction projects in B.C. ,” she said.

“There is endless opportunity for the private sector to participate and deliver on capital projects in B.C.”

Hochstein said bundling, or pooling smaller projects into one large project to be managed as a single P3, provides uncertain financial advantages to the taxpayer.

“But, it cuts out mid-sized companies from doing the work because they don’t have the financing and expertise to bid on bundled projects,” he said.

“And because many of the large companies with the financing and expertise to successfully bid on these now-major projects are based outside of B.C., bundling cuts local companies out of the work.”

Hochstein cited the recent example of renovations to 13 single-room occupancy (SRO) hotels in Vancouver that went out as a single P3 in February.

Manley McLachlan, president and CEO of the B.C. Construction Association, doesn’t support bundling, either.

“Although there are benefits in the form of efficiencies, bundling has a direct impact on local industry’s ability to take on a project,” he said.

“We need to be sure we maintain local construction industry capacity.”

Finally, Hochstein said, smaller projects, such as new schools, are being encouraged by Treasury Board to be built on the design-build model.

He cited the recent example of Oak Bay High School in Oak Bay, which the school board is procuring as design-build, rather than design-bid-build.

“Design-build means companies have to invest a large amount of money up-front to even bid for the work,” he said.

“It cuts out smaller operators that are still capable of projects of this size because they don’t have the financial backing to bid.”

Clark said her agency has the expertise to effectively evaluate the various procurement options and make recommendations.

“Partnerships BC is an agent of the Crown and works with government and its agencies as one of the many team members involved in conducting analysis and developing recommendations,” she said.

“It makes sense for government to use its own agency, an agency that was established to be a centre of procurement expertise, for such purposes. Partnerships BC is not a decision-making body, all decisions are made by the public sector owner.”

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