Canada’s economy is driven by its resource industries. In turn, the economies of scale necessary to meet global demand for the extraction and processing of our natural resources means we need to have the capability and capacity to build mega-projects on time and on schedule. Yet, there is growing concerns about the Canadian construction industry’s ability to perform without putting large capital projects (i.e. projects costing $500 Million or more) at risk.
The perception of many project owners is that Canadian labour is too expensive, productivity in the Construction industry is too low and is eroding, there isn’t enough supply of skilled workers and that work can be done offshore for less. The result is that on massive projects like LNG Canada’s planned facility in Kitimat B.C. (estimated at $40 billion) have developed strategies to have significant portions of the plant built as modules and imported to the site and to let contracts on a fixed price basis to shift a lot of risk to the contractors.
There is certainly some validity to the perceptions, however there are many ways to mitigate the risks. Oakbridges’ strategists can help project owners improve the probability for success (on time and on budget) in the following ways:
- Work with the Project Management team during the Feasibility phase to study the Labour Market conditions in a given region and establish a mitigation plan to reduce identified real risks;
- Assist the Project Owner and EPC/M during the Definition phase in creating an Industrial and Labour Relations Strategy and choose the model of engagement that best suits local market conditions and the project needs (E.g. Open Site, Managed Open Site, Wal-to-Wall arrangements, etc.);
- Represent the Project Owners interests in negotiations for industrial instruments (Project Labour Agreements, commercial contracts, Impact Benefit Agreements, Opportunity Agreements, etc.) to ensure identified risks and expected benefits are addressed;
- Support the Project Owner, EPC/M and contractors during Construction to develop and maintain positive relationships with important stakeholders (unions, the community, special interest groups) and to manage disputes as they arise in an expedient, cost effective way; and
- Educate key members of the Project Management team so they are fully aware of the available industrial and labour options and are better equipped to make decisions that will keep the project on track.
Early planning and preparation is the key. Labour can represent as much as 40% of the capital spend on a major project. Through early planning and preparation at the front-end, and with the right approach, labour costs can be reduced by as much as 25% from the estimates that assume “traditional” construction models and approaches. That translates to a potential 10% savings; and 10% on a Billion Dollar project is a lot of money.