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Most people say that after a year like 2009, the only place to go in 2010 is up. Provided that publicly-funded project promises and the magic of federal stimulus come through, that very well could be the case. But a delay in projects and a forthcoming skilled labour shortage are bumps in the road that any journey “up” will first have to surpass.

Keith Sashaw, president of the Vancouver Regional Construction Association looks back on 2009 as a harsh year for the industry, but sees light ahead in 2010.

“It was probably one of the most challenging years in a decade and a half, characterized by a sharp and sudden contraction in the last quarter of 2008. Since then we’ve been running with 50 percent of permits issued in 2009 as compared to the year before.”

Contraction in construction activity and a decline in employment numbers resulted in stiffer competition among contractors – jobs that would have drawn two or three companies to the bid in 2007 now have 15 or 16 contenders.

“Profit margins have reduced significantly in 2009 as well,” says Sashaw, “as contractors are doing their best to keep people employed.”

Still, he says the industry is feeling an increasing sense of optimism, beginning with an anticipated “flurry of activity” associated with the Olympics when $200 million worth of work on temporary facilities was up for grabs. Also cause for hope, he says, are signs of life in the residential sector (though a recovery in highrises is probably far off) and stimulus dollars beginning to trickle in, though commercial activity is expected to see a much stronger rebound in 2011 and 2012.

“We definitely feel BC is past the worst of it, if not at the bottom.”

Staying on top in 2010 means paying attention to the details, says Sashaw, and actively seeking out opportunities. “The concern at this point is that we are looking at tenders and scratching our heads wondering how [contractors] can possibly do projects at those prices. Contractors need to pay attention to their bottom line and can’t be giving work away. If everyone bids accordingly, we can keep the cycle going.

”Many contractors have remained focused on productivity and skills upgrading this past year, meaning they’ve either used downtime to upgrade employee skills or they’ve laid off employees that aren’t as productive. Increasing productivity is a notion that will carry into 2010, especially since BC and the industry in general is looking at a demographic labour shortage over the next few years.

“When you look at apprenticeship enrollment we seem to be maintaining, as people generally recognize that both construction and the economy are cyclical. Yet, the average age of the workforce in construction is 42 or 43, and we are going to be facing severe challenges in meeting demand for their skill sets.”
Demographics in Canada are such that the population isn’t even replacing itself, never mind retiring construction workers.

Sashaw says demand for highly skilled workers can be met in two ways – importing skilled, trained workers from other regions and exploring technology solutions that replace manpower.

“Innovation in the industry will quicken as we move forward,” he says. “The industry is always looking at developing and investing in labour-saving devices.”

Bruce Sychuk, executive director for SMACNA-BC says the sheet metal industry is down 7.2 percent over last year. Though an improvement over budget predictions of a 16 percent drop, he says October’s numbers boosted an otherwise dreary outlook because of activity at the Olympic Village. Now that that work is finished, the industry will be looking at a levelling off well into 2010. At the time of writing, Local 280 had 110 journeymen on the board (of 1,000 available) and 40 apprentices unemployed out of 400.

Sychuk says projects weren’t delayed because of the Olympics, but co-ordination among an amended traffic set-up was be difficult.

“Vanoc had dedicated lanes for Olympic traffic, and the best advice for a contractor was be to share this information with the general and try to schedule deliveries between 12 and 6 a.m.”

Although there isn’t a lot to bid on now, recovery doesn’t seem that far off, says Sychuk. “The talk in the town is of recovery in late spring. The economy should stabilize and hopefully smooth out a bit.”

To move in the direction of positive change, Sychuk recommends staying focused on what contractors can influence and control; not becoming reactive to what they can’t influence; recognizing that in times like these opportunities are internal versus external; and that it is important to be pro-active.
“Basically [contractors] should stay focused on management structure and accountability, and look at employee engagement  – talk to them and look at strategies to improve performance.”

He also urges contractors to resist the temptation to lower profit margins just to keep crews employed. “Don’t drop prices because then it’s a race to the bottom,” says Sychuk. “You’ll just end up taking profit margins out of the market by going volume versus quality.”
The bright side for the sheet metal industry is the assurance brought about by successful labour negotiations that put a four-year labour agreement in place in August. “That continuity adds a bit of comfort to everyone,” says Sychuk.

Everyone is eyeing public sector projects, including commitments in the provincial budget and those earmarked for federal stimulus money, says Manley McLachlan, president of the BC Construction Association. Despite announcements about project funding, there is little evidence at this stage that those projects will be initiated in the short or long term, and this is causing the industry “to move from cautious optimism to stages of anxiety.”

“We just haven’t seen them hit the marketplace, and the longer they take to get to market, the longer it will take members of the industry to experience the benefit of those projects,” says McLachlan. “If you are a finishing trade contractor and you have an 18-month contract, you’re looking at 14 months before things get moving.”

No one is quite sure what is holding back the go-ahead on what are supposed to be “shovel-ready” projects, but McLachlan suggests it may be project owners, hesitant about what to expect economically in the coming year.

Concerns aren’t without reason. The BCCA is hearing from experienced general contractors that some have literally no work booked for 2010, while others say institutional developers are starting to re-engage, but cautiously.

“It’s about market timing for them,” says McLachlan. “They are eyeing the market for high-density housing and trying not to hit the market when it is low.”

“We are always optimistic,” says McLachlan. “We look at everything that is going into the hopper including federal and provincial commitments, budgets that are still strong, movement in the global industry, and credit slowly starting to move. Clearly we are starting down in the valley after an extra high peak, but the prediction is for a turnaround in 2010.”

In the meantime, providing hope is the public sector. “We are pleased that the provincial and federal governments have acknowledged problems in the industry. If we didn’t have that, there would be a lot more than anxiety out there.”

It’s important for contractors not to panic, says McLachlan, echoing Sashaw’s caveat against working for too little. “That’s hard to do when the water is coming through the windows, but the biggest mistake is to begin buying business. There is no point wearing the wheels off your equipment just to keep your men employed.”

In the midst of industry retirements, he recommends staying focused on training as an investment, and having a plan in place to deal with the knowledge loss that will occur when retirements occur in the workforce.

“These are the folks that have the corporate knowledge and ability to train apprentices, so contractors have to figure how knowledge transfer is going to take place.

“Information should be readily available to access,” says McLachlan. “If the pace of change outside your organization is faster than the pace inside, you have no future.”

There may not be a lot on the horizon in the immediate future, but BC may be as close to the bottom as it is going to get, says Murray Corey, executive director for the BC Wall and Ceiling Association.

“A little bit of the slowdown is compounded by the Olympics, particularly in downtown Vancouver because they systematically delayed or deferred building permits,” says Corey. “There’s a window there, because it didn’t make sense to start a project during or just before the Olympics. We would expect things will start to roll again afterwards.”

Corey says that although the commercial market came out of the boom slightly over-built, positive indicators in the residential real estate market are cause for optimism for his members.

The most important thing to think about, says Corey, is having realistic expectations about what the rebound will look like.

“People are hoping we will soon return to ‘normal.’ That won’t be at the level that it was at its peak, but it will be sustainable, steady growth, and we feel positive in the overall long term about the BC market. There is continued population growth in the Lower Mainland and on the Island. Those are positive signs in the market for our industry, so we have optimism looking forward.”

The wall and ceiling industry will feel the influence of two government initiatives in 2010: the Wood First Act and the implementation of the Harmonized Sales Tax.

Developed in support of BC’s failing forest industry, the Wood First Act mandates that all publicly-funded projects up to six storeys must use wood framing rather than steel. The BCWCA, which has spent the past several years promoting steel for its non-combustible, 100 percent dimensionally accurate, and rot-proof qualities, expects a back up in steel work.

“We are supportive of the forest industry in general, and we feel bad being pitted directly against it,” says Corey. “To some extent, the Wood First Act is competition for steel, and it definitely has an impact on the steel stud manufacturing industry in BC.”

The HST will come into effect July 1, and overall it should result in marginally lower building costs. “We will have to wait and see whether it makes a significant impact on our members, but it certainly won’t increase the cost to build. It will be a little simpler at the end of the day and compliance will be less onerous.”

When it comes to making a good go of 2010, Corey’s advice is much like the others’: “Look at how you do business, and review your practices,” he says, pointing to the value in the use of technology to do business and having the best information available for the decision-making process.
“How we do business internally and how we communicate will be critical factors for success in the future.”