Why the Ontario Ministry of Transportation is considering new models
August 6, 2010 By Rob Bradford
Circa 1996: Roadbuilding contractors, consulting engineers and the
Ministry of Transportation spend the summer in “partnership” meetings
to plan the ambitious “Re-Engineering” transition to a new contract
delivery model that introduces end-result specifications, quality
control plans and overall greater contractor risk and responsibility.
Circa 1996: Roadbuilding contractors, consulting engineers and the Ministry of Transportation spend the summer in “partnership” meetings to plan the ambitious “Re-Engineering” transition to a new contract delivery model that introduces end-result specifications, quality control plans and overall greater contractor risk and responsibility. Consultants will become the contract administrators.
Fast forward to summer 2010: Roadbuilding contractors, consulting engineers and MTO are meeting in planning and information sessions to bring about the next evolution in contract delivery in Ontario. The Ministry is looking at new models that will move more responsibility to the contracting and engineering sectors and will again fundamentally change the face of the industry. Models of interest include design-build, Alternate Financing Proposals, minimum oversight, the Alliance model, project bundling, Construction Manager at Risk and others. Along with the new contract delivery models comes a move to performance specifications where the emphasis shifts from testing materials properties to specifying performance expectations for things such as skid resistance, rutting, and cracking. Underpinning the move to performance specifications will be the increased use of longer-term warranties.
Some will say the roadbuilding industry is preparing for another major shift. Others will suggest that current changes are merely a continuation of the odyssey begun in 1996 – that the Ministry has very skilfully groomed the contracting industry to embrace quality control and adopt business practices that would allow the final push to global contract delivery models.
The impetus for the development of new delivery models is a practical one. The Ministry is now delivering twice the amount of work they did only a few years ago and operations staff continues to be reduced. MTO can no longer directly manage all of its work under the old models. Contract administration is becoming more challenging each year and new ways are being sought to reduce the Ministry’s work in preparing projects for tendering.
The ORBA president, Paul Quinless, spoke to the impending changes in his inaugural address to members in February: “Our business is not the same business it was 10 years ago and 10 years from now it will have been transformed again. Technology has changed the way and speed at which we communicate. It has changed the way we measure and calculate quantities and satellite-assisted technology now guides our equipment, enabling us to do our jobs better.
“New contract delivery models are also bringing change. Our clients are looking for best-value solutions. We will see design/build work becoming common and public-private partnerships will play a much greater role in how our clients procure work. We will be building to performance specifications and taking on all of the new responsibilities that go along with that.
“More and more we will be working as partners rather than competitors. Warranties will become longer and more common. Growing environmental concerns will bring drastic changes to the way we manage our work.”
Design-build is where the Ministry is starting in its program to develop new contract delivery models. Three small jobs (i.e., under $1 million) have been tendered this year. They are relatively simple projects and intended to get the industry’s feet wet in bidding the risk and managing performance specifications. This fall, there will be at least three more substantial design-build projects called that will be in the $10-$20 million range. In the future one can expect to see considerably larger design-build projects tendered.
The Ministry is quick to point out that it is not looking at a complete shift to any given delivery model. Rather it is developing a “toolbox” of delivery models that can be used for appropriate projects. The industry can expect to see other new models tried out in the next few years before the Ministry’s toolbox is fully developed.
Contractors are cautiously supporting the challenge of adopting new delivery models that mean more responsibility and new risks, but also allow them to bring their expertise and innovation to the project and gives them much more control over how the work is performed, what materials are used, etc.
Warranties are an area of particular concern for contractors. New delivery models will replace the standard one-year general warranty with much longer ones. Seven-year warranties are on the street now and they could go longer in the future. Contractor concern is not so much about whether they can perform the work, but more about how warranty work will be assessed and the factors that can affect the work but that are out of the contractor’s control.
The impact of these new directions being investigated by the single, largest owner with whom ORBA members do business will be significant. Larger member companies are generally prepared to manage the risk involved with design-build and other new delivery models. Some of them have direct experience with it in other provinces or other construction sectors. One can expect, however, that there will be new competition for traditional roadbuilders from contractors who have had such experience in other construction sectors.
Smaller companies are more cautious about their future with MTO, and with good reason. The Ministry has repeatedly said it will always maintain a range of work to recognize the small and large contractors that make up the industry traditionally. It’s obvious though that a shift to larger contract packages, bundling of smaller contracts into a single tender, extended warranties and other new concepts will continue to erode the role of smaller companies in the provincial highways market. Some will find new market niches or move into more municipal and private work. Others will recognize that opportunity exists to partner with consultants and/or other contractors to enable them to succeed in the changing MTO market.
Rob Bradford is executive director of the Ontario Road Builders’ Association.
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