Canada bets big on infrastructure

After almost two years of political fanfare orchestrated by the Canadian federal government, the much-awaited Canada Infrastructure Bank (CIB) finally announced its first ever investment this summer. CIB will be spending $1.28 billion on a major expansion of the Réseau express métropolitain (REM) in Montreal.

CIB, which has a mandate to spend $35 billion over 11 years, was conceived to address Canada’s aging infrastructure.

Since 2016 the federal government has continued to spend a budget of $180 billion over the course of 12 years on its main priorities of public transit, social infrastructure (hospitals and schools, for example), and transportation. Funding will be sourced from the federal government and the private sector.

According to Ehren Cory, CEO of Infrastructure Ontario, Canada’s infrastructure is at least four decades behind where it should be. Today modernizing infrastructure has become a government priority that even transcends political party affiliation.

Recently some of our metal manufacturing and forging companies have faced challenges created by U.S. trade protectionism, specifically the 25 per cent tariff on steel. However, contrary to what many believe, our industries’ successes do not solely depend on U.S. buyers’ purchasing decisions.

Opportunities abound within Canadian borders that many can exploit by being tactical and strategic.

In recent decades Canada’s provincial governments have adopted an Alternative Financing and Procurement (AFP) model that leverages partnerships with the private sector to upgrade aging infrastructure. This model has garnered the attention of numerous international jurisdictions. Concession risks are transferred to the private sector where there are incentives to generate higher profits and where stringent rules to increase efficiencies are in effect to avoid cost overruns and project delays.

Opportunities in infrastructure

The magnitude of Canada’s infrastructure pipeline projects for 2018 and beyond is vast Ontario is set to spend $79.5 billion on 39 projects; Quebec will spend $36.9 billion on 18 projects; and B.C. and Alberta plan to spend $43.7 billion on 24 projects combined. Many other provinces have infrastructure projects in their pipelines as well.

You can participate in these opportunities in many ways.

• Find out about the specific government projects within your geographic target markets. Many of these projects are related to transit, transportation, energy, water, and health-care facilities, all of which use many machined and fabricated metal products.
• Determine which members of the consortium will participate in the tendering of these projects and inquire about the consortium’s criteria for subcontractors. Most large engineering firms value work quality, service level, price, and overall value added to the project. Register as a potential supplier with these contractors to participate in the next tender.
• Keep abreast of new industry developments. Some metal machine shops and fabricators are predominantly focused on real estate construction, aerospace, and resource-based industries, and infrastructure traditionally has resided outside of their usual scope.
• Be forward-looking. Upcoming projects should be constantly on a sales team’s radar. Potential opportunities can be uncovered by attending related events and reading infrastructure industry magazines.
• Stay close to decision makers. The P3 2018 Conference, the annual conference of the Canadian Council for Public-Private Partnership, will be held November 5-6 in Toronto, will be attended by roughly 1,200 top influencers in the global infrastructure industry. This year the P3 Conference opened with a keynote address from François-Philippe Champagne, Canada’s minister of infrastructure and communities, signalling the importance of infrastructure in federal government’s mandate. Conference participants also had an opportunity to acquire knowledge and network with decision makers in the industry.

Winning a tender is only the first of many steps. To succeed following a winning bid, you can keep on the right track in several ways:

1. Focus on quality.Global sourcing has become a disingenuous word used by most industries.

Masquerading as “value for money,” this sourcing is most general contractors’ way of curtailing costs by purchasing cheap supplies from low-cost overseas suppliers. While this is a legitimate route to maintaining healthy profit margins, additional scrutiny is needed to guarantee that the quality is comparable to Canadian-made products. There are better ways to compete in the supply chain than to inevitably engage in a race to the bottom.

2. Invest in human capital. Better-than-industry compensation is one of the best ways to attract talent. However, the ideal technical staff may already be in the shop need only some training to augment their skills.

3. Ensure on-time delivery. Investing in technologies that will elevate your company’s ability to deliver projects on time is crucial. Implement mission-critical software that will improve real-time connectivity and project tracking. Suppliers’ failure to deliver as expected creates a domino effect and is one of the major causes of cost overruns and project delays.

4. Focus on efficiencies. This can be achieved by digitizing the production process to reduce costs, streamlining production activities, and improving quality of output and overall productivity. Some government grants are available to small and midsized businesses to implement these technologies. This is one of the most clear-cut means of ensuring that product pricing is in line with the contractor’s procurement costs.

Alma Johns is president of Bench Capital Advisory Inc., www.benchcapital.ca.