On April 21st, both the Federal and Ontario governments announced their 2015 budgets. Depending on perspective, the new budgets are steps towards positive change for contractors in Canada, particularly in Ontario.
The Federal government continues its support of infrastructure spending, committing an average of $5.35 billion per year under the New Building Canada Plan. A new fund will be created to provide PPP Canada Inc with $750 million over 2 years starting in 2017. In 2018, $1 billion per year will be provided for a new Public Transit Fund under alternative financing plans that include P3’s. All of this is in addition to the Federal Government’s fall announcement that $5.8 billion will be allocated over the next 6 years for infrastructure renewal and investment, as well as on-reserve schools across Canada.
The Ontario government is interested in infrastructure more than ever before as they look toward “the biggest infrastructure build in Ontario’s history”(Charles Sousa, Ontario’s Finance Minister). For 2015/2016 alone, $11.9 billion has been allocated for core infrastructure; water, roads, bridges, public transit, hospitals, and schools. Furthermore, the Ontario Municipal Partners Fund has been allocated $505 million in 2016 for small infrastructure rehabilitation projects, with emphasis in Northern Ontario. Transit and transportation projects, however, are the major focus with an additional $2.5 billion committed, totalling $31.5 billion over the next 10 years; $16 billion of which will be earmarked for the Greater Toronto and Hamilton area.
What does this mean for brokers? First, opportunity, especially for brokers in Ontario. Secondly, education. Brokers will better serve this segment of the market if equipped with the right knowledge. They will need to understand the ever-increasing complexity of contractor’s surety and insurance needs. As project delivery methods continue to evolve and more risk is downloaded from owners to contractors, brokers will truly need to understand the changing landscape.
Will the trend of large projects and “project bundling” continue? Will more large foreign construction companies be attracted to Canada, pushing out small regional players? How will alternative financing plans, such as P3’s, effect the majority of Canadian construction companies? How much scale will Canadian companies require to compete? What are the risks, and are they too great to justify involvement? These are just some of the questions.
More money being dedicated to new and existing infrastructure is good for Canada and means opportunity for contractors. Brokers need to prepare their clients by offering knowledge on all associated risks including contractual risks. For contractors, quality of people, strong training programs & internal processes, and business discipline will be paramount.