Construction Business - January/February 2023

January/February 2023 Vol. 20 No. 2
PM 40063056
JEFF MUSIALEK, SMITH BROS. & WILSON
INFRASTRUCTURE | BONDING, INSURANCE, SURETY

Inside
January/February 2023 | Vol. 20 No. 2
06 Connections
Smith Bros. & Wilson has been building in Western Canada for 125 years. With
president and co-CEO Jeff Musialek at the helm, the company has grown significantly
and is posed for further expansion.
10 Feature Project
The Alberni by Kengo Kuma luxury tower in downtown Vancouver is hard to miss
with its striking curved structure.
PUBLISHER
MANAGING EDITOR
CONTRIBUTING WRITERS
Dan Gnocato
dang@mediaedge.ca
Cheryl Mah
Matt Arruda
Ron Glen
Glen MacRae
Patrick Russell
Alexander Spraggs
Duncan Stanage
Laney Third
Industry Focus
14 Bonding, Insurance, Surety
Surety Bonding: 2023 Outlook
Impacts of Increased Costs
Take a Proactive Approach to Risks
18 Infrastructure
Water Systems: What’s at Stake?
Improving Infrastructure Investments
Exceptional Transportation Work
B.C./ALBERTA SALES
VANCOUVER OFFICE
TORONTO OFFICE
PUBLISHED BY
PRESIDENT
Kevin Brown
Dan Gnocato
Tel: 604.549.4521
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Suite 64170
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Tel: 604.549.4521
2001 Sheppard Avenue East
Suite 500
Toronto, Ontario M2J 4Z8
Tel: 416.512.8186
Departments
04 Message from the Editor
21 The Legal File
First Nations Land: Unique Opportunity
Managing Contractor Insolvency Risk
Copyright 2023
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Editor’s Note
Challenging Times
What does it take to build a successful
construction business
and ensure it thrives? The industry
is highly volatile and
full of risks with razor-thin margins. After
speaking with so many industry leaders over
the years, I’m still always impressed about
how companies are able to survive the cyclical
nature of the business. The challenges are
not for the faint of heart — just ask Smith
Bros. & Wilson.
After 125 years, the company is stronger
than ever and poised for more growth, according
to Jeff Musialek, president and co-
CEO. The company today is very different
from the one formed by the Smith brothers
in 1897 but the core values remain. With
careful succession planning, the future looks
bright for another generation.
While many companies are keeping busy,
the current market is presenting a number of
challenges, namely inflation, rising costs and
supply chain issues. In this business climate,
bonding, insurance and surety are critical
tools for owners and contractors to leverage
risk strategies to complete projects. Read
about important insights and outlooks in our
feature.
For our focus on infrastructure, we take a
look at road transportation, water systems,
and award winners of the 2023 B.C. Transportation
Association of Consulting Engineering
Companies Awards.
Finally, one of the latest and most interesting
additions to Vancouver’s skyline is the
Alberni Kengo Kuma, a 43-storey mixed use
tower that stands out for its unconventional
curved form.
Cheryl Mah
Managing Editor
BFL CANADA
Construction
and Real Estate
Insurance, risk
management, and
surety bond brokers
For more information contact:
BFL CANADA Insurance Services Inc.
1177 West Hastings Street, Suite 200
Vancouver, BC V6E 2K3
T. 778-329-4179
construction@bflcanada.ca
4
CONSTRUCTION BUSINESS January/February 2023

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Connections
INDUSTRY
PIONEER
BY CHERYL MAH
The West Vancouver Public Services & Municipal Hall
Smith Bros. & Wilson (SBW) is a pioneer in the
construction industry. At 125 years old, the company
has played a pivotal role in the development
of towns and cities across Western Canada. Under
the leadership of Jeff Musialek, president and co-
CEO, business volume has grown dramatically
in the last decade and shows no signs of slowing
down.
“I can’t think of a time where there’s been this
much work,” says Musialek. “We are very busy.”
There are many challenges and risks to sustaining
a construction company. SBW has managed to not
only succeed but endure as B.C.’s oldest construc-
tion company. Their quality work can be seen in
many historical landmarks such as the Vancouver
Post Office, Seaforth Armoury and the Vancouver
Art Gallery.
The company today is very different from the
one formed by the Smith brothers in 1897 but the
core values remain.
“We started out as a family business and
became a business of families,” says Musialek.
“We have many long-term, good employees
that have been with us for 20-30
years with low turnover. We have lasted as
long as we have because we are well-man-
6
CONSTRUCTION BUSINESS January/February 2023

Connections
aged and have strong family values, commitment
and integrity.”
Musialek has been a part of the leadership team
since 2013 when he joined the company as vice
president. He was elected to his current position
in 2019. Working in the industry, he was aware of
SBW’s reputation as a good builder.
“It wasn’t a difficult choice,” recalls Musialek
about what attracted him to the company. “SBW is
known for its integrity so I came to the partners. I
knew I could bring my experience to help. We ended
up rebuilding and modernizing all the systems
in the company. Bringing in a lot of new people and
training them. The volume increase over the period
of time I’ve been here is probably more than 10
times growth.”
Musialek grew up in Kelowna and was exposed
to construction at an early age through his father,
spending his childhood and summers at construction
sites. He graduated from the University of
Victoria with a BA in 1993 and a certificate in
Building Technology from BCIT in 1996.
Prior to joining SBW, he worked in different
capacities with Graham Construction, Dominion
Construction, and WR Shields Contracting. Over
his 30 year career, Musialek has successfully completed
projects across B.C. and the Yukon in civil,
industrial, institutional, and social infrastructure
markets.
“I love the business. I love the people,” he says.
“The business is full of challenges every day —
never a dull moment. It’s exciting and rewarding to
solve complex problems and to meet the needs of
our clients.”
Headquartered in Surrey, SBW is active in institutional,
commercial, industrial and civil construction.
Projects range from SkyTrain stations
and bridges to municipal buildings, hospitals and
schools. With a team of around 200, the company
undertakes about 30 projects at any given time. A
special projects group manages smaller contracts.
Musialek notes projects are now predominantly
located in the Lower Mainland but the company
has worked historically all over B.C., Alberta, Saskatchewan
and the Yukon. The company is known,
in particular, for their ability to deliver complex
projects with a high level of intricate concrete work.
Current projects driving volume include the
Harry Jerome Community Recreation Centre,
SkyTrain Operations and Maintenance Facility
and Dickland’s Biofuel Facility.
“The new Harry Jerome Community Centre is
an exciting project in North Vancouver. It is a large
comprehensive project with an ice rink, pool, gym
and seniors centre. We built the original in the 60s,”
says Musialek. The three year project is on track to
complete in 2025.
One of the most complex jobs undertaken by the
company was the innovative Surrey Biofuel Facility
in 2014, the first and largest of its kind in North
America. It was the company’s first major construction
management project as well as its first P3.
“The Surrey Biofuel Facility was an important
project for us. It’s the world’s most advanced bio-
Above: The Commercial Broadway Station was the largest SkyTrain station upgrade in TransLink
history. Bottom: The Molson Coors Fraser Valley Brewery is the newest and most modern brewery
for Molson.
SBW was named VRCA Member of the
Year, which recognizes outstanding
achievements by a company.
fuel public facility, converting waste into renewable
natural gas. We’ve built another biofuel since then
and we’re looking at several others,” says Musialek.
More sizable contracts followed including
the $15-million renovation of Vancouver
Central Library, the $42-million upgrade
of TransLink’s Commercial–Broadway Sky-
Train Station and the $200-million Molson
Coors Brewery in Chilliwack (another project
where SBW built the original).
All of these projects helped put SBW on its current
business volume trajectory, rejuvenating the
company and also earning industry honours along
the way with several VRCA Awards of Excellence.
Most recently, SBW was named the VRCA
Member of the Year, which recognizes outstanding
January/February 2023 CONSTRUCTION BUSINESS 7

www.wmbeck.com
1-888-437-1100
Connections
achievements by a company. Each year, the VRCA
recognizes the finest companies, projects and individuals
in the construction industry.
“We’re very proud to be recognized by VRCA
with that award. We have so many good relationships
in the construction community and have high
respect for the organization,” he says, adding the
company was a founding member of the association.
To accommodate their growth, SBW moved
from Vancouver to its new, company-built Surrey
office in 2020. The three-storey concrete and heavy
timber building includes a 5,000 square foot prefab
warehouse, storage site yard and parking lot.
“We’ve already outgrown the space. The building
is designed to add another floor and we submitted
the building permits to go ahead probably
this summer with the addition of the next floor,” he
says. “We also have a second office in Langley.”
Musialek anticipates continued strong growth
with the company set to look into other markets
in the province as well as possible expansion across
Western Canada. In the past, SBW had offices in
many major cities such as Winnipeg, Calgary, Edmonton,
Regina and Victoria.
“The company is primed and ready to grow. We
have the right people and the capacity,” he says.
Careful succession over the years has been key
to ownership transitions within the company. The
company’s culture and values have carried successfully
over five generational transitions.
“We have young leadership in place and have focused
on the succession of great leaders to carry on
the practices and values of the company for years to
Completed in 2017, the Surrey Biofuel Facility was a seminal project for Smith Bros & Wilson.
come,” he says. “We have a robust system to transfer
knowledge and experience and offer career advancement
opportunities.”
While the construction industry is facing a number
of current challenges (inflation, supply chain issues,
labour shortage), Musialek is optimistic about
the next few years.
“We’re seeing continued robust expenditures
from both large companies and public institutions,”
he says.
We Care. We Help.
info@wmbeck.com
8
CONSTRUCTION BUSINESS January/February 2023

PROUD WINNER
SMITH BROS. & WILSON (B.C.) LTD.
Canadian Cancer Survivorship Centre
Rainbow Park (Smithe & Richards)
Roddan Lodge
Peace Arch Hospital Expansion
SMITH BROS. & WILSON (B.C.) LTD.
General Contractor/Construction Manager/Design Build
9788 186 Street, Surrey, BC V4N 3N7
T. 604-324-1155/ E: sbw@sbw.ca/ www.sbw.ca

Feature Project
Visually Striking
BY CHERYL MAH
The distinct form of a new residential
tower in downtown Vancouver is
hard to miss. Rising 43-storeys into
the skyline, the project is defined by
a dramatic structural curve, and a moss garden
that surrounds the base of the tower.
The unconventional design is by world renowned
Japanese architect Kengo Kuma and marks his
first large scale residential tower in North America.
Known as Alberni by Kuma, the project is a collabo-
ration between Kengo Kuma and local architect of
record Merrick Architecture.
When Kuma revealed the design in Vancouver, he
said, “I have always wanted to have a project in Canada
because of its closeness to nature. Typologically,
this is a large-scale project in North America, a dream
for any foreign architect. We have done towers, but
not to this scale and level of detail.”
The design and construction of the mixed use project
is anything but typical.
The curved form of the building, described as two
emphatic scoops, is not only visually stunning but
was conceived to both capture optimal views and
separations from neighbouring buildings. The deep
curved recesses also allow for deep balconies with
wood soffits and decks.
The overlapping rows of vertical shingle
metal curtain wall panels add another unique
element, architecturally intended to offer reflections
of neighbouring buildings on the lower
levels and the sky on the upper levels.
The ambitious 492,000 square foot tower
is comprised of 181 units, eight levels of underground
parking and mixed-use space for
retailers. Amenities include a gym, pool,
sauna, play area, public art, wine cellar, restaurant
and more. The project is targeting
LEED Gold with the ability to connect to
the downtown district energy plant, one of
the largest in North America.
Graham Construction was awarded the contract
in 2017 and topped off the tower structure in November
2021. Substantial completion is scheduled
for January 2023.
Challenges included a tight downtown site,
unique floor plates at each level, managing pandemic
related issues (procurement delay, safety protocols)
and achieving complex design details.
To achieve the innovative and challenging form
of the tower, a 20 storey concrete tensile strut was designed
by Glotman Simpson Consulting Engineers.
The tensile strut acts to support the structural core.
The building’s unique facade features a new and
innovative glazing and enclosure system, procured
from a manufacturer in South Korea. The complex
envelope design required careful technical detailing
by RDH.
According to the design vision, the tower
aims to be in harmony with its urban and
natural surroundings, notably the mountains
and the proximity of the waterfront.
Kuma’s inspiration by nature is clearly evident on
the ground floor of the building where an extensive
Japanese moss garden sits under arching structures
surrounding an amphitheatre shaped space. The
green space defines the entrance of the building and
is meant to be a public amenity to be used for gatherings
and events.
Wood is also used throughout the exterior and
interior as part of a muted palette of materials.
The most striking wood feature is the “kigumi”
structure — resembling a large nest of wood
sticks — above the main entrance and garden. It
flows directly overhead into the swimming pool
situated on the second level.
“Buildings should be part of the city, part of
the environment. I believe that is the goal of architecture
in the 21st century.” said Kuma.
The Alberni tower is a definitive example of the
next level of iconic architecture in Vancouver.
10
CONSTRUCTION BUSINESS January/February 2023

Bonding, Insurance, Surety
Surety Bonding: 2023 Outlook
BY DUNCAN STANAGE
As we turn the calendar to 2023 the construction
industry is holding its collective
wallet a little tighter. We are seeing
widespread financial struggles from
construction clients across the province. Complex
projects and difficult owners, lack of work, fluctuating
input costs, rising wages and high employee
turnover are the main drivers which have led to low
profit margins, high competition, and dwindling
cash reserves. Bonding companies, facing increased
bond claim noise and anticipating contractor defaults
are upcoming, are tightening their underwriting.
We surety brokers are turning to more creative
solutions and leaning on experience and outside the
box thinking in order to help contractors get the
bonds they require to achieve their business plan.
This was what we expected to see in 2020 in the
early stages of the pandemic. Bonding companies
held their breath, concerned the unprecedented
climate would lead to contractor defaults, delay
claims due to widespread worker illness, and legal
battles over Force Majeure clauses. None of this
transpired in any significant manner. Owners,
contractors, and the industry as a whole acted
collegiately and collaboratively, problem solving
and moving projects ahead despite rising COVID
case counts and overstuffed hospitals. Many
contractors had ample work and were performing
it profitability. For those companies who ran into
difficulties or were not obtaining enough work to
keep their employees busy, the Canada Emergency
Wage Subsidy (CEWS) kept them afloat while also
boosting those contractors who were achieving
profitable results.
Then, as COVID case counts dropped so
did contractors balance sheets. Government
budgets constricted leading to limited
municipal work, input costs rose dramatically
due to worldwide supply chain issues, wage
subsidies were wound down, and the industry
faced a labour shortage exacerbated by
workers reliance on government handouts.
We are seeing projects continue to rise in price,
complexity, and length. Project owners push risk
down on contractors with onerous contract terms.
The $20 million project you performed five years
might cost you $40 million now. These rising prices
have not been accompanied by a proportional
increase in contractors’ financial positions.
Leveraging (total backlog divided by working
capital or net worth) is being pushed higher and
higher. All of these things are risks that bonding
companies contemplate and analyze. Underwriting
from sureties has become tighter and speaking their
language is as important as it ever has been.
It is realistic to expect contractor defaults in
the coming year. A lagging indicator, the depleted
balance sheets and project losses will eventually
catch up and some contractors who have not
adapted will fall. Bond claims are likely to increase
The year ahead will be rocky with projects continuing to rise in price, complexity, and length.
substantially so from the 14 per cent loss ratio the
Surety Association was reporting last year (14 cents
of each dollar of premium paid in claims), which
will lead to more stringent underwriting.
In the coming year we are seeing a rocky
road ahead for contractors and the industry
as a whole. You can expect more questions
and stricter underwriting from your bonding
company. Inquiries about price escalation
clauses, critical subcontractors and suppliers,
and comfort with size and scope of projects have
become more commonplace. Working with
a specialized surety broker is a differentiator
for your firm. Someone who understands your
business plan is crucial. Those generalists and
middlemen will struggle in the current climate
and do your firm a disservice. Experienced and
creative brokers can find innovative ways to
solve the challenging bonding problems the
industry is facing. There are solutions out there.
You may want to consider obtaining surety
bonds from your critical path subcontractors.
The bond you provide to the owner of the
project is for their benefit, but if you ask your
subcontractors for bonds this will protect you
from their potential default and you know they
have been prequalified for the job and they
have the experience and financial strength to
perform their component of the work. We
always recommend you look to bonds subs you
are either unfamiliar with, are performing a
complex or unique scope of work and would be
hard to replace should they default, and/or are
performing a significant size subcontract.
We have recently seen some changes within
the surety market due to some consolidation and
purchasing of bonding companies. This happens
occasionally as they jockey for market share. New
entrants typically push hard for new business,
trying to establish themselves as problem solvers and
creating their niche in the marketplace. This push
for business is contrasting the general hesitancy in
the industry due to the economic outlook.
On a positive note, the bonding industry has
made some headway on technology. The past
couple years have seen the emergence (finally)
of digitally signed indemnity agreements,
far more frequent acceptance of electronic
bonding by owners, and brokerage platforms
allowing contractors to request bonds, update
tender results and view premium calculations
much easier than was previously available.
Despite the challenges, there is light at the end
of the tunnel. We are seeing those thoughtful and
calculated contractors succeed and post record
breaking numbers in seemingly impossible contrast
to the market as a whole. There are lots of talented
underwriters who continue to understand their
clients and help them secure larger bonds and
find success, and some new entrants look to push
the industry to think outside the box and rethink
some of the old ‘we have always done it this way’
underwriting philosophies.
Duncan Stanage is surety account manager at
Wylie-Crump. He specializes in working with
construction companies to manage and optimize
their bonding facilities.
January/February 2023 CONSTRUCTION BUSINESS 11

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Bonding, Insurance, Surety
Impacts of Increased Costs
BY MATT ARRUDA
Post-pandemic, the effects of global
supply chain disruptions, accelerating
inflation as well as ongoing labour
shortages have created an extremely
challenging environment for businesses across
all industries.
All those in construction have faced dramatic
surges in costs over the pandemic and there continues
to be upward pressure on equipment, materials
and labour prices. As risk advisors dedicated
to this industry, many of our clients have
come to us with questions and concerns over the
past six to 12 months on the impact of these increases
on the insurance they require.
Here are a couple of the most common questions
we have been addressing and what you
should know about the values you report to your
insurer.
MY MOBILE PIECES OF EQUIPMENT
ARE OLDER AND MY POLICY VALUES
THEM AT ACTUAL CASH VALUE —
WHAT DOES THAT MEAN?
In the past, equipment values would be depreciated
year over year, allowing for premium reductions
due to how insurance companies would
determine how claims are paid on said pieces
of equipment. However, the reality that many
construction businesses are facing now is that
similar to the current climate for used vehicles,
shortages are resulting in pieces of construction
equipment appreciating in value even when they
are older and have substantial hours of usage accumulated
on them.
These new circumstances and the required
change in expectations among most contractors
(and insurance brokers) have caused some
potential issues with contractor’s equipment
schedules and how values are being reported.
Insurers would typically pay you based on the
“market value” of a similar piece of equipment
(based on model year, hours on the unit, attachments,
etc). When searching the used marketplace,
a unit you had once valued at a certain
amount may have actually increased by 5 per
cent, 10 per cent, or even 50 per cent, in cases of
highly specialized pieces.
If you are underinsured on those pieces of
equipment, the insurer will apply a co-insurance
penalty in the event of a claim, which typically
means that you share a portion of the loss with
the insurer. Those amounts will vary depending
on the percentage of the penalty being imposed
and how large of a discrepancy there is between
the value you were insured at and the value of a
similar unit in the current marketplace. While
we always recommend that contractors remain
diligent and regularly review these values with
their brokers - it is more important now than
ever before to maintain these updates.
I HAVE A COURSE OF CONSTRUCTION
(BUILDER’S RISK) POLICY IN PLACE
FOR A PROJECT I AM CARRYING OUT.
WHAT HAPPENS WHEN THE COST OF
CONSTRUCTION INCREASES OVER
THE BUILD TIME?
The short answer is that you should be updating
your insurance carrier and increasing
policy limits where appropriate as soon as
possible. Unfortunately, sometimes the potential
for cost increases over the policy term
is not factored in. Some policies do include
some pre-determined increases of cost either
through a set percentage of the policy limit
or a flat dollar amount. In our experience,
those amounts are not nearly enough in the
current landscape with ongoing inflation
pressures. With that said, you can minimize
the potential for cost overruns by keeping a
close eye on project progress and factoring
potential issues that could drive costs up,
as well as maintaining solid relationships
with your subcontractors and suppliers to
ensure their projected cost increases are included
in your budget. The fallout of being
underinsured on your course of construction
(builder’s risk) policy could be severe. When
you do increase the value on the policy, that
premium will be backdated to inception of
the policy. This can obviously create some
additional problems, when it comes to projections
that are already in a cost overrun
and now have further costs to absorb.
As you can see, underinsurance can lead
to unintended consequences when claims
arise and added expenses in an already difficult
time for many in the construction industry.
To prevent this situation, it is critical
that you maintain ongoing communication
with your insurance broker, keeping them
updated on changes to your operations and
fluctuations in values that must be reported.
This way, your insurance broker can provide
recommendations on any adjustments that
should be made to your policies, ensuring
you are consistently securing adequate levels
of coverage.
Matt Arruda is a commercial risk advisor and
partner at Acera Insurance Services in Kelowna,
B.C. (formerly CapriCMW Insurance). Contact
him at 250.869.3994 or marruda@capricmw.ca.
14
CONSTRUCTION BUSINESS January/February 2023

Take a Proactive Approach to Risks
BY GLEN MACRAE AND PATRICK RUSSELL
Bonding, Insurance, Surety
Inflationary pressures have heavily
impacted the construction industry, and
it is increasingly challenging to complete
projects on time and on budget. Now
more than ever, it is critical for project owners
and contractors to leverage risk management
tools and strategies to successfully complete
projects. Surety bonds and insurance are
two effective tools for managing risk and
should be a core part of a sound project risk
management strategy.
One recent example provides a good illustration
of how quickly project costs, both direct
and indirect, can escalate. At the bid stage, a 40
foot shipping container from Asia to the West
Coast of Canada was estimated to cost $2,400.
By the time the contract had been finalized and
the contractor was mobilizing on site and ordering
materials, the cost of shipping containers
had skyrocketed to more than $18,000 — a
750 per cent increase inside of six months. Additionally,
rising interest rates significantly increased
inventory carrying costs over the same
period and the contractor was forced to absorb
a significant portion of the cost increases, which
had a devastating impact on their bottom line.
While this case is a bit of an extreme example
that was exacerbated by global supply chain
challenges at the time, it does highlight the importance
of taking a proactive approach to managing
cost escalation risks.
Some practical strategies to mitigate upward cost
pressure due to inflation include:
• Recalibrate your assumptions and allow for higher
and unanticipated cost increases when building
out project budgets.
• Use hedging strategies such as forward/futures
contracts for commodity-linked inputs and taking
advance deposits to secure pricing and availability
of critical project equipment/components
that is not manufactured domestically.
• Ask for evidence of bonding capacity or
prequalification letters from subtrades and
suppliers to ensure they are experienced and
have a track record of delivering projects on
time and on budget.
• Obtain bonds from as many subtrades and
suppliers as possible. Bonds help mitigate
both the financial and timeline impact of a
subcontractor default.
Surety bonds, more commonly referred to as
“bonds” or “bonding,” are strong tools for mitigating
contract default risk due to inflationary pressure.
Bonds are unique instruments issued by insurance
companies (sureties) on behalf of contractors
that act as financial guarantees in the event of a contract
default. Bonding a contract creates a stronger
commitment and obligation to complete a project
as prescribed in the contract, both in terms of cost
and timelines. Practically speaking, bonds transfer
the risk of cost escalation to the contractor that supplies
the bond, create greater accountability, and
provide assurance that defaults will be remedied,
either by the contractor or surety.
Inflation can also be an issue with insurance.
Most construction contracts are bound by the
insurance requirements in CCDC 41 — Insurance
Requirements that stipulates that project
property insurance must be covered for 110 per
cent of the contract price. For a decade or more,
this never posed a problem as the cost of builders
risk or course of construction insurance, as it is
known, was relatively inexpensive. But decades
of those low rates and premium levels made
project insurance unprofitable for most insurance
companies. As investors sought better rates
of return, money left the insurance marketplace
looking for greener fields. Insurance companies
needed to increase premiums and lower their
risk by demanding higher policy deductibles.
In recent years, some deductibles for residential
high-rise buildings have skyrocketed and
are now in the range of $250,000 or more.
Additionally, some premiums have doubled
and even tripled from a few years ago. These
changes are due to inflationary pressures on
the availability of money that backs insurers’
daily operations.
When inflation increases the costs of labour and
materials for a project, the owner or general contractor
needs to increase the policy limits. However,
finding additional insurance at a reasonable price
can be an arduous task due to the reluctance of the
insurance industry to insure projects at all but the
highest premium and rate levels. Insurance brokers
are often challenged to find enough capacity to
increase the policy limits, which is driven by an insurer’s
internal financial management requirements
which can only allot a certain amount of money to
insure a project. If the owner needs more insurance,
they may need additional insurance companies to
subscribe to the insurance policy.
The banks that finance the project, often along
with the involvement of quantity surveyors, will
be closely monitoring the project budget and will
not accept underinsurance. To mitigate these challenges,
it is important to work closely with a good
insurance broker to monitor the construction project,
particularly in terms of time and budget. Construction
delays can prolong the work and will drive
up the final price, causing a cascade of additional
challenges that can take weeks to work through.
The closer the contractor or developer works with
the broker, the better the cost management for the
project will be. Overall, a proactive approach to risk
management can help reduce the impact of inflation
on the construction industry as a whole.
Glen MacRae is executive vice president, and
Patrick Russell is vice president, surtey at Wilson
M. Beck Insurance Services Inc.
January/February 2023 CONSTRUCTION BUSINESS 15

CONSTRUCTION SAFETY
New Zone Control Regulations
for B.C. Tower Cranes
BY MARK JH KLASSEN
In March 2023, WorkSafeBC will implement
new regulations for tower cranes in B.C. that
will require the use of anti-collision systems.
This development comes in response to
newer technology that helps to ensure the
safer use of tower cranes by preventing craneto-crane
collisions and crane-to-power-line
collisions. The systems also provide zone
control by creating safe barriers in other
vulnerable settings, such as close proximity to
existing buildings or to traffic.
“These systems work,” affirmed Ryan
Burton, managing director of Bigfoot Crane
Company, and former board chair of BC Crane
Safety. “They make tower cranes safer.”
Burton witnessed the use of the zoning
systems firsthand in the Lower Mainland when
they were tested on tower cranes at the
Olympic village site in Vancouver in 2010. He
became convinced that it was just a matter of
time before the systems would become
standard within the local tower crane industry,
as they already were in Europe.
After Burton insisted that Bigfoot start
upgrading their fleet of tower cranes with the
zoning systems, the company saw dramatic
results. “Although incidents were rare before,
maybe 1-2 collisions per year with powerlines,”
said Burton, “within two years of using these
systems, we completely eliminated those
incidents.”
According to Clinton Connell, executive
director of BC Crane Safety, “The new
regulations were expected, and they are
certainly well intended. I haven’t heard anyone
in the industry arguing against the benefits of
using these systems — they are proven safety
devices. However, the biggest challenge is the
timeline.”
In order for the B.C. tower crane industry to
comply with the new regulations, all crane
owners and users must ensure that their
cranes are not only equipped with zone control
systems by March 2023, but that they are fully
approved by a professional engineer.
“Brand new cranes are plug-and-play ready
for these new systems,” said Connell. “The
electrical schematics come fully compatible
from the OEM. In that case, the owners just
need to find a trusted vendor to install the new
system and get sign-off from an engineer.”
However, the process to compliance
becomes complicated when cranes are not
technically ready for the newer systems.

“It completely depends on the age of their
fleet,” said Connell, when considering the
preparedness of crane companies in B.C. “Any
tower crane built before 2006 would not be
compliant with current zone control systems,
and a lot of cranes that have been in service for
years have undergone modifications that are
not necessarily approved.”
“The older the crane, the more convoluted
the process,” said owner of Arsenal
Engineering, Ryan Stewart, who has been
inspecting and certifying cranes in B.C. for 15
years. “Companies in B.C. with newer cranes
will have an easier time, but my general sense
is that, as an industry, we’re not prepared for
these new regulations.”
“Finding a good system and installing it is
not the problem,” said Burton. “The challenge
is making sure that your crane’s electrical
panel is not only compatible with the new
systems but that any previous modifications
have been approved by a professional
engineer.”
According to Burton, the electrical panels
on older cranes are the bottleneck. Before
they can be fitted with a zone control system,
they need to be brought into compliance and
approved. “That’s step one,” said Burton,
“before you even start talking about adding a
new zone control system.”
According to professional engineers in the
crane industry, like Stewart, the problem with
many of the older cranes is that they have been
modified over the years, and changes have not
been approved. Perhaps skilled electricians
completed field fixes to keep cranes up and
running, but the re-wiring did not necessarily
match the schematics supplied by the OEM (a
regulatory prerequisite for installing a zone
control system). Although these older wellmade
cranes are working perfectly in most
respects, they are not compliant with the
newer systems. In some cases, the OEM no
longer exists and so the road to compliance is
even more difficult.
The practical steps to compliance will be the
same for all companies in the tower crane
industry. First, they will need to have their
cranes evaluated, to determine whether the
factory schematics match their current
configuration. If the electrical panel is
compatible and unmodified, then they can
proceed to installation of a new zoning system
and subsequent approval from an engineer.
However, if modifications have been made,
they will need to be documented and approved.
This will inevitably require the work of an
electrical engineer. In certain cases,
schematics will need to be completely
re-drawn to bring them into compliance. Only
after the electrical schematics are approved
will there be an occasion for installation and
final approval of the zoning system.
At this stage, it appears that there are few
companies within the tower crane industry
that are fully prepared to meet these
requirements by March 2023.
“The timeline is tough,” said Stewart, “and
some companies will scramble. But it will
depend on how WorkSafeBC handles this.
What approach will they take? How will they
enforce the new regulations?”
Engineering companies like Stewart’s
Arsenal will do what they can to assist. “We’re
currently learning about how these zone
control systems work,” he said. “We will be
able to give approval on certain steps to
compliance. We can approve installations on
newer machines, sort of like a regulatory
review. But we are not able to meet the
demand of all the electrical engineering that is
required for the compliance of older cranes.”
Burton estimated that about half of B.C.’s
tower cranes would require significant effort
to bring into compliance, which represents a
colossal amount of work. He agreed with
Stewart’s assessment of the need for qualified
personnel. “Finding electrical engineers who
know cranes is not easy right now,” he said,
“especially those who are willing and ready to
go up 500 feet in the air to work on a tower
crane that is already in operation.”
Burton has worked hard to secure an
electrical engineer that will specifically help
Bigfoot with zone control systems. In time, he
hopes that Bigfoot will be able to offer a
service to other companies to help bring them
into compliance.
However, concerning Bigfoot’s ability to
meet the March deadline, Burton expressed
caution. “We may have a portion of our fleet
ready, but we will not be fully prepared. The
timeline may be sufficient to get zoning
systems installed, but the engineering will
take much longer, maybe two to three years.”
As part of the process, Burton also noted
that Bigfoot has entered into partnership with
one of the world’s largest manufacturers of
zone control and anti-collision systems, AMCS
Technologies, a French company that has been
a global leader in construction safety devices
since 1994 and produces what Burton
considers to be the best zone control product
for cranes in the market.
From the standpoint of BC Crane Safety,
Connell is concerned about ensuring uniform
messaging to all industry stakeholders as
March approaches. “WorkSafeBC is the
regulator,” reminded Connell. “We just want to
make sure that feedback from the industry is
heard by the regulator, and that everyone has
the resources that they need to move forward
toward compliance.”
BC Crane Safety will continue to facilitate
conversations between the various
stakeholders like WorkSafeBC, the crane
industry itself, and the engineering community,
as well as the vendor community that provides
installation of the zone control systems.
“I don’t want to trivialize this process of
complying to regulations,” Connell said in
conclusion. “This is a challenge. We realize
that crane owners are being asked to do
something that they haven’t had to do in the
past. So, we’re trying to help them through that
challenge.”
Connell also reiterated the fact that he was
not hearing any negative voices in the tower
crane industry about whether these devices
were a good idea or not. The consensus is that
zone control and anti-collision systems are
valuable and necessary. The road to industrywide
compliance, however, is yet to be
travelled.
Still, industry professionals like Connell,
Burton, and Stewart are confident that, in the
end, the industry will adjust to these new
regulations.
Connell offered the helpful analogy of GPS
systems and backup cameras in vehicles. “At
first, they were a novelty,” he said, “and they
were just an aftermarket upgrade that anyone
could do to their vehicle. But now, GPS systems
are standard and backup cameras are
required by law in new cars.”
If Connell and his colleagues are right, it will
only be a matter of time that zone control
systems will be standard in tower cranes.
According to WorkSafeBC’s new regulations,
the time is March 2023. Yet the question
remains: Is B.C.’s tower crane industry ready
to comply?

Infrastructure
Water Systems: What’s at Stake?
TWO PROJECT EXAMPLES
British Columbia’s watersheds are facing
ever-increasing pressures with climate
change destabilizing freshwater sources,
adding droughts, fires and floods to the
existing threats of contamination and cumulative
impacts on the land. In particular, these impacts
are having profound consequences for B.C.’s
Indigenous communities.
Over the past two years, Healthy Watersheds Initiative
(HWI) projects have been launched at more
than 200 sites around B.C. to restore watersheds
and wetlands.
The projects span thousands of sites within the
province’s eight major drainage basins, creating
spawning grounds for salmon, and building habitat
and community resiliency to withstand sea level rise
and climate change events.
As global warming accelerates — resulting in record
droughts, wildfires, and flooding disasters —
actions taken to conserve and renew watersheds are
essential. HWI projects demonstrate a strong path
forward for investing in nature-based infrastructure,
planning and monitoring that builds community
resilience and safety at a fraction of the cost of
recovery efforts after extreme climate events.
HWI is supporting the more than 60 projects
across the province through $27 million in stimulus
funding under the B.C. government’s economic
recovery plan.
A recent HWI report highlights the success and
cost effectiveness of investing in community-led
watershed restoration and stewardship work. One
of the successes achieved with the projects was the
training and creation of jobs for more than 1200
people and spinoff benefits for local contractors,
service providers and businesses.
The report also emphasizes the complex, challenging,
and important areas of learning that project
teams undertook as they advanced the United
Nations Declaration on the Rights of Indigenous
People (UNDRIP) through their work.
“We are deeply grateful to all the project teams
whose work and insights made it possible for us to
see and understand roles, responsibilities, and actions
that are critical to UNDRIP commitments,
economic recovery, climate action, and community
and watershed health,” said Leanne Sexsmith
and Zita Botelho, Co-Directors of the Healthy
Watersheds Initiative. “We are thankful to our Indigenous
Leaders Advisory Circle, the B.C. government
and community partners for working with us
to guide, implement, and share in this work, which
has resulted in incredible learning, impacts, and returns
from one of the most significant investments
in water security in decades.”
The restoration of riparian and wetland habitats
through HWI projects helped protect important
species, increase biodiversity, manage peak water
flows and summer droughts, and supported habitat
and community resiliency. Work included removing
physical barriers to migrating salmon, planting
vegetation, building infrastructure, and investing
in data collection and monitoring. It also included
contributions to longer-term watershed and species
sustainability plans.
“Maintaining and protecting healthy watersheds
and wetlands are among nature’s strongest
barriers against climate change - and will help
sustain healthy ecosystems and healthy communities
for future generations,” said George Heyman,
Minister of Environment and Climate
Change Strategy. “The Healthy Watersheds Initiative
helps fund local projects that rehabilitate
Quatse (Gwa’dzi) Estuary Restoration
One of the HWI projects focused on restoring coastal processes and improving fish and wildlife habitat in the Gwa’dzi
River Estuary. This project was implemented and delivered in partnership with the Kwakiutl First Nation, The Nature
Trust of BC along with all levels of government. The project work focused on enhancing fish and wildlife habitat while
ensuring the estuary would be resilient to sea-level rise and climate change.
Chilako River Restoration Demonstration Project
HWI jobs and training contributed to leadership development, advanced career goals, connected people to community
and culture, and supported intergenerational engagement and knowledge sharing. Through the HWI, the Upper
Fraser Fisheries Conservation Alliance (UFFCA) restored riparian and floodplain ecosystems along the Chilako River
and supported 27 jobs. The UFFCA partnered with Lheidli T’enneh and Saik’uz First Nations to complete this work.
The project focused on revitalizing spawning habitats, reducing erosion, and minimizing the effects of climate and
land use changes
threatened watersheds and wetlands, restoring
these critical habitats so they are healthier and
more resilient to climate change.”
ADVANCING IMPORTANT
COMMITMENTS TO UNDRIP
With the majority of projects supporting the exercise
of Indigenous rights and incorporating Indigenous
knowledge in planning, they are advancing
important commitments to UNDRIP and providing
inspiring examples of what is possible through
strong investments in watershed conservation and
restoration, community leadership, and relationship
building.
“Water is critical for us, for all of us. For myself,
as an Indigenous person, it takes me back to my
roots, my origin,” said Mavis Underwood, Chair
of the Healthy Watersheds Initiative Indigenous
Leaders Advisory Circle and Governor for the
Real Estate Foundation of BC. “We have a destiny
that was here in the hearts and minds of people
before us, generations before us that connect us
back to the land and the water. Indigenous law in
most cases describes a relationship of gratitude,
respect and responsibility for air, land, water, and
species that are gifts through creation to help sustain
all life. It is exciting to see the outcomes from
the work of the project teams and it is inspiring to
see young people who are leading the way and are
making a difference in their watersheds.”
The work completed through the HWI demonstrates
the success and cost-effectiveness of working
in partnership to resource and bring communities
together to improve local watershed security. Overall,
the report amplifies the extraordinary co-benefits
of the work for ecosystems, economies, community
health, and well-being.
The HWI projects were supported through a $27
million investment from StrongerBC — a $10 billion
COVID-19 economic recovery plan. To deliver
the funding, the province partnered with the Real
Estate Foundation of BC (REFBC), who administered
the Healthy Watersheds Initiative (HWI), in
partnership with Watersheds BC.
18
CONSTRUCTION BUSINESS January/February 2023

Improving Infrastructure Investments
BY RON GLEN
Infrastructure
TRADE-ENABLING INFRASTRUCTURE
NEEDS TO BE PRIORITIZED
Canada West Foundation’s (CWF) “From Shovel
Ready to Shovel Worthy” report, published in
2022, found that disjointed, politicized approaches
to funding our trade infrastructure is harming
Canada’s global reputation as an investment destination
and trading partner.
Governments are too often tempted to invest in
“shovel ready” projects that lack strategic value and
ignore routine maintenance on roads that thousands
of Albertans rely on every day. The CWF
report concludes that ad hoc infrastructure funding
tied to annual budget and/or election cycles is a
poor infrastructure investment strategy.
With Alberta now in its election year, the Alberta
Roadbuilders and Heavy Construction Association
(ARHCA) is urging government to heed the
warnings, and advice, contained in this report.
In our submission to the Alberta Government’s
Budget consultation, we asked government
to abandon its ad hoc funding approach
and commit to predictable and sustainable investments
in Alberta’s public infrastructure.
Our association believes this is essential to not
only support our economy, but also to protect
our highways from further deterioration.
Albertans support investments in highways
because they create jobs and benefit the economy.
And yet, the province’s own data shows
that a decade of deferring repairs has created a
costly infrastructure deficit that looms large for
the taxpayer and threatens our road network’s
economic and safety performance.
What needs to happen is simple: government
must publish a transparent list of improvement
projects, commit to appropriate predictable funding,
and hold administrators accountable for meeting
their goals. Funding decisions ought to be tied
to clearly stated objectives.
PROCUREMENT MUST BE FAIR
One other change must be made. And that is to fix
the government’s broken procurement model.
Over the past decade, governments have become
overly sensitive to criticism of reasonable cost escalation.
This has resulted in an increased reliance on
procurement models that provide cost certainty,
such as design-build-finance-operate-maintain
(DBFOM) public-private procurement mode.
However, shifting the owners’ risk to the design
engineer and contractors comes at a premium price.
Governments must be prepared to pay this premium
cost... or stop, retool programs, and accept the
oft stated goal of allocating risk to the party most
capable of managing each specific risk. Including
maintenance and financing in procurement can
work well in some circumstances, but as Alberta
found out last summer on the Deerfoot Trail Freeway
Program, it can predictably fail when owners
ignore warnings of cost premiums due to the design
of the RFP.
Albertans deserve a more nimble, efficient, economical,
responsible, and transparent system of
approving, budgeting and procurement that will
ensure that failures, such as the Deerfoot Trail
Freeway Program cancellation, will not be repeated.
We need to return to a business model of partnership
where all parties invest in communication and
relationships so that government decisions are fully
informed.
FINDING SOLUTIONS
In addition to highlighting issues that need addressing,
the ARHCA has spent considerable time and
effort contemplating solutions.
Our research paper called “The Case for an Alberta
Highway Trust Company” not only documents
the problems, but also offers a solution. In
our proposal, the Trust Co. would have funding
guaranteed by contract with the government and
sufficient scheduling and procurement independence
to achieve outcomes based on engineering
determinants rather than annual budget surprises
and election cycles. The Trust Co. would strive to be
a superior, preferred client. One that is a knowledgeable
owner, understanding and accepting owners’
risk, provides reliable vision, and plans that incentivizes
appropriate industry investment in people
and equipment.
ARHCA is proposing the creation of the Trust
Co. as a vehicle to provide financial stability necessary
for efficient management of Alberta’s the $70
billion highway asset. This arms-length provincial
corporation would create and deliver on a transparent
highway improvement plan and project list
based on engineering determinants. The current
procurement and project management employees
from Alberta Transportation could staff the new
corporation to ensure knowledge transfer. The Alberta
Highway Trust Co. would publish a priority
list, as well as a long term 20-year strategy with a
rolling three to five year detailed plan.
What makes our proposal unique is that the
Trust Co. would have a contract with government
as “owner” for annual payments to fund the plan
approved by government. Guided by a board appointed
by government, The Trust Co. would be
accountable to the owner but keep politics out of
its day-to-day decisions. This model will allow procurement
methods and schedules that encourage
industry to invest, innovate and compete for the
privilege of building Alberta.
Lastly, as a business with a long-term contract,
the Trust Co. could issue bonds to Albertans who
want to invest in Alberta’s infrastructure. Government
could also invest intermittent resource windfall
revenues in the Trust Co. to protect Albertans
from future tax increases to pay for future repairs.
Too often, public discussion of funding roads gets
sideswiped by talk of toll roads. There are other options,
and Albertans are proven leaders in developing
innovative financial approaches to problems.
This approach addresses the key concerns of
ARHCA members in providing: reliable and consistent
funding, transparently communicating a list
infrastructure projects, and offering a fair procurement
process.
Albertans deserve better than deteriorating
roads and projects that can’t pass go because of procurement
red tape. But to do better, serious change
must lie ahead.
Ron Glen is president of the Alberta Roadbuilders
and Heavy Construction Association. The AR-
HCA Alberta Highway Trust Co. policy paper is
available at fixourroads.com.
January/February 2023 CONSTRUCTION BUSINESS 19

Infrastructure
Exceptional Transportation Work
BY CHERYL MAH
The importance of transportation
infrastructure was never more evident
than after B.C.’s devastating 2021 floods.
The province’s November floods cost
billions in damage, losses and shut down highways
and a railway for weeks. Engineers and construction
crews are instrumental in the repair efforts, which
are expected to continue into late 2023.
Exceptional work and technical excellence to improve
transportation infrastructure in the province
is recognized annually with the B.C. Transportation
Consulting Engineers Awards. This year’s winners
include Stantec Consulting for design repairs
and flood response to Highway 8 between Merritt
and Spences Bridge.
Working with the Ministry of Transportation
and Infrastructure, and other contractors and consultants,
Stantec repaired existing bridges, built two
temporary bridges, and provided other support.
Starting work immediately after the flood, the team
reconnected the high-priority route.
Stantec earned the award in the design and contract
preparation — structures category. Another
winner in the same category was the team of Hatch
Ltd., Charter Project Delivery Inc., and T.Y. Lin International
Canada Ltd. They won for repairs to the
Taylor Bridge between the north and south Peace
regions. Using computer models and inspections of
thousands of structural elements, the team detected
and repaired a weak gusset plate, while keeping
one lane of the bridge open for several consecutive
nights during the repair.
Other transportation infrastructure award
winners:
DESIGN AND CONTRACT
PREPARATION – ROADS
For widening more than one kilometre of Highway
97 and making intersection improvements in
Quesnel, Urban Systems won the design and contract
preparation award for roads. This project’s
worksite included heavy summer traffic, nearby
frontage roads and local businesses, multiple utilities,
flat surfaces and environmentally sensitive
creek-side slopes.
ALTERNATIVE TRANSPORTATION
R.F. Binnie & Associates won the alternative
transportation award for launching RapidBus
routes R1 through R5 in the Greater Vancouver
area. Working with the ministry, eight municipalities,
one health authority and four contractors,
it oversaw a complex and fast-paced project that included
road widening, intersection improvements
and new multi-use pathways, bus stops and bus
priority infrastructure.
CONSTRUCTION MANAGEMENT AND
SUPERVISION SERVICES
The award for construction management and supervision
services went to Associated Engineering
(B.C.) Ltd. for the resurfacing of nearly 11 kilometres
of Highway 14, a primary access road for the Sooke-
Port Renfrew area. The project between Otter Point
and Woodhaven roads included paved shoulders,
slow-moving-vehicle pull-outs, geosynthetic reinforced
soil repairs, and drainage systems to minimize
road flooding. Clearer sight lines improved safety at
Tugwell Creek, where slides and rocks previously affected
the road.
SPECIALIZED ENGINEERING SERVICES
PBX Engineering Ltd. won the specialized engineering
services award for rehabilitating the
Lions Gate Bridge reversible lane-control system.
This project resulted in increased safety,
highway capacity and reliability, better cybersecurity
controls and less traffic congestion. PBX’s
work required only a single weekend evening
closure, allowing normal traffic to continue
during the day.
SUPPLYING PRODUCTS COMMUNITIES ARE BUILT ON.
The Langley Concrete Group is proud to be continuing our ongoing
expansion plans within our operations to support our customers and provide
structural precast products using local suppliers. Made in B.C. means
investing in our communities, providing jobs and helping our economy.
At this time, more than ever, support locally made products, of all types.
www.langleyconcretegroup.com
20
CONSTRUCTION BUSINESS January/February 2023

First Nations Land: Unique Opportunity
BY LANEY THIRD
Legal File
Currently in Canada, there are more
than 3,000 reserves collectively
holding roughly 3.8 million hectares.
Much of this land is ideally located for
development and often overlooked by developers.
This presents a unique opportunity for those willing
to invest time into understanding First Nations
land ownership and developing the necessary
relationships with appropriate stakeholders.
TYPES OF LAND OWNERSHIP
The land ownership model that most people are familiar
with, despite perhaps not knowing the name
of, is fee simple. Homes that are not located on a reserve
or leased land are likely owned in fee simple.
Land owned in fee simple confers significant rights
to the owner, such as the rights to use the land, sell it
to anyone, rent it out, or mortgage it.
Reserve lands, on the other hand, are held in
trust for bands by the federal government. Bands
have exclusive use and occupation rights to these
lands. These lands are communal and must be used
in a way that benefits the entire band. Leases are the
most common way that developers partner with
First Nations bands or individuals. There are two
types of First Nations land that a third party may
obtain a leasehold interest in: lands held under a
certificate of possession (CP) and designated lands.
Portions of reserve lands are often owned by individual
band members who hold CPs. A CP is similar
to a fee simple deed; a CP gives the holder the
right to occupy the land, lease the land, sell the land
to another band member, and bequeath the land
in their will. The distinct difference between CP
land and fee simple land is that a CP holder cannot
sell the land to a non-band member or apply for a
conventional mortgage. CP land typically does not
qualify for a conventional mortgage because it cannot
be foreclosed upon by a bank in the same way
that fee simple land can be. This creates challenges
for CP holders seeking to develop their own land
and may require external investors.
A First Nation band may choose to designate
community lands for long term leasing. To designate
land for leasing, the band must hold a referendum
of its membership. Some bands will broadly
designate lands for industrial purposes; others will
designate lands specifically for a predetermined development
project.
LEASING FIRST NATIONS LAND
If a developer is interested in receiving a leasehold
interest in any land located on reserve, the developer
should approach the First Nation band or CP holder
to discuss the status of the land. If both parties
are interested in proceeding, the developer should
begin doing due diligence to ensure the land is suitable
for the intended purpose.
During the due diligence phase, the developer
should review the First Nation’s land code, if one exists,
as well as any bylaws that may impact potential
development, subleasing, mortgaging, or assigning.
The developer should further consult with the First
Nation band to determine the applicable building
code, as reserves do not automatically fall under
federal or provincial building codes. It is common
for leases to specify what building code must be
adhered to. Several bands have created their own
building code that applies to all projects on reserve.
Prior to a lease being granted, the prospective tenant
must obtain an appraisal of the land and environmental
assessment.
Leases on designated land are restricted to a term
of 99 years. Leases of CP land are typically limited
to 49 years unless the First Nation band approves a
longer lease.
Governance of First Nation lands varies greatly.
As a starting point, the Indian Act requires that a
lease of designated land is negotiated with the First
Nation and Indigenous Services Canada (ISC) and
granted by ISC on behalf of the First Nation. If the
lease is for CP land, the CP holder will apply to ISC
and then ISC will confirm approval with the applicable
First Nation band and draft the lease.
There are some exceptions to ISC’s involvement,
including: (i) bands with delegated authority
under s. 60 of the Indian Act; (ii) bands
that have adopted their own land code under
the First Nations Land Management Act; and
(iii) self-governing nations with a negotiated
treaty or agreement in place. If the lease is not
approved by ISC and the band is not exempt
from this requirement, the lease will be void
and any party who occupies the land may be in
trespass.
Once a lease is entered into, the tenant may
mortgage, assign, or sublease its leasehold interest,
subject to the terms of the lease; some leases
require that a tenant receives consent from ISC
and/or the First Nation.
This area of law is very complex and specific to
each individual First Nation band, and for this reason,
any developer seeking to develop lands on reserve
should consult with a lawyer who is familiar
with First Nations land law.
Laney Third is an associate lawyer at Forward Law
LLP in Kamloops. Visit www.forwardlaw.ca.
January/February 2023 CONSTRUCTION BUSINESS 21

Legal File
Managing Contractor Insolvency Risk
BY ALEXANDER SPRAGGS
One of the greatest risks to construction
projects is the insolvency of one
of the parties involved. This risk is
exacerbated when rising interest rates
make borrowing more expensive while inflation
makes construction more expensive.
The Bank of Canada’s objective of increasing
downward pressure on inflating prices is acutely felt
in the construction industry. Struggling contractors
and subcontractors who see fewer and fewer
projects down the road will bid lower in an aim to
win a project and keep cash flowing. At the same
time, owners facing lower sales revenue and limited
borrowing power will put intense pressure on contractors
to stay within budget. Projects with multiple
struggling parties involved will be on a knife’s
edge, and the insolvency of one trade can trigger
the whole construction pyramid to come tumbling
down in a wave of defaults.
One of the best ways to protect your business
from insolvency risk, whether you are a developer,
contractor, or trade, is to bond your project or seek
out bonded projects.
HOW BONDS WORK
Two types of bonds relevant to this risk are Performance
Bonds and a Labour and Material (L&M)
Bonds. There are three parties to these bonds, the
obligee, the principal and the surety. If a prime contract
is bonded, the owner is the obligee, the general
contractor is the principal and the surety company
is the surety. In the case of a bonded subcontract, the
general contractor is the obligee and the subcontractor
is the principal.
For a Performance Bond the surety ensures, for
the benefit of the obligee, that the bonded contract
will be performed, up to the penal value of the bond
(typically half the value of the bonded contract). In
the case of an L&M Bond, the surety ensures that
all parties providing labour and materials to the
principal on the project will be paid in full.
Beyond these fundamental protections against
insolvency that bonds are intended to provide, there
are several other aspects of bonding that help to
mitigate the risk of insolvency.
UNDERWRITING THE RISK
The insolvency of a principal is the fundamental risk
that a surety takes on. Accordingly, when a surety is
asked by a contractor to bond a contract, they will
underwrite that bond by analyzing the contractor,
the contract and the contract price to ensure the risk
of contractor default is low. Further, once a surety
begins a relationship with a principal, they will often
bond all that principal’s projects. Sureties will
use their ongoing relationship with and knowledge
of a contractor to constantly assess risk. A prudent
bonding company will refuse to bond a project
where they see that a contractor may have stretched
themselves too thin or bid too low.
Further, bonding companies secure themselves
against a principal’s risk of insolvency by requiring
indemnities from the owners of that principal. This
ensures that the people responsible for the business
of a contractor have skin in the game.
Finally, bonding companies have significant expertise
in the construction market. Where a principal
begins to flag, sureties are able to use their experience
in the industry to step in and either ensure
that the principal finishes the contract or smooth
the transition from the principal to a completion
contractor.
COMMON MISTAKES
Having bonds in place on a project is not the same as
having insurance on a project. Sureties have certain
rights which insurers do not.
One common mistake made by obligees when a
principal starts showing signs of going sideways is to
start working outside the express terms of a contract
to help nudge a struggling contractor along to completion.
Even something as innocuous as making an
advance on a contract can prejudice a surety’s rights
and potentially nullify a bond. It is critical when
working on a bonded contract to work within the
terms of the bonded contract and, when in doubt,
confer with the surety when a principal is flagging.
Further, a bond’s terms must be strictly adhered
to. There are critical provisions regarding notice and
deadlines for making claims that may void a bond
altogether if breached.
Knowing how to navigate a bonded contract,
make claims against a bond, or communicate with
a surety can make all the difference between getting
paid or getting in line with all the other creditors. It
can also make the difference between keeping a project
on the rails and on budget, or watching it grind
to an expensive halt. When in doubt, don’t hesitate
to reach out to a legal professional with knowledge of
the surety business to ensure you take full advantage
of your rights on a bonded project.
Alexander Spraggs is an associate at Pihl Law in Kelowna,
practicing primarily in the areas of construction law
and commercial litigation. He has a particular interest
in construction insurance coverage claims and bonding
disputes and has represented sureties and bond
holders in a variety of complex construction projects
across British Columbia and Alberta.
22
CONSTRUCTION BUSINESS January/February 2023

The BC Construction Safety Alliance is a
not-for-profit association that provides services to over
52,000 construction companies employing over
220,000 workers.
Contact us today!
Email: info@bccsa.ca
www.bccsa.ca

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