Mechanical Piping Plumbing Journal 2008

From an economic perspective, the other felt that Subguard® IS SDI REALLY AS GOOD AS IT SEEMS? would expedite the process, making it In some cases, it might be. However, for the majorcontractors have to more responsive, less ity of contractors at work today in Canada, SDI can be expensive, and withriddled with pitfalls. consider when it comes out the third party, SDI was designed with the large contractor in mind. more streamlined. Those with the resources to thoroughly investigate to SDI is that it is a In very simple subcontractors and suppliers prior to the start of a terms, the SDI policy project, and, in the event of default, have the resources “claims-made policy.” is supposed to work to incur various costs (e.g. legal costs) without delaying as follows: in the the project in any way. As well, they have the fi nanevent of a subconcial capability to pay the deductibles and continue to tractor default, the SDI policy kicks in and the contracfinance the default through to reimbursement. tor is compensated by the insurer. There’s no need for Steven Pavelich, Managing Partner with Wilson M. an investigation, and the potential of a damaging and Beck Insurance Services, Inc. in Kelowna, B.C. sees SDI expensive delay to the project is mitigated. It should be as something that benefits the few, but certainly not noted though, that the contractor still needs to present the majority. the claim, have the insurance company accept it all the “The rule of thumb (with SDI) is that if you’re not while funding the default through to the contract’s doing at least $100 million of business a year, don’t completion. even think about it,” says Pavelich. SDI gives the large The providers of SDI also stress that most policies contractor the ability to become contractual “judge cover all prequalified subcontractors. This differs from and jury,” he adds. “The (large contractors) can declare bonds, which require individual bonds for each subsomebody in default, hold their money up, find contractor. Some view this as an opportunity somebody else to do the work, and it’s for the contractor to decide who is qualileft to the contractor to sue for the fied to work on the project, creating money that’s being held. Prea less than level playing field for viously, if the subtrade had subcontractors in the bidding put up a bond on the job, process. This is clearly a con(and was then found in troversial issue. default) the contractor As is the cost of SDI. Its prowould make a claim ponents claim that it is drawith the bonding matically less expensive than company, who would surety bonds. At first glance then investigate, and it appears to be. As stated, if there was a dispute whereas bonds generally cost – the bonding compabetween 0.85 and 1 percent of ny wouldn’t pay. With the subcontract value, SDI is SDI, the dispute resonegotiable and usually ranges lution is significantly from 0.4 to 0.85 per cent of the total altered from the usual subcontract value. Regardless of the process,” Pavelich consize of the project, these types of savtends. “Besides that, the ings can be significant. deductibles are extremeHowever, the aspect of SDI that its advocates ly high, which precludes most commonly trumpet is its ability to effect a most generals from imple©onurdongel/Istock.com solution in a very short time frame after the occurmenting it.” rence of subcontractor default. Without the requirement From an economic perspective, the of an investigation, the SDI process is seen as much more other factor that most contractors have to consider expeditious and allows for a quicker return to the when it comes to SDI is that it is a “claims-made poliproject. cy.” What this means is that in the event of a default, factor that most 42 Mechanical Contractors Associations of Alberta, B.C., Manitoba & Saskatchewan 2008

Table of Contents Feed for the Digital Edition of Mechanical Piping Plumbing Journal 2008

Mechanical Piping Plumbing Journal 2008 Contents MCA Canada Chairman MCA Alberta MCA British Columbia MCA Manitoba MCA Saskatchewan Alberta British Columbia Saskatchewan Manitoba Demographics & Management Employees Insurance – The Pros & Cons of Subguard® Construction Sector Council Data Richmond Olympic Oval Uses the Ice to Heat Things Up B.C.’s Hydrogen Highway™: The Hydrogen + Fuel Cell Alternative The Manitoba Hydro Tower Project Index to Advertisers

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