Mechanical Piping Plumbing Journal 2008

the contractor initially bears the entire cost of the claim, the claim is investigated, and if it is substantiated, pays out the claim – minus the deductible. Depending on the size of the claim, many contractors in Canada simply wouldn’t be able to support that financial burden. “It’s one thing to make a business decision to absorb a large deductible, but something else entirely to take on what could be a multimillion dollar loss that you have to pay for before you’re reimbursed,” says Pavelich. Another substantial detraction from SDI is the fact that, in insurance terms, subcontractors are not parties to the policy and as such are not allowed to view the contents of that policy. So, they are not aware of what they are supposed to be complying with – which would clearly open the door to any number of potential problems should a subcontractor be found in default. Pavelich was careful to add that this may not be the case in all instances, but he believes that for the most part this is a condition of SDI policies. In an article entitled “Some Subs Annoyed with Subguard” published in the October 2005 edition of the St. Louis Construction News & Real Estate magazine, editor Peter Downs refers to the fact that, in order for a subcontractor to get a subcontract award, the subcontractor must submit their current financial statements to the contractor. He states, “Privately held companies are naturally reluctant to disclose confidential financial information, information which could be misinterpreted or taken out of context and lead to rumours that could undermine a company’s abil- ity to get business.” According to Steven Pavelich, this is occurring north of the border as well. “It’s a pretty big issue, particularly when you consider that if there is a dispute over money, there’s a real potential for the contractor to use what they know about the subcontractors’ financial situation against the subcontractor.” The aspect of SDI that has many subcontractors very concerned, though, is that contractors are not required to take on bonded subs, thereby forcing those bonded subs to compete for jobs on a different scale. “It allows general contractors to take bids from subcontractors who aren’t necessarily following the same rules. And the bonded subs want to know that they are bidding against ‘like kind and quality’ contractors,” says Pavelich. “Most contractors require bonds, but when (a large contractor) comes along and says that the bidders don’t need bonds, because they are using SDI, it results in an uneven playing field,” he adds. Simply put, SDI is a product that doesn’t offer the same level of protection to subcontractors as it does to general contractors. And even at that, the number of general contractors with the resources to use SDI are few and far between. When asked for his opinion on the effect such a product could have on the industry, Pavelich is succinct: “It is a tool utilized by a small minority of contractors that tips the contractual equity scale heavily in their favour. There is at best a marginal benefit to subcontractors under SDI, but certainly the negatives outweigh the positives.” Our membership, a leading influence in the building industry by consistently promoting co-operation, trust and higher standards. #203, 2725-12th Street NE Calgary, Alberta T2E 7J2 Tel.: (403) 250-7040 Cell.: (403) 861-7335 Fax: (403) 735-5910 Toll Free: 1-888-265-6665 wilma@smcaa.ca www.smcaa.ca 44 Mechanical Contractors Associations of Alberta, B.C., Manitoba & Saskatchewan 2008 http://www.dcm-mechanical.com http://www.jetlubecanada.com http://www.smcaa.ca

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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