February 10, 2006


No guarantee with warranty program

Builders nervous of what the ministry will roll out

Ontario pavement contractors are nervously watching how the government’s new seven-year pavement warranty program will unfold this year. A major concern is whether projects will be bondable and, if so, will sureties favor major road builders only.

After discussions with the surety industry, Rob Bradford, executive director of the Ontario Road Builders Association, said up to now sureties won’t guarantee that they will write seven-year bonds.

They might underwrite a three-year bond, renewable for three years and then renewable for the last year. But that formula leaves road builders on edge, Bradford told the Daily Commercial News at ORBA’s AGM and Convention Tuesday in Toronto.

“If you were in the surety industry, wouldn’t it make sense to collect your money through the early part of the project when nothing is going to happen to the roads?” he said. “It really makes me suspicious about whether anybody is going to get that seventh year.”

If the bonding can’t be renewed, under the current arrangement of the warranty program there will be a penalty to the contractor of two per cent of the contract value.

ORBA fears the program could become exclusionary, with only the largest contractors able to secure bonds for the seven-year warranty contracts.

“That’s what it looks like at the moment unless the ministry can make some arrangement with the surety industry and calm their fears a bit,” said Bradford.

Calling it “a competitive limiter,” he pointed out from a surety point of view the medium and small contractor would be excluded.

“It’s an issue that has to be dealt with because at the end of the day when a contract closes and I find out 80 per cent of my members couldn’t bid it because they couldn’t get surety, then ORBA will have a problem with the way it is set up.”

From the Ministry of Transportation’s perspective, the warranty program makes good financial sense because it cuts out administration costs and pavement testing.

He suggested that the ministry believes roads will be of a high standard if the contractor’s job is to design and build it to meet the seven-year warranty.

“I tend to believe that as well,” Bradford said. “I think that the smart contractor will go into the bidding with enough money to design a good pavement; otherwise, he probably doesn’t want to be there.”

There have been discussions in the past about setting up warranties for pavement overlays, Bradford said. “That is where we really get scared because we don’t know what’s underneath, what caused the old pavement to fail. Consequently, how can we with any authority say we’ll just throw something on top and it will be fine?”

The ministry of transportation attempted to implement a program eight years ago.

In a session on pavement warranties at the ORBA convention, Gary Leon, senior design engineer of MTO, told delegates while the MTO understands the association’s concerns, at this time it doesn’t have any options. “We would like to hear some ideas on it and we are in contact with the bonding industry to see if there are any alternatives to the current set up.”

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