September 15, 2006

Asphalt

Municipalities urged to establish price index

IRWIN RAPOPORT

correspondent

In order to protect their bottom lines, road builders are pressuring Ontario municipalities to adopt an asphalt price index similar to the one employed by the province’s Ministry of Transportation (MTO).

The Ontario Road Builders Association is suggesting a $15 trigger be put in place to deal with the rising price of asphalt. If a contract was secured when the price of asphalt was $300 per metric ton and is now at $500 per ton, for example, ORBA members would cover the first $15 increase of the increase and a municipality would be responsible for absorbing the remainder.

“There is no use putting the contractors into bankruptcy over the price of asphalt,” said ORBA executive director Rob Bradford. “A good number of municipalities are picking up on that and some of our contractors are getting relief on jobs where they bid with low prices – when the price of asphalt was at a lower price.

“Unfortunately,” he added, “there are some municipalities that have said ‘a contract is a contract.’ We will do the work and lose money, and that municipality may not find its relationship with its local contractors as great in the future. There will be guys who will go bankrupt because of this.”

Bradford pointed out it is in the interest of municipalities to have a strong local contracting community, which ensures good work and competition when tenders are brought forward for road construction and rehabilitation.

“Fair is fair,” he said. “Contractors take risks everyday. They don’t mind risk that can be managed and sometimes they lose, but when the risk becomes unmanageable for reasons they can’t control, there has to be a recognition, at least a sharing of that risk, by the owner.”

Last August, the MTO lowered its trigger from 10 per cent to five per cent, a decision that will save contractors money when prices for building materials increase rapidly.

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