A St. Albert-based company has emerged the winner of a $205-million construction project in Edmonton.
In a joint venture with Prairie Roadbuilders of Acheson, local Alberco Construction was awarded a contract to build a highway interchange on Edmonton’s south side, at Queen Elizabeth II Highway and 41st Avenue SW.
Ron Simonsmeier, president of Alberco, said the companies decided to bid on the contract together to support their local workforce and economy.
“We needed to look at bidding on a bigger project like this in order to remain sustainable and compete with some of the big multinational firms,” he said.
“It’s just the way the owners are packaging these projects that has made it necessary for us to team up so that we can actually submit a bid on a project like that.”
The firms competed against national and international firms, including Edmonton’s PCL Construction and Aecon Group of Toronto. With a bid of $146 million they were more than $55 million below the highest bidder.
(The difference between the winning bid and the total value of the contract – $146 million versus $205 million – is attributable to land and engineering costs.)
Simonsmeier said he worked with Prairie Roadbuilders in the past and both companies knew each other well. Prairie Roadbuilders was established in 1981 and is a grading contractor with expertise in paving and drainage and underground work.
Alberco is a specialist in bridge construction and rehabilitation. The 51-year old company has worked on a number of Edmonton-area projects in the past such as the Fort Edmonton Foot Bridge and interchanges at Callingwood Road and Lessard Road at the Anthony Henday.
Collaboration among smaller, family-owned companies is not uncommon, said Prof. Peter Jaskiewicz of the University of Alberta School of Business.
Contractors may prefer larger, multi-national bidders with more experience but often favour smaller companies that specialize in a niche market and care about their reputation. They also know the locale and can easily be held responsible for a project, he said.
“Family firms care far more about their reputation and the stakeholders and that is often because they are exposed. You know who the owners are,” he said.
Collaborating with other firms gives family run firms an opportunity to grow their knowledge and keep overhead costs low.
Instead of investing a lot of money into hiring employees and machinery for every new project they can rely on their partner to supply the necessary expertise, he said.
“You could also say that for the client there might be less risk because if one (company) has more trouble the other one is likely to help out,” he said.
“And if it’s a larger project that requires a bit of machinery and investment it might be good to split these investments.”
Jaskiewicz added that losing to smaller companies puts pressure on the bigger players to reconsider their expenses and creates better competition in the marketplace.
And while forming a successful alliance requires businesses to share similar values and to know each other well, they may even decide to joint venture permanently, he said.
“The family firm thinks in years, if not generations, because they intend to hand over the firm to the children," he said.
"They need to focus on sustainability and a project that makes sense in the long term.”
Construction of the interchange is expected to begin in July and last three years, with most of the work taking place in 2014. Alberco will build four bridges on the interchange.
Simonsmeier said his workforce will likely increase over certain periods of the construction phase. In the summer, Alberco usually hires about 40 workers on top of their 60 regular employees.
“We have some solid work for the next three years and I would say that it is also an opportunity to look at this type of work again in the future as a joint venture situation,” he said.