With 35 years of business experience and a lengthy list of successes under their belt that no other First Nations company in Quebec can rival, for the Cree Construction and Development Company (CCDC), declaring a deficit for this past fiscal year may be a serious matter but is no reason to break out into a sweat.
While CCDC President William MacLeod admits the subject isn’t the easiest topic for discussion, he felt it was wiser to approach the Nation to explain why this was happening with the entity and also why it isn’t cause for alarm. For that matter, as he explained, it is a very normal part of the construction business.
Simply put, the numbers that are currently being crunched and are about to be reported are merely temporary. Within the next few weeks MacLeod is anticipating that while the company actually did about $95 million in managing contracts last year, they probably will be declaring an $8 million deficit stemming from outstanding claims on two projects.
“For this particular year, we are looking at around eight million in deficit, but the real figure won’t come out for a few more days.
“There are some additions that we have to look at. I mean there are some change orders from revenues that need to be confirmed and when those particular figures come in then it will lower our actual deficit. However, we definitely will be going into a deficit,” said MacLeod.
While CCDC did a wide range of contracts last year, there were two particular projects that have brought about this current challenge – a school project in Chisasibi and a water-and-sewer job in northern Manitoba.
As MacLeod explained, within the construction industry there is a normal process known as a claims process and this is applied where there are unforeseen circumstances, such as soil condition or design changes or any other issue that could make for a cost overrun.
While the company usually will try to make an agreement with the client during a project and when this happens it is called a change order. With a change order both parties agree on the price of a particular change in the plans or it could be additional work that is requested.
“That is how you usually change the work, but in some cases, it doesn’t work like that. Instead of a change order you go into a claims process and claims have to be put down. The construction company has to put down exactly what the issue is or what happened with that particular contract and what the impact was to the schedule or the actual budget,” explained MacLeod.
In the case of the Chisasibi school project, CCDC encountered some design changes, which created financial impacts that increased the cost of construction. This in turn spilled over to affect wages, supplies and schedule.
In the case of the water-and-sewer job in Manitoba, due to the largest rainfall ever recorded in that province, flood damage resulted in a loss of productivity from farmers to cottage owners to construction companies.
While CCDC has currently entered into the claims process for both of these projects because you can never record claims as a source of revenue until after a settlement, the $8 million remains part of the 2011-2012 numbers.
“Hopefully we can resolve these claims within this fiscal year 2012-13. Then we can report it as revenue and it actually goes right down to the bottom line. And it goes back to that particular contract, like the school project, that is where the claim will be with the settlement as that is where the deficit will show. With the school, we lost x amount of dollars and when we resolve the claim it goes back up,” said MacLeod.