Third party verification services stress Ontario contractors, suppliers

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 ISNetworld and other services win major clients with online compliance management systems

Ontario Construction Report staff writer

Several Ontario contractors and industry suppliers have expressed concern about the increasing prevalence of third-party verification services and their impact on administrative costs and client relationships.

These organizations have expanded from their U.S. home bases, especially within the petrochemical and heavy industry sectors, to Canadian markets.  One of the largest, ISNetworld, plans to open a Toronto office in January. The company has won contracts with the Regional Municipality of York and Ontario Power Generation, among others, and is seeking to expand its business in Ontario, Quebec and Atlantic Canada.

The verification services consolidate and validate health, safety and regulatory compliance documentation, removing the administrative and verification challenges from owners. In return, contractors and suppliers purportedly gain access to business opportunities, ensure their compliance with a myriad of rules and regulations, and have a one-stop system to manage their compliance requirements.

“ISN’s online contractor management platform, ISNetworld, is a global resource for connecting organizations with safe and reliable contractors,” says ISN Canada director Kim Ritchie, based in Calgary.  “ISN collects and reviews health and safety, procurement, quality and regulatory information from more than 56,000 subscribing contractors across 75 different countries. Established in 2001, ISN’s mission is to improve the efficiency, compliance and safety performance of ISN’s hiring clients and contractor customers.”

“The contractor requirements in ISNetworld are determined by the hiring client,” she said. “ISNetworld is a tool to help hiring clients review this information in a centralized database.”

However, Clive Thurston, president of the Ontario General Contractors’ Association (OGCA), says his office has been receiving complaints about the third-party verification services.  “We are pushing back hard, and this will be a contentious issue.”

One contractor, who has had to work with the third-party services for several years because his multi-million dollar Sarnia business serves the petrochemical industry, described his frustration with their business practices.

“In my personal and professional opinion they are the most unprofessional organizations I have ever seen,” the contractor said.

(The contractor, and some others interviewed for this story, asked not to be identified publicly. “I would be very afraid of retaliation if my name is published,” he said.)

“What they do, and how they work, is that they go to the client base, and sell the client a bill of goods. That bill of goods is we will make sure everybody who works for you is safe, and we will ensure that.

“The clients wanting to get out of responsibility for safety hand that over to these companies, and once these companies get your names … they come to you for money.

“The dollar value goes up substantially,” the contractor said. “It’s a fairly substantial increase each year. You have to pay that or they go back to the client and tell them you are not safe.”

Contractors and suppliers say the third-party verification services have dramatically increased their overhead costs, in some cases requiring enough labour and time to add $10,000 a year in expenses per client. This is a significant cost for larger businesses/clients, but can be truly extreme for smaller businesses and contractors seeking smaller contracts with organizations using the verification services.

For example, Marc Ally, vice-president of Almon Equipment Ltd, which specializes in road maintenance and traffic control signage, says: “If I divide the costs by the number of clients who use this service, it can be upwards of 10 percent of the annual contract values.”

He says he is careful to track his compliance costs, because ultimately these must be factored into his bidding prices.

Sometimes Ally says he is puzzled by the documentation requests, for example, for training and safety practices that have no application for his business, but are mandated through the standard processes set by the third-party services and their owner-clients.  The Ontario Power Authority, for example, requires “safety gear and knowledge of electrical systems” when his staff will only visit sites briefly to drop off traffic control equipment.

“We have a requirement for respirator training,” he said – and his organization needed to train and fit two employees with respirators, for example. “This is for a different client. The main point being that to continue to do work for a client I had to get respirator training and fits even though the certifications will likely expire before my employees use the training or devices a single time.”

However, Ally says he appreciates that there is a need for the verification process.  “It just needs to be refined a little to be administered a little easier,” he said.  “What needs to happen is things should be set up with different limits.”  Smaller contracts with lesser requirements would need to file and maintain the appropriate documentation level.

“Approximately 50 per cent of ISN Canada contractor customers (those with fewer than 10 employees) pay $700 to $875 annually,” said Kim Ritchie with ISN. “This all-inclusive subscription allows contractors to report their information to an unlimited number of hiring clients in ISNetworld. ISN’s pricing is posted on its website (www.isn.com).”

Paul Casey, vice-president of programs and strategic development for the Infrastructure Health and Safety Association (IHSA) says hundreds of contractors have gone through the rigorous process to complete the Certificate of Recognition (CoR) process, backed up by field audits.

He said he doesn’t wish to speak against the third-party verification services, but wondered if owners have a false sense of security in the document verification process because they aren’t backed up by actual audits.  The third-party services add financial and administrative costs for contractors who are already making sure they comply to the highest health and safety standards, he said.

ISN’s Kim Ritchie says her organization’s “Review and Verification Service (RAVS) includes a team of health and safety personnel that review and verify contractors’ written health, safety and environmental programs meet regulatory and hiring client requirements.

“ISN does not currently perform field audits in Ontario,” she said. “We see this RAVS process as complementary to the IHSA CoR program.”

Other contractors suggest that the third-party services are playing both ends against the middle – using their arrangements with owner clients as a leverage tool to sell services to the suppliers and trades hoping to do business with the clients.

“I have been approached (from ISNetworld) from the Region of York, in Toronto,” said the owner of a GTA-based millwright services business.  “They state it is a requirement to do any work with the region.  They called my number multiple times requesting me to fill out their application and a fee would have to be paid, never disclosing what it may be.”

“My impression was that it was an unjustified money grab,” he wrote.  “I felt it was not legitimate and that the region should have a Canadian firm responsible.”

Another contractor, describing a verification service not associated with ISN, said he paid the service fee because he had learned from his lawyer that another one of the lawyer’s clients “had leased space in a building in Toronto” with the requirement that only organizations registered with the third-party service could do the work.

The contractor examined the project, and observed that the only qualified bids the owner had received were well above what he would charge for a similar job.  He paid the fee, and won the work.

“It was the most bizarre set of circumstances,” the contractor said.  The third-party organization told him that “we have to train you in driving certification,” he said. “If you park in this business you must be trained by us” for an additional fee.

He declined.

The contractor indicated that he soon found that the opportunity for profitable work turned into a one-time chance; and did not receive any additional business through the third-party service.

Meanwhile, Gayle Suderman, director, human resources and safety at the Chant Group, an Aurora, Ontario-based program, project and construction management company, said her business had excellent relationships with one of its clients, with multiple contracts and a solid health and safety record, before the client organization signed on with ISN.

“Since signing on with ISN we have yet to have one,” she said, adding “we feel a separation from the rapport we once enjoyed with our client, similarly, the client may also have an unclear perspective on the pool of service providers they have to choose from.

“It’s hard to know, because ISN is a barrier between us and our client,” Suderman wrote in her letter (published in full in ontarioconstructionreport.com).  “I’m not sure that the client even knows who we are. We are lost in the digital ‘to-do’s’ of ISN. In the end, we are forced to develop safety policies and work plans we will never use in the type of work we perform and have thrown up figurative hands in frustration, resigned to submitting these work plans simply to get a green checkmark in the required categories.”

Suderman, and at the representative of at least one other business who asked not to be identified publicly, said further problems have occurred when ISN sends up red flags about missing WSIB clearance certifications. Suderman says in many cases, the necessary paperwork has been filed in a timely manner, but ISN’s digital systems sense for some reason (which she says isn’t transparent) that the certificate isn’t in order, and red-flag the client.

She says she is concerned that Chant may have lost business, because bidding opportunities won’t be posted to the company when the flags are in place.

Before the third-party services came into being, she says she could communicate directly with relevant staff at the owner organizations, clarifying points and resolving any issues in a timely manner. Now everything is covered in what she indicates is a digital fog, where the relationships have been replaced by check-boxes and mandatory filings to comply with rules and policies of no relevance to her business scope of work.

Ritchie from ISN says “Contractor requirements in ISNetworld are determined by the hiring client and by applicable regulation.”

She wrote that safety programs required for contractors are based on the province where they work, the type of work they are performing and the hiring clients requirements.  “Contractors can request an exemption if they feel a program is not applicable to their scope of work,” she said.  “These exemption requests are approved by the hiring client, not ISN.”

However, several contractors wrote in emails and said in phone conversations that they discovered the exemption process has been cumbersome and it is often easier for the contractor just to make up a policy, which will never be used. The problem, however, is that to do this right, the policy must be incorporated into the contracting company’s manuals and systems, and every change needs to be verified and communicated internally, creating a massive, expensive and frustrating paper-burden to fulfill requirements that would never be experienced in real life.

Ultimately, some contractors say the cost of the third-party services must be passed on to the client.  “We have had to add the cost of this service to a prequal we’ve submitted for Ontario Hydro,” one contractor wrote. “We’re recently had a request from the Region of York requesting our participation with ISNetworld if we intend to continue pursuing projects with the region.

“I’m not sure what the value of this service will be to our company, as the onus has always been on us to supply written safety programs, insurance certificates, training documents, WSIB clearance certificates and/or SWIRs, MAP certificates and any audits we have participated in to the entity we are submitting the prequalification to.

“If we go to tender and win the bid, we are still required to submit all documentation.  For those contractors who are CoR certified, this is all a part and parcel of these requirements. This service may assist the entity with streamlining their paperwork, but what I see from my end is duplication of work, more cost to submit a prequal and less profit on the project.”

Ritchie says ISN holds user group meetings across the county, to allow contractors to meet with their hiring clients and ISN representatives in person.  “In addition to setting up help desk sessions for contractors that would like one-to-one support, hiring clients can also provide a presentation covering their contractor requirements and expectations.  All current ISN contractor customers are invited to attend. Invitations are sent through their ISNetworld account.”

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