Tree planting low bidding: desperate or optimistic?

No one is surprised that some B.C. planting bids for 2009 came in low. There was some surprise at just how low.

So low in some cases that clients, particularly the Forests For Tomorrow program, are wondering how contractors will perform at these rates. The FFT program represents about six percent of the total reforestation effort next year, which is estimated around 215 million seedlings; down from approximately 250-million in 2008. Whether the FFT is a bellwether of the whole market is uncertain. Nevertheless the same depressing trends have been reported for some BCTS and MoFR contracts. These anecdotal reports would corroborate conjecture that low bids, particularly very low bids, are wider spread than just FFT. But BCTS represents on average around a quarter of the total tree planting for the province. The balance, say 70 percent of the program, is industry activity which is not available to much scrutiny. Without a complete picture it is hard to say how much of the industry is potentially operating at a lower rate than what it will take to stay in business. This of course is the main concern.

This concern is exacerbated by the noticeable trend in the FFT bids where low bids—low compared to last year—were not just single outliers, but whole clusters of very low bids. This would suggest the invisible hand of the market place was herding a significant share of the silviculture sector down a steep slope. But before we conclude a lemming migration is underway let’s bear in mind we are dealing in averages, estimates and a very fragmented synopsis of overall price behaviour. The averaging of course does not reflect actual events. The market does not average its effects in reality, so the apparent down turn is not evenly distributed. As a result some contractors and regions have been particularly hard hit and are already emerging as casualties. Unfortunate as these losses are, they may not be representative of the whole; at least not yet. So we have to be careful about what inferences to draw at this point about the health of the silviculture sector even though our own informal polls show almost all contractors working at well below their capacity. That will have an effect in terms of workforce retention, profits, investments and resolve.

Less ambiguous however, is where these trends will lead us as they continue. Our most optimistic projections for the planting season of 2010 based on seedling orders for 2009 bring us in around 180 million seedlings. This is well below the 200-million seedling minimum needed to maintain nursery capacity and the current contracting industry. Losses and closures will then become less the exception and more pervasive. The silviculture service sector will suffer true and irretrievable erosion of production infrastructure and other entrepreneurial capital including its workforce. This is no time to invoke any simplistic notions that wise market forces are simply correcting for some excess in the silviculture sector. I can’t think of a worse time to shed capacity than now as we face over 12-million hectares of forest under assault from the largest insect plague on the planet. As well our government has willed a response to green house gases for British Columbia that includes a major reforestation effort. But without a robust silviculture sector it will not have the means to achieve much on these promises.

Of course this planting season’s low bids, regardless of how widespread (or not), are still not good news. They represent a loss that will have to be made up from somewhere else. But whether they are sheer desperation and the prelude to collective catastrophe we should hold off on pronouncing. It may be more constructive, in spite of those who have lost work on account of them, to view these bids as expressions of optimism. Maybe misplaced optimism. But optimism nevertheless, that things will work out and there is still a future in our sector. People don’t bid thinking they can’t succeed. Let’s hope then that government commits in the very near future to significant change in forest policy and practice—say a clear commitment to a major silviculture response to the MPB—to warrant that optimism.

John Betts,
Executive Director
Western Silvicultural Contractors’ Association
hotpulp@gmail.com
Ph: 250-229-4380