Observations on changes in Calgary’s engineering job market


By:  Kevin Noakes & Paul Bowers


It is a precarious time for the piping design and engineering business lately in Calgary, Alberta, Canada. New projects are being delayed, workers terminated and rumors of more layoffs to come occur on a regular basis in a location formerly a center for the design and engineering of new oil and gas facilities in North America. The recent dramatic declines in capital expenditure expansion investment in Alberta and loss of jobs in general have been foreshadowed by the continuing decline in new engineering project work in Calgary as an increasing amount of engineering project work/jobs have been outsourced offshore in work share arrangements. This has been a profitable solution to both the historic shortage of, and high dollar cost for, technical personnel/professionals in Calgary.



In a city where, historically, engineering recruiting services were concerned there were not enough technical personnel available locally to do the ongoing and expected new project work, now there are too many. What happened? Globalization and modern communications offer Alberta-located engineering companies that are awarded Alberta-based project work the opportunity to demobilize (terminate) local staff in Calgary (or just not hire them), while simultaneously sending hundreds of thousands of man-hours of project work to what are euphemistically called high-value engineering centers; as opposed to the more descriptive “cheap labor offshore engineering centers” (CLOECs). Increased use of data-centric 3-D industrial plant engineering modeling software has simplified and facilitated the outsourcing of engineering, design and drafting work. Software licenses can cost tens of thousands of dollars per user seat, dwarfing the already expensive cost of the computer hardware infrastructure for dedicated workstations. Also expensive are the people needed to operate and maintain this software, with Calgary and region senior user/designers and system administrators being paid in the $100/hour Canadian, or equivalent, range. The coincidence of an increased use of data-centric 3-D industrial plant engineering modeling software (which simplifies work distribution), inexpensive offshore labor trained in software operation, and available, reliable and affordable Internet service at offshore locations made it a good time to outsource the engineering, design and drafting work at man-hour costs significantly less than in Calgary and accept potentially lower quality work. 


Three major factors are at play here and are reminiscent of the fire triangle. Remove any one of the three elements and the resulting reaction cannot occur. This is the new era of high-value engineering — “distributed engineering, design and drafting” — using 3-D modeling data-centric software performed overseas in a low-cost city/region and often marginally supervised by local staff with limited oversight, time and authority to improve any initial, provisional design work. Calgary engineering and design coordinators from the consulting company are being relied on to interpret, verify, validate and revise unacceptable work (if any) that may be caused by lack of direct on-site supervision and miscommunication of issues, etc. Clients are most often paying minimal rates for software operation skills rather than design discipline knowledge, experience and talent, while simultaneously unemploying many of the Calgary-located piping designers and engineers in the very place where the facility being engineered is to be built.


Work share is a business strategy to lower costs to clients and increase profit margin for the consulting engineering firm. This has been in the planning for the execution of projects by the multinational engineering companies that specialize in new plant (green field) design and engineering for the past five to 10 years. And once started, it has become a self-consuming vortex that initially feeds on a local belief it is in the interests of all to participate in this practice to drive the “blended” costs of labor (the chargeout rate that averages the cost to the client/owner for the work share team here and offshore) down and give the advantage of winning a project award to the engineering firm that has a CLOEC. For new plant design, CLOECs are a fact of life. Work share is not practiced in the interests of developing or sustaining the Calgary/North America engineering and design job market. Should engineering companies be interested in supporting the local job market as good corporate citizens who expect and enjoy the benefits of a stable economy? The reality is maximum profits are the expectation of investors and lower costs are the expectation of the clients. Outsourcing work to CLOECs is a marketable cost-saving alternative that has been easily sold to cost-conscious clients by multinational engineering companies.


It’s desirable in most business enterprises to have a smaller, less expensive but more capable team to do the work. The latest engineering design modelling (3D data-centric) software enables a faster design process with fewer participants performing software-enhanced design via “expert systems” with less experienced design and engineering personnel. Current 3D data-centric design modelling software guides more junior designers through many complex tasks formerly performed by much more experienced and expensive personnel. This obviously offers a competitive cost advantage and is an echo of the way that CAD has rendered obsolete many of the skills, and some might say, talents, required of draftsmen whom once used pencils and inks. 


A further cost advantage gained by engineering companies, on the back of this new design and engineering software technology, is to outsource that work to regions that pay anywhere from one-tenth to one-third the labour rates common in western countries. Workshare arrangements take many forms. One example of the practice of workshare is that of a national petroleum company owned by a foreign government requiring the engineering partnership of an Alberta Province based engineering firm, with an engineering firm controlled by that foreign government, as a precondition for the award of an oil and gas project. Total Project Cost Repatriation is a business strategy offered as a value incentive by Alberta engineering firms to foreign national petroleum company resource owners in order to acquire project work. This ensures that their investment in a resource development project in Alberta has as much as possible of the engineering, design, material procurement and construction into fabricated modules is done in the owner's nation and performed by that owner's work force. The prefabricated modules are then shipped to Alberta for installation and interconnection. The successful engineering company awarded the project manages the work process to ensure the proper permits and documents are sealed and approved by Alberta engineers. Regardless of where engineering documents are produced they must carry the seal of an Alberta Professional Engineer in order to be built or installed in Alberta. Here a market exists for rechecking the owners' documents by engineers who have the authority to make needed changes (if any) to unsuitable designs. This adds the value of local technical competence and familiarity with provincial/federal regulations. There is some risk of  engineering companies in Alberta becoming little more than gateways and approval-stamp clearinghouses for work performed outside of the country and the irony of the advanced stages of workshare, where all of the new plant facilities work is outsourced or offshored, is that the only thing that may be made in Alberta is the legally-required stamp of engineering assurance on the construction documents! Is the next step in this repatriation of the Total Installed Cost for these plants their installation in Alberta by "High Value Foreign Labourers"  brought in to workshare the installation construction?


Exxon blazed this trail a few years ago. About two hundred oil and gas production modules were built for an Imperial Oil plant in Alberta with most materials and fabrication sourced in South Korea. The only controversy though, was an outcry from the people of Montana about shipping them across their state roads, not about their overseas manufacture, devoid of many jobs for Canadians; and now Suncor follows this strategy and will have the Alberta Fort Hills mineable oil production facilities project design engineered and process plants manufactured in South Korea. Other indicators of the shift in the engineering industry job market are that the majority of recent inquiries and sales for SPED piping design training material and demand for piping design and engineering instructors now comes from middle eastern and Asian nations, there are increasing numbers of international personnel recruiters fishing the North American job market for project management and technical supervision expertise to work in Asia and there is a growing job market locally for Alberta engineers to 'seal' out of Alberta Province engineering documents.


The challenges of increasingly complex task replacement by automation and offshoring work are not unique to the business of process facilities engineering and existing oil and gas extraction and production facilities still need to be maintained. However, while Alberta engineers and technologists are left with the 'brownfield' asset maintenance and process de-bottlenecking sustaining project types of work, this situation is not conducive to on-the-job skills development and the maintenance of a local well-trained competent, well-paid workforce.


Increased use of data-centric 3-D models, reliable worldwide Internet and inexpensive offshore labor combine to undermine local engineering employment possibilities. It takes a lot of personal investment and time to complete the training and develop the skills necessary to work and be successful in the engineering and design side of the oil and gas industry. Engineering knowledge and project execution processes and methods are being replaced by both software-imposed (and software-limited) protocols and tasks sent overseas. These factors correspondingly erode opportunities for on-the-job training, education and technical experience, resulting in “apprenticeship gaps” between new graduates and highly experienced professionals.


There’s an economically advantageous incentive and capability for global reach engineering companies to train and integrate a new technology-equipped offshore workforce and strategically shift the centers of engineering excellence from Canada — transferring their engineering and process technology. As offshore workers are increasingly relied upon, stepping rungs are removed from local designers and engineers climbing the experience ladder — further undercutting local job market expertise by removing the means for developing these skills and future local engineering employment opportunities.


The need and desire for technical expertise to be learned and developed in this field, combined with the loss of engineering challenges of new plant (green field) projects, will also reduce the number of potential designers and engineers interested in training in this field and further diminish the availability of local experts. The longer-term implications of workshare outsourcing are the eventual decline of local and national abilities to execute these complex engineering projects.


This is the elephant in the room: the importation of unemployment into Canada through the exportation of local project work. Global reach engineering companies are not attempting to replace Canadian workers with foreign nationals with work visas. Project work will just not be done in Canada at all and will be done exclusively by foreign nationals in their home countries with no need to come to Canada. Global reach engineering companies are using this business strategy to siphon off local project work to their overseas affiliates, creating the need for local engineering companies in Calgary, Alberta, Canada, to follow suit and establish their own cheap labor overseas engineering companies. It’s no longer viable to do the engineering work in Canada when overhead and operating costs put you out of the price expectation ballpark when bidding for local project awards.


Canadian workers and companies cannot compete with labor costs from nations that have limited social welfare infrastructure, pensions, health care and minimal taxation costs, with little or none of the regulatory burden and environmental controls Canadian society bears. This is not an even or fair playing field on which corporations based in any Western democracy with their regulatory tax burdens can hope to compete for labor costs. Offshoring work removes this overhead and operating cost. It also removes the need to pay the taxes that support the Western taxpayer-funded social infrastructure in which they reside. 


  The same workshare elephant visited the rooms of the formerly flourishing textiles industry in the province of Quebec, Canada, 30 years ago and, 15 years later, the formerly hardy manufacturing industry in the province of Ontario, Canada, decimating these industries as production fled to low-cost, high-value production centers. Social economic order requires checks and balances be put in place to regulate socially destructive economic incentives to avoid and evade social costs and taxes. As long as there is no requirement for a construction project or installation in a province of Canada to have some portion of that work done in that province, work will continue to flee to the lowermost international labor markets. And for the work that does flee, taxing the activity of workshare (any outsourced, offshored contracts) over the total installed cost of the outsourced project work — to recapture this lost, corporately avoided tax revenue — will help sustain our infrastructure and level the workshare playing field. Otherwise, Canadians possibly need to consider outsourcing our legislative governments and as much of our social services as possible, and be free of the pension, health benefit and infrastructure costs for doing it. Surely we could rely on low-cost, high-value government centers to do the same amount of “not very much, not very well” for a fraction of the cost it is done for us now.



Originally published in 2015 Business & Industry Connection BIC Magazine