Archive for February, 2011

Time for a Construction Revolution?

I read an article in The Times the other weekend about how the uprising began in Tunisia with a simple story about a fruit and veg man being badly treated and how that subsequently spread to the events we all saw in Egypt, and now other countries too.  It got me thinking (dangerous I know…)

The thing about being an SME, or at the lower end of the food chain, is that it’s a very hard and lonely place to be right now.

You’ve got the big companies holding on to your cash for longer. Getting paid after 60 or 90 days is not uncommon now and, really, for no other reason than to fund the way they are pricing their work. It looks good to their backers as it appears they’ve cash in hand at the bank. Everyone knows the game.

You’ve got your own banks telling you to get your cash in earlier otherwise they’ll, well, you know what… to you.

You’ve got the Government fiddling with red tape and employment laws making it even harder for you to know what’s best for your business. Can someone tell me what the new retirement changes will mean to an SME for instance?

And in the end all that happens is any little profit you may be making is squeezed out of you when you get hit by, yes… a bad debt!

Sounds like I’m speaking from experience here and, well, I am… I’d love to give you a few real case studies here, but I’ll keep quiet. Maybe that’s another blog….

So what to do?

Building did try and get a campaign going last year before the election with their Charter 284 Manifesto… Remember that? It had the great statistic that every £1 spent in Construction is worth £2.84 to the Economy. That’s a fantastic statistic and makes our industry one of the most important to the Economy.

So what happened to that? Well all we’ve had since then is cuts in spending and more cuts in spending. Why wasn’t our voice heard? I don’t trust the new way in which the Economy statistics are being produced either at the moment. Who feels like our industry grew by 8% in the fourth quarter of 2010 compared to 2009?!

Surely it’s time for a Construction Revolution of our own?

The RICS has tried again to kick things off in it’s own way with a call for a reduction in the VAT rate on the repair and maintenance of homes to 5%, which they calculate this could lead to £17bn of benefits to the Economy by 2019. But is anyone at the Government really listening to us? I think not…

It’s time for some action from us in the industry to make the Government truly understand how important this industry is to UKplc.

So what to do? I wish I knew but if there were enough of us ordinary everyday people in the industry who could get together and start a campaign for some action to kick start things then I’d be up for the revolution!

Measurement is for Dummies!

Shhhh! Here’s something that we’ve kept secret over the years:

We don’t mind teaching people how to measure properly (if you’re interested that is) to SMM7 standards.

Shocking I know isn’t it!

You see the thing is the more people that know the better the standard will be in the industry for us all.

A bit of an outdated view perhaps?

Well what is the first thing anyone wants when they price a job? A set of quantities, what else would you need? And the thing is it’s getting harder and harder to find people that can do it.

So here’s the deal (I’m sure that’s a line from an advert, and this is one by the way) we recently did a training session for a contractor for his staff on groundworks. We used a sample of a current job they were looking at as the basis of the session.

Result:

They liked it

We liked it

We taught some younger folk the rudimentary elements of taking off, and they also found some mistakes in the tender they were looking at – potentially we saved them a lot of money as a result!

Everyone happy!

It’s my favourite topic at the moment, measurement or the apparent lack of it by the RICS in encouraging it to be taught. If you saw their recent training brochure dated January 2011 there’s absolutely nothing included for it. Unless of course you include (no offence guys) teaching estate agents how to measure gross or net internal floor areas for the sum of £295 per person! Now how on earth are all these new recruits going to know how to do things? Rely on the Universities? But they aren’t teaching it! It’s dreadful…

So for those of you who want a little taster of the sort of thing we can offer, have a look at this link to our website on the basics of how to measure excavation and earthworks – I hope you enjoy it!

Advertisement over!

The Cash Flow is Your Friend

Ah, the power of social media! This week I have a guest post from Stuart Petrie-Tootell, who approached me on Twitter after reading my blog! You can follow Stuart on Twitter here and read his own blog here.

Stuart is a Chartered Quantity Surveyor, and has spent the last 10 years working in the Consulting side of the business. He has spent the last 3 years working in the United Arab Emirates, mostly on projects in the property sector. During his free time he has his hands pretty full with looking after his three children and enjoying all that the UAE has to offer; beaches, malls and 4×4 driving in the desert.

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We’ve all seen the standard shallow “S” curve, the one you find located somewhere at the back of your monthly cost report, and if you’re lucky you receive an “updated” cash flow with each contractors payment application, which shows a variance so wide between “forecast” and “actual” that you would be forgiven for thinking that you were looking at the spend profile of two different projects. Sound familiar?

It shouldn’t be like this, in my view the cash flow forecast should be the most important tool in the PQS’s kitbag and should be looked at with the same level of scrutiny and frequency as a Project Manager does with the programme, after all – isn’t this what it is based on? Too many times I have received a contractor’s cash flow, which comprises a single line item; construction works, and when challenged on how it is built up you get a feeble “it’s just based on a standard “s” curve”. Not good enough guys, as this is the barometer for performance.

These days with pretty much every contractor and probably most sub-contractors having access to software such as Primavera and the like, there shouldn’t be any reason why a project programme can’t be resource and/or cost loaded. Then, it should only be a matter of a few clicks and a nice bit of wizardry in your spread sheet to produce a nice curve, ok so it may be a typical “S” curve – but at least now there is some detail behind it that you can get into and interrogate and you should be confident that the two documents; programme and cash flow are actually talking the same language.

Detail is another key…..I’m not saying we need a cash flow that details right down to every last screw, but let’s at least have the cash flow broken down into the same level of “elemental” or “works package” detail that the programme is; in fact let’s make it a key deliverable under the Contract, detail the requirements in the preliminaries and make it an item for the pre-start meeting agenda.

What I want is not so much a “cash out” schedule, making allowances for payment duration times, retention deductions, advance payment recovery etc (although I acknowledge how useful this is for the Client trying to work out his bank draw down requirements etc), what I want is a tool where I can sit down with the PM, Construction Manager, Architect and say “look guys, in 3 months time we’re due to spend $m on floor finishes; has the “equal or approved” stone type been selected? Has the sample mock-up been signed off? Have we resolved the RFI over screed thickness?”, or “we start to spend on internal doors next month, it’s half way through this month, so why can’t I see any door materials on site? Are you having supplier procurement issues?” etc etc, you get the picture.

Very quickly you can see that it moves away from being something that gets updated once a month when the valuation has been agreed just to show you just how much you missed the months spend target by, to a tool where you as the PQS or PM can actually have a pro-active involvement in steering the Contractor towards the common end goal. Sure, there can be a few difficult details to work out, like; do variations get put below the line or loaded back in to the elements/trades – my view is that it depends on the extent of the scope of the variation – whether a figure has been agreed and an idea of timescale has been considered prior to the VO being signed off, but the main focus is on being able to manage the base contract works.

So to wrap up, the cash flow forecast is something that you should be looking at on a weekly, if not daily basis. Get in there with the Contractor’s QS, find out whether all approvals have been obtained, find out whether orders have been placed, and be looking 3 months ahead to what is going to be needed to complete the project. It is something that sadly some of my PQS colleagues in the past have been less than enthusiastic to embrace – believing that programme and progress is purely the territory of the PM….. (just wait to see the Contract Managers reaction in the next progress meeting when he’s telling you all that the design, procurement, deliveries and physical progress are all in tip-top shape and then you pull out your cash flow which shows things differently!).

Pitfalls of Design and Build

I was reading the article by Rudi Klein in building magazine at the weekend (yes I still subscribe and get a paper version, old fashioned I know!) and his article HOW TO STAY OUT OF HELL about design risk.

Have to say he has a point doesn’t he? Why as an industry do we separate the design process from construction? As he says any manufacturer worth his salt wouldn’t separate design from manufacture.

But don’t you find that the design and build contract process is being abused?

Here’s a recent example to mull over….

Contractor calls our office: ‘I’ve got a potential contractual problem on a job, can you help me please?’

GFP: Well I’d like to think we can, tell me more….

Contractor: I’m trying to handover a job, and I’m having difficulties because the building was originally built in the wrong place!

GFP: Oh, now that is a problem, tell me more….

Contractor: You see we set the building out as the drawings and documents, all checked out ok on site, and then we looked at the proximity of some overhead power lines to where the imaginary building (as of then) would have been built. And well quite frankly we thought it wasn’t right.

GFP: What did you do? Tell me more……

Contractor: Well we sort advice from the design team who checked everything over and we were told we had built it in the right place. All as per the contract drawings. Except that nobody had considered the implications of the overhead power lines and the proximity to the building.

GFP: What happened next then? Tell me more….

Contractor: The design team worked out that we had to move the building. So we were instructed by way of a priced and agreed variation under the contract to carry out some remedial works so the building could be built in a different position (now not as the approved planning drawings). This we did and finished the building, albeit a bit later than scheduled. But as it turns out it was only relatively minor works to what we thought could have been a major problem. So we all felt quite pleased we’d come up with a good solution.

GFP So what’s the problem then? Tell me more….

Contractor: The client says it’s all our fault and won’t accept the building.

GFP: Why is that I don’t understand? Tell me more….

Contractor: I forgot to tell you it’s a design and build contract, the design team have been novated to us and as far as the client is concerned we are responsible for all of the design and the risk that goes with it.

GFP: Now I understand, I’m afraid we’ll have to look at what you’ve signed up to. Send us over some documents……

So who is right, and is it the Contractors fault?

To be continued……


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About Me

I’m now the Managing Director of Mynott Associates Limited my own specialist measurement business. I’ve been in the industry all of my life since I left school. My first job was with Bovis Construction as a management trainee where I trained to become a quantity surveyor. I’ve worked for contractors all through my career, I am FRICS, FCIOB and MCIHT qualified and act as an RICS assessor. I’m also a keen Arsenal supporter having followed them from a young boy

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