Archive for March, 2011

Tender lists, who cares?

Now this might start as a strange story, so bear with me, you’ll get the drift of my theme I’m sure.

Why is it, that assuming exactly the same product is available, if you went to buy it from say, Harrods as opposed to any other high street retailer such as Argos and the like, you’d expect to pay more for it at where?

Well Harrods of course, everyone agrees on that.

So far so good.

Then why is it that a current trend I’m picking up on is to line up the likes of Harrods and Argos against each other and expect Harrods to give you the cheapest deal? Now substitute those names with any diverging set of Contractors or Subcontractors or Suppliers you care to name. Oh and then also have a very extensive list too, don’t just go to Harrods and Argos. Now I can hear you all groan as you say we’ll never win that project with ‘X’ on the tender list they are ‘buying’ work all over, what an unfair listing.

Sound familiar?

What damage is this practice doing to the industry as a whole?

Well here’s my take on a bit of that.

Part of our State of the Economy Survey we carried out recently contained a question ‘Whats the single biggest likely area for costs to increase this year for you?’ We had the usual expected answers of fuel, steel, concrete and the like, see the recent building article we are living  in a materials world for more on that….…but, one of the other top answers was ‘the increasing cost of putting together a bid to win a project.’

Interesting.

Well we know for sure about that in a small way for our contribution of providing bills of quantities to contractors bidding on design and dump, errr sorry, design and build projects these days. Let alone the pqq’s that go before that, the subsequent bid team that is needed and the various documents that everyone seems to require for the bid and then no longer refer to for the duration of the project. As after all who considers those when ‘X’ has put in a bid so much cheaper than anyone else………you go with ‘X’ don’t you……… it’s such a bargain you cannot refuse it.

Now where does everyone think these costs end up?

Well on the face of it with the contracting party.

But in the long run?

Well the end user of course.

 What a waste of time, money and effort.

Who advises clients on this?

Well professional advisers naturally. So come on guys instead of lining up Harrods with Argos, make the competition realistic and keep the numbers bidding to a sensible list. Stand up to Clients who insist on having you compile unbalanced tender lists. You’ll be surprised about the outcome.

And a final thought, what practice came about as a result of extensive tender lists and contractors not wishing to decline a tender opportunity………..

So where is the future for us?

Let’s start with Professor Brain Cox and his wonderful programme on Sunday evenings Wonders of  the Solar System, all burnt up in the sun is the most likely outcome but that’s billions and billions and billions (or whatever he says)…….of years away.

By the way is it just me or does he send you to sleep too, and you have to watch the programme again to understand it?

Well enough of that, we did our annual State of The Economy Survey again this year and one of the questions we posed was where do you think the work is going to come from this year?

And without giving names of anyone away, I thought you all might like to see the most popular answers we received and whether you agree with them or not, so here goes…..

1. High End Residential –and/or high income private clients with money to invest
2. Refurbishment – all sectors
3. Retail
4. Schools, including Free schools
5. Student accommodation
6. Hotels
7. New office developments
8. Health
9. Regeneration of brownfiled sites
10. Infrastructure – power, rail, utilities

Now if any of these rock your boat or are in an area you were or were not thinking about you’ve got some like minded people out there. The wittiest comment of them all however I liked was ‘Finding oil!’

All I can say is the very best of luck for what is going to be another challenging time ahead for everyone associated with the construction sector

If you missed the link above full details are on our website www.gf-partnership.co.uk/news/

Something might turn up…

Now this is a word of warning for those of a nervous disposition……don’t read this! Why?

Well I could be writing about anyone you know in construction right now…..

I read the article The Eye Test in last Fridays ‘building’ magazine, page 42/43 if you happen to get a paper copy, or here’s the link if you subscribe.

It’s a message for all company directors out there, don’t take risks at the expense of the support of your creditors.

The gist of the case was about a property company continuing to trade beyond the point any reasonable person would, on the blind belief ‘that something might turn up’ and the consequences this had.

The thing is it really is quite a difficult call to make, as if you are certain you’ve got a deal that will make you a fortune, and you’ve got all your eggs in that basket, and bang! All of a sudden things don’t quite fall into place. Suddenly you could be in a very cold and lonely place! And who wouldn’t think…..something might turn up……..as invariably if you put the effort in, make a few calls, ask a few favours ………..it does. But be warned it might not, and there are consequences…..

The judgment in the case itself is a message to company directors, but the key principles apply to anyone involved in running a business these days when they get to that point of no return.

So the messages from the article that came out to me were:

  • Look after you creditors and their interests – surprising that to some people you might think
  • Monitor your cash flow intensely, identify any irregularities that highlight the company cannot make its payments by the due dates – basic common sense isn’t it?
  • Investigate all available options for putting the company back on track – and don’t delay in doing so, it takes time
  • Hold regular board meetings, and keep notes of why you have decided to act in that way, what facts did you have that made you take a particular decision – you’ll never remember in time to come.
  • Consider the need to keep all stakeholders in the business informed at the appropriate times – everyone has an interest in keeping the business alive
  • Don’t place orders for work when there is no prospect of you paying for that work – common sense again!
  • Don’t put personal or any other interests before those of the company – difficult one to judge but don’t go for short term greed

And………….don’t continue to trade on the basis that ‘something might turn up’…..

For anyone interested to read more on this, the case is Roberts vs Frohlich and if you do read it, it has some great insights into the way or industry works with developers and contractors jostling in the formation of contracts. It also has around paragraph 43 a great quote from the letter of intent and the problems of naming individuals in any such letter. Fancy naming the Chairman of an organization as the only person you could negotiate commercial matters with!

Couldn’t resist this one either……….there’s also a Spanner in the works too!

Calm before the storm…….

I don’t know about you but we’ve been rushed off our feet since we came back after the Christmas break and things have only really just slowed down for us – producing boq’s for contractors that is. Time to draw breath we think. Conversely our Consultancy site based QS services has been at a low level of activity for quite a while now, everyone getting by the best way they can.

But is it just me, or is there something in the air………things are about to get more, dare I say sinister this year?

Buildings headline news of insolvencies being down in January compared to last year is more optimistic news – sad news for those 205 companies and all their employees mind, not a great start to the New Year for them.

But I think things are about to take a turn for the worse…….. (and I’m not the only one, take a look at Neil Edwards blog for some words of warning too)

Now I normally look on the bright side when I can, but I can hear too many alarm bells starting to ring now, meaning it’s going to get tough and nasty for us all. And soon.

Fuel prices, raw material prices, interest rates, extended payment periods, government spending cuts, increases in national insurance contributions….I feel like I could go on ……the thing is nothing is going to get any cheaper.

Where is the pressure for everyone?

To reduce costs, and we just cannot do it any longer…..…there’s only one direction for costs this year and that’s upwards.

What has everyone been doing this last year or so? Living off the higher priced projects on the past, and taking advantage of their supply chain reducing its costs over the same period.

What is happening now? Prices are still being submitted at low rates anticipating that things will be bought even cheaper later on.

The bad news………….It’s just not going to happen.

The supply chain is at rock bottom and cannot go any lower. Look also at the Construction Products Association recent press release ‘Sharp Material Prices Add to Construction Woes’. I predict some serious repercussions for lots of organisations as a result. So now is the time to be vigilant and if the bank says that client is a bad bet, you know what? They are probably right.

It really is the calm before the storm………..


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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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