Posts Tagged 'Building charter 284'

We’ve done it all before…

I read with interest the article in ‘building’on Friday by Paul Morrell titled making a Virtue of Necessity and what struck me from his message most of all was that we’ve done all what he’s looking for before!

The essence of the message I get from him and the cabinet office document ‘Government Construction Strategy’ is for change through liked minded individuals, companies groups and organisations. Yes we need an educated client with consistent application and yes we need an integrated proposition from the industry too.

And here’s my experience  – it’s all been done before in the private sector!

Who and how?

With Bovis Construction (as then) and M & S.

When?

Way back on 13th December 1945 at Stepney Green is when it all began……we never learn do we?

 How did it work?

Simple really……….

The client had a need to build new stores to expand after the war and it integrated Bovis along with the professional team to do just this.

The client had an expansion programme that Bovis worked with, so it new in advance what was being built and where so resources could be planned and managed

A select supply chain was established so buying power could be used, preferred rates/prices and/or schedules of rates were set up across the country.

You knew if you were working on a store in Epsom that a ‘Truro’ pelmet detail meant that it was the same detail that had been used at the Truro store.

The contracts were simple, Bovis was paid a fee for its management skills and expertise, the supply chain prices were transparent through to the client too.

At the outset of the project an estimate of prime cost was established with Bovis and the consultant qs and you worked together as a team to make it work – on the same side with the same objectives.

The contract to the subcontractors were 2 sides of paper – the thing that nobody liked on it was the infamous pay when paid clause – but that’s now outlawed isn’t it?

And it worked because everyone trusted each other throughout the entire process

So here you are Mr Morrell here’s the blue print for your strategy –it’s a document called The building process – a case study from Marks and Spencer Limited published in 1970 you’ll have to get hold of it from the national archives mind.

Here’s three quotes for you from ‘building’ magazine in July 1970 on the document too…..

  1. It is the forward looking methods employed, the enlightened manner in which primary and secondary objectives are defined, the effective co-ordination of multi-disciplinary skills and attitudes and the mutual trust and respect created by the relationship enshrined in the Marks and Spencer/Bovis method of procedure that some future improvements in the general management of building should be sought…..
  2. The case study highlights the fact that Marks & Spencer over the years consistently have simplified procedures by reducing the amount of paperwork employed and in consequence the company has placed increasing reliance upon direct personal contact and individual responsibility. The combined effect of these twin objectives has been to create a real feeling of belonging to the Marks & Spencer organisation whether the individuals concerned are directly or indirectly employed.
  3. The long and close relationship between the staffs of Marks & Spencer, their professional design teams, of Bovis and of various specialist sub-contractors must have contributed in large measure to the success story recounted in the bulletin and in particular to the recent development and application of computer techniques to location billing, material scheduling, manpower planning, expenditure control and the monitoring of progress.

I found my copy of a commemorative brochure produced by Bovis in 1970 to celebrate the long working relationship, and for these quotes. It is also the source of the pictures and quotes….couldn’t find anything on line at building!

So…….it’s been done before……… and it worked!

P. S. The document produced by Bovis is a fascinating read and if they let me I’ll try and make it available on line, its quite a story!

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………..

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………..

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!

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……

Cut Throat Tender Pricing….

So another year begins and listening to all the pundits this is going to be tougher than the last one.

But what of tender prices? Inflation is allegedly running at near 4% (although it feels a lot higher to me) so tender prices on the up? No, not a bit.

So whats happening?

Well I wonder how many tender bids are going in at lunchtime today that have been priced below net cost? I’d never be able to prove it but I suspect nearly all of them.

So why is that?

Well as we know there isn’t a lot of work around, and there’s probably still too many of us chasing that amount of work too…and clients know that. So more of you are being asked to tender…and do you consider you are pricing against like for like competition? No, is the most likely answer.

So what to do?

Go in as cheap as you can, beat the opposition, keep your team intact, gain a contribution to your overhead, pray the job goes well, there are lots of variations and changes to claw some money back, over value the job on interim valuations, screw the supply chain further (after all they never put in a sensible bid at tender stage, and if they did you ask them to knock it by 15-20% anyway), and oh that the client still has the funds from his finances to pay you!

But consultants you’re not helping either.

Don’t stuff your tenders with huge provisional sums because designs haven’t been resolved or you haven’t made your mind up, or the client hasn’t. Don’t include provisional quantities or items, keep your specifications tight and detailed to what you want. Don’t send out vague, confusing, incomplete, conflicting designs, drawings and information as the contractor will see this as a great opportunity. And please stop issuing tender addendums when you’ve only just sent out the documents, send it all out once and be done with it!

And finally don’t burn everything you can possibly think of and put it on a cd, as all the contractors do is the same, but pass it on to the supply chain. And what happens? The man in a van gets it, doesn’t understand it, either doesn’t bother with it, puts in a price because he thinks he understands it, only to find he’s committed to something he doesn’t understand.

Then  he doesn’t do the job and leaves everyone with a problem.

By way of an side, but on the same vein, we’ve got a project in the office that we are doing the bills of quantities for the contractor. Tucked away in part of the tender documents there’s a clause that states if your bid is above £7.2M don’t bother sending it in! (The job has already been tendered last year at around £8M, sent out again with no design changes, what do they expect I ask?)

So clients don’t expect the impossible, but if you do ask for it be warned as if you step out of line, dither over a decision, play with the contractors cash flow expect the worst as it will come back and bite you!

Thanks to John Langford for his tweet @ConstructionMM for being the inspiration for this.


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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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