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!

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.

Notices in Writing

As its getting nearer to Christmas I thought I’d trot out one or two of our favourite old chestnuts…

It’s a very old one……

Get your notices in writing!

If I had a pound for every time we’ve had to tell a contractor or subcontractor did you send them a notice under the contract that you were in delay, that it was a variation, that you haven’t got this vital piece of information…..well, I’d be a rich man and not sitting here on a cold, dark and foggy December night writing this!

It doesn’t have to be anything elaborate, confrontational or quoting the contract clauses verbatim. What it simply has to do is quote the facts of the situation. Record the current position, nothing more, nothing less.

Simple!

Keep it up-to-date too, tell the other party if things have improved or got worse, have a dialogue you’ll be surprised what it may bring out. If it brings out the worst, well then you know where you stand a lot earlier that if you let matters drift. You could end up with a serious financial penalty that could perhaps have been avoided.

Then why don’t we do it?

Not enough time, afraid of offending the other side, not sure what or how to say it, think you are in the wrong too, or something else? Then pick up the phone and talk to your counterpart, tell them the situation and that you are going to drop them a line as a result recording it. At least they will know its coming.

If you cannot do that then ask me to do it for you, I’d be only too pleased to help!

A relevant case if you are interested in reading more is Steria Limited v Sigma Wireless Communications limited, or have a read of our briefing paper (number 1 on the list, now there’s some irony!)

Predictions – Who cares?

We nearly half way through twenty ten!

How time has flown by.

I thought I would look back at my first blog this year (struggling for inspiration really) and take a look at my predictions.

Well here they were/are:

• House building will take off again in the middle of the year after a Tory victory in the general election; well now let me see which bit of that is right?
• The new high speed rail link to Scotland and the north will get the go ahead; I think this is still going to happen, which route is it going to take though?
• Hotel refurbishment and new build will start a mini boom in and around the London area as the run up to the Olympics kicks off; mmm not too sure about this, but, theres still time
• The new rules of measurement will make no impact at all (but we will have to learn about them anyway though); now that’s true, (sort of) we have had to make some adjustments to our work
• Prices will remain very tough in the first two quarters of this year after that there will be a rise as we all become more settled about the future and the industry will become far more stable; mmm prices still tough(bit of an understatement that) .. a more settled and stable future …. wait and see
• ……Oh and England will win the world cup after Arsenal have done the double! Well you can dream can’t you! Ah well there’s hope yet for England sadly not even the Arsenal ladies did the double this year

Think I might give the second half of the year a miss on predictions!

On a more amusing theme, someone asked me the other day for some tips on dealing with a client who is being difficult in paying up monies they are owed (a familiar story for us too I’m afraid!) and after much debate here in the office as to the best advice we could give we opted for this story we found – challenge them to some shin kicking! You never know you might get the result you have been looking for! Failing that there’s always adjudication but it wouldn’t be as much fun as this. Would it?

Getting Paid!

Now everyone’s struggling to make ends meet these days and we like most service based companies keep an eye on who are the best and worst payers that we work with.

So how about this for some statistics on payments, our best client pays us within 19 days of us raising an invoice and our worst does it in 110 days! Our best top 3 clients for payments are (in no particular order….. ok other than alphabetical as it’s fairest)

Durkan

Midas

SDC

and our worst 3 for payment I hear you ask ……(again it’s alphabetical)

Amey

ISG Jackson

ROK

So do you have any good and bad clients for payment? And what do you do about it?