Construction output grew by a record 41.7% in Quarter 3 (July to September) this year as it recovered from a record decline of 35.7% in Quarter 2 (April to June), according to the government number crunchers at the ONS. Though on a month-by-month basis construction output grew by some 3% in September, it remains nearly 11% lower than the pre-pandemic levels in February this year, when it was already down on last year.
Mace’s latest Market Review for the 2nd quarter of 2020 suggests tender prices falling by as much as 2.5%, largely due to restructuring by contractors and the need for the supply chain to secure orders.
Mace is suggesting contractors and clients should review their procurement strategies.
Increasingly contractors are heading out to Europe with their UK agent/supplier on the promise of buying slab direct and avoiding the mark-up of the fabricator in the UK.
This is lining the contractor’s pockets at the expense of the margins of supply & install companies.
The mark-up on slabs from the stone company reflects the wastage and the risk and no small amount of specialist skill in selecting the right stone.
By removing the element of expertise provided by the specialist, the contractor leaves itself open to risk. After all, what is a specialist for if not to specialise in the materials it works with.
I have become involved in a contract where the stone fabricator was tasked and paid for renders of bathroom floors and walls cut from contractor supplied material.
The stone company was also provided with a stone consultant’s report (not mine), which clearly identified the parts of the material that were acceptable and those which were not.
On photographing several hundred slabs and starting to produce renders, it became apparent there was not enough material to produce the sizes required in the acceptable areas of stone from the slabs supplied. The marble fabricator had to stop work and ask the contractor for more slabs.
The contractor responded by asking the fabricator to justify the need for additional slabs and provide evidence for every bathroom.
At who’s expense, the fabricator sensibly asked?
At yours, says the contractor – and we’ll share any additional profit when we use your calculations to persuade the client they didn’t select the right material for the criteria required.
But hang on a sec. This is a labour-only sub-contract. You, the contractor, are purchasing the material and taking on the risk and the profit. Shouldn’t you be down in our yard with your self-appointed slab expert, who assisted you in trousering our profit, working out the waste from the poor-quality marble you purchased at a knock down price?
No, says the contractor. You need to explain why the material we purchased is crap. That’s easy, we say. It’s crap because its crap in our expert opinion.
But we don’t understand why, retorts the contractor.
Well, there aren’t enough slabs that have enough areas that match the criteria set out in the stone consultant’s report and signed off by the design team, we explain, politely.
And while you’re there, why did we spend hours and hours of labour time photographing material that ultimately is below the standard required?
Did your slab expert inspect the block to ensure it matched? Is he/she going to be paying us for all the wasted time and effort?
Silence.
The contractor eventually goes down to the yard and inspects the material, then goes away with enough evidence (he thinks) to persuade the client that the design team changed the design.
Therefore, all the material they instructed the contractor to purchase on their behalf (don’t mention the bulging trouser pockets) is not enough.
The fabricator then points out that the slabs purchased by the contractor and his self-appointed slab expert for the kitchen tops are 2600mm long by 1200mm wide. Measured in square metres there is enough stone for all the kitchens.
But...
The cut-to-size pieces required for the kitchen worktop design are 700mm wide. Therefore the slabs are not wide enough to get two kitchen worktops out of each slab but only one, leaving 40% waste and the headache of buying another block from which to cut the extra slabs required in the hope they will match the design criteria.
Had the contractor not ‘reviewed its procurement strategy’ but instead left it to the specialist stone fabricator, the job would not have led to the enormous waste of everyone’s time sorting out an issue created entirely by greed and ignorance (the contractor’s personnel freely admitted, in several meetings, they wanted to make the profit on the materials that would normally go to the fabricator).
When a labour-only project is won, it is labour only – not labour plus “can you dig us out of this enormous hole we’ve created for ourselves by wasting all this time and resources”.
So, contractors: don’t cut out the specialist if you don’t know what you’re doing.
If this is the ‘new normal’ procurement strategy of the post-Covid, post-Brexit construction world, God help us.