2009 is looking bleak as the recession takes its toll. So CM has assembled a contractor, a lawyer, a training specialist, an accountant, an economist, and a construction guru to answer readers’ questions, and see if there’s a rainbow between the cloudbursts of bad news.

If there is a general election and a change in government, could current investment into BSF, LIFT and PFI projects be reduced? Project manager, national consultant

Noble Francis
There has to be a general election on or before summer 2010. But whichever party is in power, there are going to have to be significant cuts in spending post-election. The government expects borrowing to rise to a record £118bn next year. If the economy slows more than the government expects, then VAT, corporation and income tax revenues will be lower. So either borrowing will be higher or other spending will be cut. In addition, government is bringing forward £3bn of spending from 2010/11 for social housing, transport infrastructure and schools, which is good news for 2009, but not the longer term.

Don Ward
Our understanding from conversations with the shadow spokesperson Mark Prisk is that the Conservatives would not cut back on investment in education and healthcare as they are fundamental to our quality of life. But let’s be honest, I don’t think anyone yet knows what the state of national finances will be in a year or two, do they?

How do I ensure that machines and vehicles are maintained efficiently and safely when money is tight? What happens if manufacturers also cut back and can’t provide the parts I need? Tony Hodson, works manager, GCA

Elvin Box
Regardless of the economic climate, plant and machinery are an investment. At purchase, consider repair and maintenance costs, resale value and support. Internationally recognised brands, serviced and maintained properly, will attain a good re-sale value.

Ensure that general on-site day-to-day operation and maintenance are appropriate.

A rigorous regime will need to be initiated, not one that merely ‘ticks the boxes’, to reduce the risk of breakdown. Cost savings follow naturally. Consider incentivising staff to outperform normal KPIs on running, maintenance and replacement costs on a month-by-month basis.

If manufacturers cut back costs and can’t provide parts, put in place a regime whereby you are updated weekly of availability of spares and parts. Obviously safety can never be compromised, so this element of the budget cannot be offset to fund other business costs.

How can project managers review manufacturers and suppliers during the tender period to confirm their stability, given that the market changes weekly and credit ratings cannot keep apace? Project manager, national QS firm

James Money
The first information source is word of mouth: what are people in the market saying about a firm? Does that firm have customers who are in trouble themselves? Your accountant and lawyer may be good sources of industry knowledge. Some organise ‘credit circles’ as an informal information exchange.

Are the suppliers’ accounts filed on time? Do they provide information of the quality that you would expect of one of your suppliers?

If you are fairly certain that a supplier is undercharging to be considered for a contract then ask whether it makes sense to agree at that price – don't risk bankrupting a supplier for the sake of a few pounds. And remember that your suppliers will be asking the same questions about you.

Building Schools for the Future and other frameworks favour the large national contractors. How can medium-sized contractors compete during a recession? Paul Hardy, construction director, Kingerlee, Oxford

Don Ward
Some medium-sized contractors have done well out of frameworks, either directly, as in the Birmingham City Partnership where the client divided the work into different value bands, or indirectly by adjusting to new relationships, including, perish the thought, working with larger first-tier contractors.

It’s true that those firms which did not adapt in the good times are now disadvantaged – and frameworks are one example of this. But the good news is that many frameworks are coming up for renewal after four years, and the new round is likely to have a greater focus on added value, plus targeted cost reduction.

Can you find out who is retendering in your area, get to know the client and their issues, and work out where you can make a difference for them? All in readiness to pitch for the reselection process.

Elvin Box
With the commercial and residential sectors to all intents and purposes ‘dead’, small-to-medium local contractors will have to reinvent themselves to work within frameworks.

They should seek to form alliances or joint ventures with larger contractors, by offering them the opportunity to tap in their local knowledge and labour force, specialist skills, and client or consultant relationships.

Small-to-medium sized contractors also need to expand their business development networks. Good project leads can emanate from anyone, as long as staff realise the importance of their knowledge, support and assistance.

Try construction-related events, or broader business networking groups.

With less work around for smaller contractors, how do I ensure cash flow and timely payment for the work we do still have? Specialist contractor

James Money 
There is no easy answer. Ensure that you deliver under the terms of the contract and enforce those terms. Employers will look for every opportunity to delay payment. If you show you are willing to wait 10 days for the first stage payment, then you will wait 20 days for the second.

If you are fulfilling a critical role in a project, don’t wait until you have finished before submitting invoices and being paid. See if the employer can purchase raw materials directly, taking this cost and risk away from you. Finally, cut back on your own expenditure ruthlessly. Times will be hard for quite a while.

After redundancy, what can a person do to maintain positivity and get a new job? Liz Villani, Courageous Success

Richard Larcombe
Treat getting a new job as a project in itself, keep a list of contacts and record any follow-up steps after a meeting. Network like mad. But if you’re speaking to a friend or contact, don’t ask ‘Can you give me a job?’ Say: ‘Can you put me in touch with someone who might be interested in my skills?’ People generally want to help other people, so it can be a powerful technique.

Use the internet for research and interview preparation – you might read on a website that a company is expanding in a given direction.

And stay in touch with your former colleagues. There’s a temptation to lick your wounds and isolate yourself, but it’s important to have shoulders to cry on.

In a competitive market with prices going down, will we return to the ways of 20 years ago with cost and time restraints on projects – and more claims problems? Project manager, national contractor

Don Ward 
This is a concern for a lot of people, and I hear reports of the re-emergence of lowest-price single-stage tendering of main contracts by clients – and of subcontracts by main contractors. Budget concerns are unfortunately a fact of life, and clients or contractors always want more for less.

One school of thought is to focus on the tender price and drive it as low as possible, even to the point of a sub-economic bid where the contractor must make a loss – unless, of course, they make claims. But let’s face it, you have knowingly set the project up to fail.

The other is to sit down with the team early, talk to them about the target price, remove any concern about profit by ringfencing that amount, say 3%, and then work together on the remaining 97% to drive out cost and waste. At Constructing Excellence we are focused on the skills and behaviours to enable this option.

In the last recession, I ended up working for Wandsworth Council, another architect I know worked as a petrol pump attendant. If people are made redundant, what alternative possibilities are open to them? John Eynon, design director, Wates

Richard Larcombe 
Remember that construction professionals often have transferable skills: if you can manage a construction site, you can manage lots of other things. Find out where the job market is more buoyant and see if it suits you, or work out where government spending is going.

There could be openings at development agencies, in the not-for-profit sector such as housing associations or social enterprises, or even the professional bodies.

Or think about topping up your qualifications, either on a full-time course, or a part-time course and part-time job. Designers and surveyors might choose a Masters degree, contractors might favour a level 4/5 NVQ which would lead to chartered membership of the CIOB. Technically, to complete an NVQ, you need to be in a job. But prior experience should allow you to complete 80% – a good assessor will help with this. If you tell a prospective employer that, I think they would be impressed.

On a £50m design and build contract where the contractor goes bust halfway through, it will be pretty hard to get someone else on board to finish the job. What’s the best procurement route to manage risk in 2009? Project manager, Davis Langdon

Michael Blackburne
No procurement route is without risk, but developers would be wise to ensure that all key parties enter into correctly drafted contracts as early as possible (and collateral warranties are procured from sub-contractors and the design team, with step-in rights where necessary). Additional security should also be sought in the form of a performance bond and a parent company guarantee.

Design and build is still a sensible form of procurement, particularly if the team is appointed early. If the D&B contractor goes bust, the developer can exercise its step-in rights to take over the position of employer under the appointments and sub-contracts. Although there is still a risk of the new contractor not accepting the original contractor’s work, the client can minimise this with well-drafted documentation.

Under traditional procurement, where the main contractor goes bust half-way through, the developer still has the headache of finding a replacement who will accept the work.

Construction management, meanwhile, may leave a developer more exposed and does not give cost certainty available under a D&B or traditional approach.

Falling land values may mean pfi/ppp deals are not viable any more

Noble Francis, Construction Products Association

Will cutting interest rates to 2% get the banks lending and private clients borrowing? And as banks are going cold on PPP/PFI, will the rate cut make a difference? Editor of CM

Noble Francis
On the first point, the short answer is no. Not all of December’s 1% cut in base rates will be passed on to borrowers, corporate or consumer, just like the previous two. Banks have become extremely risk averse after accumulating large amounts of toxic debt. The recapitalisation and nationalisation of banks after the chaos in September will be of more help long term, but will take time to sort out. If you were a bank, would you want to lend to a property developer investing in an asset whose price has fallen 15% in a year and is still falling?

As for PFI, the main concern is often not the cost of the finance, but the fact that it is just not available. In addition, a significant proportion of the collateral from developers wishing to borrow is based on land values, which have fallen sharply over the past year and may mean that PFI/PPP deals are just not viable anymore.

When do full business rates kick in on new developments? I’m worried about a repeat of the early 90s when builders completed offices, but couldn’t hand them over because the clients didn’t have any tenants. It led to messy legal problems. Steve Kitchen, site manager, ISG

Michael Blackburne
Since 1 April 2008, full business rates are payable by landlords on empty properties after three months from when the property was first empty and on industrial property after six months.

It is conceivable, as the question suggests, that developers may seek to delay certification of practical completion [and paying full business rates]. If a contractor has constructed a building in accordance with the developer's requirements, but the developer delays certification, the contractor should exercise any available remedies under the contract (for example, claiming for loss and/or expense).

An interesting approach was recently taken in Liverpool and Leeds. The landlords of 2m sq ft of sheds were not asked to pay business rates on empty sheds because they were not suitable for occupation as floors were not put in until a tenant was secured. However, other local authorities may not be so pragmatic.

If recent graduates are made redundant, and assuming the upturn comes in 12-18 months, what skills should they be retraining in? John Eynon, Wates

Chrissi McCarthy
A number of careers are likely to be in demand once order books start filling up. Estimating and planning will be on the rise as firms start tendering for new works. There was a shortage before the downturn so it is unlikely there will be enough to fill the gap. With around 33% of RICS members in quantity surveying, project management and building surveying over 55, there could be a potential drop of a third of the current workforce in 10 years, leaving the door open for new recruits.

With the rise of design and build and other contractor-led procurement routes, a host of new roles has opened up, not least in design management. Though traditionally design managers would be up-skilled from site management roles there is now a trend to recruit graduates specifically for the roles.

Andrew Platten
The whole debate concerning green construction is currently taking place because very few people know how to include such measures into designs, source reliable suppliers, understand specifications and guarantee delivery on site. Mastering this would be a good way forward.

Can universities expect a rise in applications for Masters degrees? And is this a good way to differentiate yourself in a competitive market? Recent graduate, national QS firm

Edward Simpson
Universities cannot predict with certainty that they will be able to cope with an increase in demand. But taking a higher degree is not necessarily an either/or situation: part-time or distance learning might also suit. The more long-term and critical decision is which MSc and why? Any MSc is a specialism indicating a major career decision is being made. Should the decision to specialise be one that is difficult to answer, consider an MBA as a more general higher degree which brings a different set of benefits.

Where do you see spending coming from over the next three years? Will public sector work remain strong? Site manager, national contractor

Noble Francis
Not private sector construction, which we are forecasting will fall 8% next year as falls in commercial combine with further falls in housing and industrial.

Public sector construction is where growth will occur. Education will benefit from the £45bn Building Schools for the Future programme, Building Colleges for the Future, valued at £2.3bn, and the Primary Capital Programme. Olympics work will provide good growth prior to 2012.

Rail is also expected to provide a boost to construction with a number of projects currently underway, such as Thameslink and East London Line extensions, and Crossrail in the pipeline, ensuring that infrastructure work rises 50% by 2012.

In a competitive market with prices going down, will we return to the ways of 20 years ago with cost and time restraints on projects – and more claims problems? Project manager, national contractor

Michael Blackburne
Developers will become more focused on achieving the completion of projects on time and on budget. In better times, they might have encouraged the contractor to value engineer through negotiation, but cost certainty is now even more crucial and this is less likely to be the case. Hard times will no doubt lead to hard bargaining over claims for extensions of time and for loss and/or expense, with additional pressure coming from funders keeping an eye on their money.

Risk transfer and cost certainty will be in the forefront of developers' minds. This may result in a move back to single-stage, lowest bid tendering – and increased claims.

What do I do when banks threaten to withdraw overdraft facilities? Specialist contractor

James Money
Banks do not want to lose customers. But their job is to manage risk, and the simple fact is that any business associated with construction and development is now perceived as risky.

To maintain the bank’s confidence, keep the bank informed. Tell it what projects you are working on, and submit regular forecasts. Banks hate surprises, so warn them in advance of pinch points in your cash flow.

You may have enjoyed the good times, so demonstrate that you can now cut back on costs that may be hard to justify in the current climate.

If recent graduates are made redundant, and assuming the upturn comes in 12-18 months, what skills should they be retraining in? John Eynon, Wates

Andrew Platten, Leeds Metropolitan University
The key objective is to make sure that you are able provide a range of skills to your employer – it makes you more employable and easier to switch from projects. Essentially, it is a case of surveying your current strengths and expertise. For construction management graduates, I would advise the development of contractual and cost management skills. It is important that this is not simply awareness, but being able to apply these skills to larger public sector infrastructure or educational projects will help provide a strong service to your employer. Linking these skills to good project management will make for a very versatile and employable manager.

Likewise, the whole debate concerning green construction is currently taking place because very few people know who to include such measures into designs, sourcing reliable suppliers, understanding specifications and guaranteeing delivery on site. Mastering this area is going to provide a good way forward over the forthcoming 12 month period.

If recent graduates are made redundant, and assuming the upturn comes in 12-18 months, what skills should they be retraining in?

Chrissi McCarthy, Bespoke Consultants
Looking to the future there are a number of careers that are likely to be in demand once the order books start filling up.

1) As we leave the downturn careers such as PQS, estimating and planning will be on the rise as firms start the process of tendering for new works. There was a shortage before the downturn so it is unlikely that the current redundant population of estimators and planners will be enough to fill the gap

2) Although the current situation for building and quantity surveyors is unstable, with around 33% of RICS members in QSing, project managing and building surveying over the age of 55 there could be a potential drop of a 1/3 of the current workforce in just ten years leaving the door open for a wave of new recruits.

3) Civil engineering continues to remain healthy and with civil engineers being added to the skills shortage list this year along with the above mentioned Quantity surveyors it could well be worth a look in

4) With the rise of design and build and other contractor-led procurement routes, a host of new roles has opened up not least in design management. Though traditionally design managers would be upskilled from site management roles there is now a trend to recruit graduates specifically for the roles.

5) Site managers had, throughout the skills shortage, been considered one of the most difficult professions to recruit, especially in senior and middle management. If there is a drop in training during the recession, this gap will only widen.

6) Sustainability is likely to be in the spotlight again once we leave the recession. Retraining to specialise in these areas on top of original skills could put you at a distinct advantage. But it is not advisable to train as a domestic energy assessor, as there is currently a surplus

When applying to companies, you may be more likely to be successful if you send your CV directly to the firm and not through an agency. When there is a excess of candidates, employers much prefer those who are appear to have made an extra effort and show a particular interest in their organisation.

Finally, as a graduate applying to firms, remember there is life out side the top 20 main contractors/consultants. This is where the majority of applicants automatically apply, so you may find less competitive opportunities in the SME range

During the current downturn in construction activities, can universities expect a rise in applications for Masters degrees, to enable applicants to differentiate themselves from their peers? Recent graduate, national QS firm

Andrew Platten, Leeds Metropolitan University
The answer is certainly “yes”. The route to a Master’s award is now seen as one way of differentiating candidates from others. The issue is what to study and how to study, particularly if you are working hard to keep your existing post.

Developing weaknesses and deepening your skills base is going to be the best strategy and this is already being observed in the University sector. Candidates looking for a specialisation and one that carries a professional qualification will do no harm to the curriculum vitae. Candidates are now requesting new modes of study. For example, our most popular course in project management currently runs at weekends. Other examples include distance learning, on line provision and similar “blended” courses.