In a year in which smaller firms have watched themselves being driven out of their local markets by the Ministry of Defence's prime contracting, the NHS' Procure 21 or the PFI, Tony Blair's chaotic Cabinet reshuffle in June dealt our industry the minister for small business and enterprise, Nigel Griffiths. Bloody brilliant.
I am convinced that this appointment wasn't merely fortuitous – that at least somebody in the Cabinet Office realised that although construction is one of our largest industries, it is powered by its 80% majority of smaller enterprises.
The largest companies may have hijacked the industry's lobbying power, but it is still the small and medium-sized firms in every sector that are training our staff and operatives, and commanding our vast army of subcontractors. It is they who are providing an efficient service to private and public sectors at local level – a service with which clients are comfortable because those who provide it are based in the community and not imposed upon them by the obsessive centralisers in Whitehall.
In other sectors, as the government has created large privatised monopolies, it has increased regulation. The cost of running several layers of regulation in the rail industry is now four times more than the final subsidy to the old British Rail. The government has tried to use over-regulation to engineer the consolidation of UK construction. In the process, it has driven up costs, and these have more than accounted for any savings that it might have expected – even if it was working. Consequently, public sector procurement is in turmoil.
Procure 21 is in a shambles before it starts. Neither framework contractors nor their clients understand how it works, and the smaller firms are avoiding it like the black death. PFIs are being bundled into unwieldy and downright inefficient packages that are as unpopular with smaller public sector clients as they are with their suppliers. There is no way, under these regimes, that the construction industry can meet Gordon Brown's spending targets for the next election.
Somebody in the Cabinet now realises that construction is powered by its 80% majority of smaller enterprises
By abandoning small PFIs (18 July, page 11) the Treasury has got it the wrong way round. Instead of bundling contracts worth less than £20m to disguise the excessive cost of procurement, they should reduce those costs by devising more efficient ways of letting the jobs.
My own company has commenced work on a small PPP providing childcare for the staff of a hospital trust; the job has a capital value of about £3.5m. Even with 50% capital-value procurement cost, the trust has secured better childcare for more staff at a significantly reduced subsidy, and everyone in the supply chain will make a fair return, commensurate with their risk.
If a small PPP like this can save the NHS money without taking advantage of its service providers and while absorbing a 50% procurement overhead, how much more cost-effective could PPPs become if that procurement cost was reduced to less than 10% through better standard contracts and systems? Smaller service providers and contractors experienced in this type and size of contract should be encouraged to participate as project companies.
We don't need 500 pages of contract at £600 a page to professionally manage a small PPP and provide a commercial service – whether it is childcare, catering, laundry or whatever.
This is where Nigel Griffiths comes in. He has to explain to the Treasury that it has been listening to people who only speak for 20% of the industry. To achieve its targets, the Treasury will have to stop excluding smaller firms, reverse its policy and discriminate in favour of small firms by excluding big ones from contracts worth less than £3m.
Colin Harding is chairman of Bournemouth-based contractor George & Harding.