Money pervades readers’ thoughts this week, as they ponder project costs and value for money, whether suicide bids ever pay off, banks not lending - and what does zero mean, anyway?
Give us a break
Fascinating article on the Shard (27 May, page 34). This project demonstrates what the building industry can and does achieve, but this is tempered by yet another whinge by the government about the cost of building, seeking a 20% reduction. The government should concentrate first on its disastrous IT, Ministry of Defence and most other procurement policies.
Any stated project cost should be just that - the cost of the site, finance, construction sum, professional fees and, particularly, the legal fees. It will then be clear to anyone
how disproportionate the legal fees are, massively so in the case of PFI bids - complacent lawyers cranking up £1,000 per hour fees, on a time charge basis! No risk of a loss there, then.
At the responsible end, construction is a skilled, hard, dirty business and the employees deserve all they get. The construction industry is excellent value, and would be more so if the high-quality buildings get the chance to live their intended lifespan - consider Broadgate, which is threatened with demolition, and yet has many years of life left.
Suicide bids rescued
Regarding your story “Over half of QSs have seen clients accept suicide bids”, most of the larger tenders have annual reviews on prices built into them. This means that while the contractor may lose money to secure a long-term contract, they usually ensure that they recoup their losses in later years through the revision of the schedule of rates and the exploitation of the client’s lack of contractual awareness by way of flooding the client with variations/compensation events.
Afzal Shabir, via www.building.co.uk
Suicide bids doomed
Directors of any business should not be allowed to trade at an intentional loss from the outset. I appreciate contracts can lose money but generally not with intent before they start on site.
Inexperienced bankers funding these businesses are not delving deep enough, as project losses are hidden while the company continues to win work and cash from
front-loaded early valuations on projects. These losses only surface once workload starts to drop.
I defy any bank manager to bankroll a business when he/she knows the firm wins contracts at below cost.
If auditors were required to look forward into the operation of a business as opposed to looking backwards, maybe this practice of suicide bidding would come under pressure.
Patrick Murdock, via www.building.co.uk
Referring to “A path to zero carbon?” - interesting article.
We see the term “zero carbon” often being used to refer to a building in operation not using any more energy for its appliances/heating and water than it can generate itself. However, this is not truly zero carbon as the building materials have embodied carbon associated with them.
We agree that energy efficient claims need to be backed up and the use of models to demonstrate that buildings do what they say is very welcome. Here at Phlorum (with the University of Brighton) we’ve developed an embodied carbon life cycle model.
The government needs to have a combined approach on this and not just single out domestic houses, while ignoring non-domestic buildings.
The term “zero carbon” is being bandied about without a true definition of what it really stands for. As a result people are being misled by overzealous claims. The government needs to look at the whole spectrum of energy users and not just punish the easiest, and, probably weakest, to form a defence.
Richard Schofield, via www.building.co.uk
Show us the money
Regarding your story “Banks criticised for not lending to construction firms”, the statistic from the government’s own construction strategy says that the UK construction sector is made up of over 300,000 businesses and that 99.7% are SMEs. These SMEs didn’t cause the banking crisis, yet we are being treated like third class citizens who do not know how to run a business when it comes to asking for financial support. I think it’s outrageous how the banks are behaving - they are making out they are open for business but they are certainly not lending or making anyone’s life in construction easy at the moment at all.
Derek Mynott, via www.building.co.uk