Don't pass the buck

However, I can’t see how the simplistic approach of squeeze-bid-prices-and-efficiencies-will-follow could ever work. Most construction companies don’t have the margins being talked about, and most of their cost base is variable, not fixed. Where 20% will come from, I can only guess.

There is a logical source for reductions of that size, but it requires a very different approach to managing the project, as well as sufficient trust among everyone involved. I would guess some 50% of a project’s cost is people. Now, how efficiently do we use this resource? I know in many areas it is well under 50%. However, accessing this potential across the whole project will take much more than improved site planning.

It seems that most clients and main contractors fall into the trap of believing that the best way to manage a project is to pretend that there is not a significant amount of uncertainty to be managed. They seem to feel that chopping it into contractual packages and tying down the terms and conditions will make it any less uncertain. The variability hasn’t gone anywhere, and most parties are discouraged from working together across the whole project. Managing risk should not be about offloading contractual risks and passing them down the supply chain. Getting a small subbie to take on risks of uncertainty does not make it any less likely that the risks will happen.

Our “common sense” approach to contracting is actually one of the main causes of the high costs and long timescales of projects. We are forcing every supplier and subbie to take on risks that may or may not happen, and they are all including for them in their prices. The hit to the project comes because, although many companies will need that allowance, some of them won’t. Others will use the time/money they have in their price, whether they really need it or not.

Ian Hepinstall, via www.building.co.uk