It’s a cruel study in contrasting fortunes. In the same week that BP announced a £9.3bn profit, Mowlem issued another profit warning
The contractor’s troubles stem from “accounting issues within its M&E business“ and an expected £15m write-down on poorly performing contracts. That is without the little matter of the Bath Spa project, currently almost £30m over budget, where Mowlem is fighting a war of attrition with the architect and the client.
Once again, the travails of a leading member of the construction industry remind the world what thin ice contractors skate on. The liabilities contractors expose themselves to in order to scrape the slimmest of margins must be laughed at in other sectors. You don’t have to be BP to earn a better return for less angst. That’s construction for you, and most likely always will be, given contractors’ desperation to keep their order books full. That said, when Laing imploded in 2001 after a series of high-risk, fixed-price contracts – two of which make it into our list of the 10 most disastrous projects of all time (pages 54-58) – it had a sobering effect on the rest of the industry. The lessons of Spa-gate are as yet unclear, apart from the one we ought to know already – that a single project like this can splash red ink all over the year-end accounts. And who knows what damage this sort of bad PR does to the order books?
Mowlem says it is the innocent victim on this one, and has some convincing evidence to support the claim. It says the council spurned its efforts to broker a peace deal, and it has certainly found a sympathetic ear in construction minister Nigel Griffiths, who describes the (Lib Dem-controlled) council as “the client from hell” (page 17). But the truth is that when a dispute turns into a farce, as this one has, nobody comes out well. It may seem unpalatable to the council to abandon the architect and its legal claims to take up Mowlem’s offer to complete the project on a fixed-price design-and-build deal. But relationships are now so bad, this looks to be the only half-sensible, remotely affordable way forward.
Denise Chevin, editor
What’s in Auntie’s drawers
How often have you thought “I’d love to have been a fly on the wall when they decided that bid”? Just how contractors win and lose a project has always been a tantalising mystery. But now, thanks to the Freedom of Information Act, we can discover what went behind those closed doors. Several weeks ago, Building asked the BBC to disclose documents relating to the construction management contract for the redevelopment of Broadcasting House. We publish extracts from those papers this week, and they certainly make fascinating, if uncomfortable, reading (see news). What is immediately apparent is that the client did not plump for the cheapest price. If that decision is discovered, and criticised, elsewhere, procurers may feel that the safest course in every case is to pick the lowest bid. It would be ironic if, after years spent trying to persuade the public sector to go for best value, contractors saw this trend reversed. We must hope the benefits of choosing value over price stand public scrutiny.