Having read Colin Harding’s article on the curse of the virtual construction sector (16 June, page 29) I must congratulate him on telling it like it is.
The construction industry in the UK is awash with litigation as a result of construction firms trying to recoup losses made on fixed-price design-and-build projects. The source of the problem is the “virtual cost plan” produced by the client’s cost advisers. Many of these cost plans are produced by people without a clue of the relative costs of building materials and the individual problems posed by different projects. Many are just working out volumes and tapping in whatever rate their spreadsheet has for that item, regardless of whether it is the going rate or not.
There also seems to be no awareness of risk, factors affecting progress such as bad weather, unforeseen difficulties in the ground and so on. The result of this is a budget that the client believes its project can be built for, but which is unrealistic and nigh-on unachievable.
Contractors are then asked to bid for the projects. Many submit a fair price that encompasses the missing factors previously mentioned. Unfortunately they are then brow-beaten by the client’s cost consultant into value-engineering the projects down to the erroneous budget figure. Ninety-nine per cent of consultants put together designs that are cost-effective and efficient. So how can this be value-engineered, barring changing specifications requested by the client?
The result is that the contractor attempts to recoup its losses by going after the only people it can: the novated consultants and the subcontractors. But they are only doing what they are being forced to by the current climate and favoured form of contract.
The issue Colin highlights is only the beginning. My recommendation is radical: ban fixed-price design-and-build and adopt a partnering-type design-and-build with earlier input from the contractor whereby it can buy into the consultant’s ideas and improve on the economy of the design by advising on the buildability of elements and the commercial impact of the initial design.
An unrealistic ideal? No, just a fair one.
Gareth Shepherd, Robinson Consulting