Stanhope’s head of development management on selecting contractors and the London market

Paul Lewis, head of development management, Stanhope

What’s your pipeline looking like?

It’s very healthy: the pipeline of developments over the next three to five years is larger than it’s ever been. We’ve got more than £2bn of construction expenditure, ranging from small schemes to some huge ones.

How do you procure construction work?

On the larger and more complex schemes, construction management still seems to offer the optimum delivery route in a lot of cases

On the larger and more complex schemes, construction management still seems to offer the optimum delivery route in a lot of cases. But with the smaller and simpler schemes we have been delivering on a lump sum basis. On larger schemes, construction management has [until recently] been quite unfashionable in the market place but there seems to be a change of view: even the largest and most risk averse companies seem to be using CM as an option for procurement.  

What are your priorities when selecting contractors?

Trust is very important to us and the strength of the individual teams that they put forward. We are known for the longevity of our supply chain. We have very long-standing relationships with subcontractors, some of which have grown from small companies to large and successful ones. Every time we get into a relationship it is with a view of (forming) a long standing relationship. One project relationships is not the way we work at all.

Financial strength is very important but the more people focus on that the more their credit ratings tend to fall and it becomes a self-fulfilling prophecy. We try to take a much longer-term view. You have to be aware of the financial position, but we try to help rather than add to the problem.

Do you see market conditions improving further over the next year, and if so, are you worried about cost implications?

We need to keep an eye on costs. Labour rates have been subdued for so long so there’s going to be a bit of a reaction and while materials leap up and down there tends to be an across the board uplift. We take soundings from the industry to make an informed view on what is the right price. Obviously that’s going to fluctuate, but I don’t think that’s a good reason for squeezing when times are hard and then suffering when times are good. It’s much better to pay the appropriate price for things at all times. It also means less volatile pricing.

Does the strengthening market mean you alter the way you are working with your supply chain, and if so how?

It’s not so much altering the way we work. Depending on where it is and what sector it’s in, we will need to broaden the supply chain. For instance, as we increase our work in residential and retail we are looking for expertise in those areas from within our existing supply chain but where that is not present we will look elsewhere.