But groups in Portsmouth, Plymouth, south Wales, north-west and north-east England are responding to the trend by pooling resources to form fully-fledged consortia and looser joint-venture arrangements. These ventures are seen as a brave move by many in the industry sceptical about their chances of success .
National Federation of Builders director Stephen Moon knows the market is tough for small firms. "The federation is concerned that bundling is destroying the base of many of our contractors," he says. And Federation of Master Builders director-general Ian Davis says there is also a problem with local authority grant-aided work: "Local authorities are under pressure to get best value, so they are packaging work into larger schemes to get what they think are better prices." Groups such as Portsmouth's 49-strong Key Consortia believe the only way forward for small firms is to club together. Consortium member Jonathan Squire, a QS in two-man firm Holloway Squire Partnership, says the group has the potential to help win its members a larger workload. "The skill will be in making sure we have people with the right skills to do the job," he says.
The consortium was formed last autumn to bid for a share of Gunwharf Quays, a £100m Berkeley Group and Land Securities mixed development in the city. Although the nascent consortium is a legal entity, it has yet to open an office or decide how to spread the risk among members and divide up profits or losses.
Key Consortia will bid for contracts up to £5m. Business Link Hampshire adviser David Buck, who helped set up the company, says: "We're not the size of Bovis or Mowlem and we don't want to be. But we want to be in a position to bid for pieces of work."
Spreading the risk
The FMB is also tackling the local authority trend of bundling housing refurbishment work to cut administrative costs. Welsh regional director Geoff Bridgeman says: "The Welsh Office is talking about block renewal schemes. It may appoint one contractor to work on 15 or 16 houses in a contract that could be worth up to £300 000." The risk is just too great for some local firms, so the federation is recommending that its members form consortia to carry out the work, and it has offered to liaise with local authorities to help them bid.
Howard Locke, FMB director for the North-west, says the 72 local authorities in his region also want to cut the number of contractors they use for housing maintenance work. He, too, hopes firms will group together. The idea is that local authorities use one firm as the main contractor, which then employs three or four others as subcontractors. He claims this concept will prove popular, saying: "I had bands of members interested at the last meeting." In the North-east, the FMB, the NFB and the Institution of Civil Engineers are trying to persuade eight local authorities to award contracts for new community or medical centres worth up to £1m to consortia. Northern FMB regional director Barry Oliver points out: "The local authorities are saying they are ken to award the work to consortia, but they need to demonstrate that keenness. Then we'll find small firms taking notice." Birmingham City Council has made no such positive noises. It has just awarded a £70m education PFI contract to Galliford. The deal has hit the small and medium-sized local firms that traditionally carried out work on schools. Richard Sapcote, director of £14m turnover Birmingham-based contractor Sapcote, feels aggrieved. "Since the Second World War, we've always had two or three education projects in the city and this thing has come through on a PFI basis. Normally this kind of work would go out to tender and local builders would price it."
The reason behind the scepticism
Despite tough times, Sapcote is wary of joint ventures. He is not alone. Colin Harding, chairman of £18m turnover contractor George and Harding, doubts whether groups such as Portsmouth's Key Consortia will survive. "It's one thing to stand up to the majors coming in through large packages or bundling," he says, "but I'm sceptical about the practicalities of doing it. If they come together and bid for a project that's way too big for the management of small firms to cope with, who picks up the losses?" Clients also remain unconvinced about consortia. Mike Griffiths, managing director at Land Securities, a developer at Gunwharf Quays, speaks of "grave reservations" about dealing with a consortium of 50 small firms. "It's not the fact that they're small companies. It's more that the management structure remains untried and untested," he says.