Are these decisions unconnected or is this the beginning of a trend? They do have one thing in common: in all three cases, it seemed that price was a key issue. The Welsh assembly decided to switch to a guaranteed maximum price contract to make sure the scheme hit budget; it is understood that the financial backers of the More London scheme insisted on a traditional contract; and Sainsbury also spoke of the high cost of the method. In adopting prime contracting, the supermarket chain is also following the example of the government, which is strongly backing the procurement method.
It seems that the buzz that surrounded construction management in the late 1980s and early 1990s is beginning to flag. The excitement created by Stanhope's landmark Broadgate project in the mid-1980s – where subcontractors were paid directly by the client and the contractor earned a fee – was heightened by an influential Reading University report, published in January 1991, saying CM was better than management contracting, the previously preferred option.
Now, reality seems to have sunk in. As Heery International managing director Graham Rice puts it: "Four or five years ago, people saw it as everything. But it's not the answer to everything." Rice is one of many who believes that CM has always been a niche procurement method and that the market has just realised this.
"The issues with construction management have always been the same," says Citex business development director Paul Nash. "It's a particular solution to respond to particular situations." Even Colin Gray, head of the construction management department at Reading University, who produced the 1991 report, concedes that "it's not going to take over the world". As a result, says Vince Clancy, managing partner of the cost management arm of Turner & Townsend, the CM market has stagnated. "The market has matured in the number of players operating in it. You are not getting as many big contractors chancing their arm at it. The market is not expanding," he notes.
If CM is not the one-size-fits-all solution for construction, why has the penny only dropped now? First, as the three cases above suggest, because developers increasingly want price certainty. Schal managing director Paul Reeder explains: "Developers are under pressure from funders to seek guaranteed maximum price. They like the approach but they now need that degree of price security."
Some clients are also seeking to move away from CM because they no longer want to manage subcontractors themselves. It is no coincidence that Sainsbury's move to prime contracting came after a shake-up in its property department. Chris Paxford, director of CM specialist PCM, describes the shift. "There is a move for some clients away from in-house administration towards outsourcing these responsibilities. They want to take the administrative burden away from organisation."
A fall-off in the types of work suited to CM has not helped either. Lottery-funded arts projects and visitor attractions, which were ideal for CM because of their complicated nature, are drying up. The recently completed Magna science centre in Rotherham was one of the last such projects. Also, the slump in internet stocks has hit demand for high-tech data or switch centres, a lucrative income stream for construction managers because of their minimal design briefs and quick turnaround time. In addition, the features that were once unique to construction management – partnering and non-adversarial contracts – are now offered by the rest of the industry. The rest of the market has caught up," explains PCM's Paxford. The difference between traditional contractors and construction managers is certainly shrinking, with the former becoming more client- and team-focused and the latter taking on more risk.
Mace founder Ian Macpherson saw this as long ago as 1998, setting up a CM contract with a guaranteed maximum price. Others have followed suit. South London outfit RGCM now offers a "CM2" product that packages those parts of the project, such as groundworks, that tend to be price-predictable. It has also set up an internet payment facility to reduce administrative costs for clients. Rival PCM last year set up a subsidiary, PCM Projects, to offer management contracting and design and build. "We say we offer a service," says Paxford. "It revolves around delivering a building, not getting hung-up on the procurement method." Meanwhile, Schal has moved closer to its owner Carillion by offering lump-sum contract work and Citex is offering warranties to client Brixton Estates, instead of relying on warranties from smaller trade contractors. "The future has to be CM with some interesting bells and whistles," says Citex's Nash.
But Paxford says the major players in the CM market are not changing fast enough. "I do not think CM companies have evolved enough in what they do," he says.
Yet his rivals voice the hope that CM could expand into new markets. Schal's Reeder says his firm, which has traditionally operated in South-east England, now has opportunities cropping up in Solihull, Ipswich and the South coast. CM is also spreading into housebuilding. As Heery International's Rice puts it: "There are still sophisticated clients out there who are prepared to take risks."
What CM is good forFit-out
It’s fast-track, there’s not much design information. “That’s an attractive situation for construction management,” according to Citex’s Nash.
Construction managers say they are now getting enquiries from housebuilders, including Berkeley. This is because of the higher number of units needed and the work itself becoming more complex (brownfield sites, higher quality housing).
Schal is managing the refurbishment of 20,000 homes for Barking and Dagenham council. Hackney council has also announced that it is looking to go down that route. CM appeals to local authorities because it allows them to keep close control over their large-scale refurbishment programmes.
Cients that produce a set building product, such as McDonald’s or Ikea, like the consistency and partnering qualities of construction management.
… and where it doesn’t workNew build
Developers of new-build projects want price certainty so they can offer funders guarantees.
They are not hands-on enough to appreciate the benefits of construction management. Also, these benefits do not tend to come through in the first job.
Big government clients – the Ministry of Defence, the NHS – are looking for contractors to take on more risk, rather than taking it on themselves with CM.