Despite strong order books and activity levels, most lead times are staying put, says Rob Darrow of Mace.
There has been a notable lack of change in most of the lead times for supplies to the construction industry this quarter. Suppliers from only three sectors have increased the time it takes to procure their services, despite general activity levels being good.
Piling → lead times have been maintained at seven weeks overall (see overleaf for more details on piling lead times).
Precast piling → lead times have remained at six weeks overall. All suppliers have a strong workload for 2005 and continue to receive a steady flow of new enquiries.
Lead times for concrete works → have stayed at five weeks overall, although some suppliers are now reducing lead times as they try to secure workload.
The average lead time for structural steelwork → has been maintained at 12 weeks.
Natural stone cladding → lead times are still 25 weeks overall, although this is set to be reduced next quarter because of the improved availability of raw material from new quarries.
As expected, curtain walling → was unchanged again at 19 weeks. However, a few suppliers are now commenting that glass availability for sites is under pressure because of workload in the factories.
Average lead times for Atrium roofing → have been maintained at 28 weeks.
Brickwork and blockwork → lead times are unchanged, although suppliers remain busy.
Drylining → is still at nine weeks.
However, providing fixed prices for the metal components remains a problem. The lead time remained constant throughout 2004 and appears unlikely to change in 2005 despite the commercial sector picking up.
Lead times for demountable partitions ↑ increased one week to 10 weeks, as anticipated in the previous article (1 April, pages 62-65). Manufacturing factories are now busy with strong summer order books.
General Joinery → lead times are maintained at 12 weeks overall, with no noticeable variances since March 2005.
Specialist joinery → suppliers have kept their lead times at 16 weeks. Suppliers across the timber sectors comment that demand for Forest Stewardship Council-certified timber is on the increase and this is extending traditional procurement periods.
Suspended ceilings → lead times have stabilised at 17 weeks overall. Suppliers are still unwilling to provide long-term fixed prices on steel.
Architectural metalwork ↑ suppliers have increased lead times one week to 13 weeks as a result of securing a number of significant projects in the previous three months. Suppliers expect this lead time to be maintained during 2005.
Decorating → lead times are unchanged at five weeks. However, all companies contacted reported strong order books, particularly in Greater London, which may result in short-term labour shortages or wage rate increases.
Lead times for Internal stone finishes ↑ have increased one week to 17 weeks because of strong order books up to the end of 2005. Although lead times have increased, suppliers have said that the increased availability of stone worldwide will improve competition in the traditional markets and should reduce delivery times in due course.
Ductwork ↓ lead times fell one week to 11 weeks overall, although the lead times of grille suppliers are under pressure and may exceed this period.
Lead times for sprinkler installations → remain at eight weeks. The supply of steel piping continues to cause problems but this is not affecting lead times.
The average lead for electrical supplies → has been maintained at 13 weeks overall. New enquiries and new projects are now busier than in the previous six months and lead times may extend next time if projects are secured.
↑ Demountable partitions
↑ Architectural metalwork
↑ Internal stone finishes
→ Piling and precast piling
→ Concrete works
→ Structural steelwork
→ Natural stone cladding
→ Curtain walling
→ Atrium roofing
→ Brickwork and blockwork
→ General and specialist joinery
→ Suspended ceilings
→ Sprinkler installations
→ Electrical supplies
Spotlight on piling - Lead times
Lead times remained constant at five weeks during 2003 and at six weeks during 2004. These periods of consistency reflected the steady level of work in the market and the sector’s ability to meet the demand. Although the commercial sector contributed less than in previous years, the market has been balanced by an increase of work from the public sector – particularly health, education and urban regeneration. In the early months of 2005, increased market activity forced lead times up to seven weeks – a level not seen for more than five years.
The piling sector is extremely busy, with availability of plant as the main constraint driving lead times, rather than the effect of pure material supply and demand. One contractor said he had not had the opportunity to service his rigs this year because all plant had to be moved straight from one site to another. Others said rigs could be deployed at a premium to assist programmes and reduce site periods, it being very much a seller’s market.
This seven-week lead time is likely to continue until the first quarter of 2006, bolstered by increases in project starts. A reduction to six weeks over 2006 and into 2007 is probable, but a return to the five-week average is not imminent.
Small projects are being quoted at lead times of four to five weeks and, with rigs in short supply, are earning premiums. Most major orders are being prebooked up to eight weeks in advance to secure plant and guarantee delivery. Contractors can supply projects in between these lead periods but it is more through luck than planning.
Spotlight on piling - Market conditions
The piling market is a mature one, serviced by a relatively small number of specialist contractors and plant hire firms. Enquiry levels are on a high, reflecting the significant project starts in the industry. The sector has responded with higher prices and longer lead times.
According to research consultancy Market & Business Development, the UK market for foundations is forecast to experience cumulative growth of 23% in the next five years. Annual growth levels are expected to hover about 5% a year in real terms between 2005 and 2007, but are anticipated to slow to 3% towards 2009. Demand is being stimulated by strong growth in the public and private residential sectors and an increased output in major civil engineering projects. This is likely to be bolstered by a modest resurgence in commercial office developments, anticipating a market upturn in 2007 and 2008.
This output growth is higher than the overall growth of the UK economy and greater than the construction sector’s average growth.
The busiest area in the UK remains the south of England, mainly London, but contractors have also noticed other hotspots in cities such as Manchester, Leeds and Newcastle, where large amounts of urban regeneration are taking place. Several contractors have also said Scotland is very buoyant, with significant public schemes either in the pipeline or about to commence on site.
Few piling contractors report significant labour shortages: the market has a quality workforce and pay levels reflect their specialist status. Many companies directly employ and train their own rig operators, supplementing them with temporary workers as required. The UK is internationally renowned as a great training ground for foundation engineers and expatriate employees form a significant proportion of the workforce. As the market is busy, labour may come into shorter supply over the course of this year. Piling contractors are also using graduate recruitment and training programmes to attract skilled workers and professionals.
Increases in operating efficiency and improvements in productivity are being achieved by contractors measuring and acting upon key performance indicators. This can be translated into incentives for the workforce in the form of early or target completion bonuses, and also improves health and safety.
Several piling contractors have taken advantage of the recent boom in output levels to invest in replacement piling rigs. Larger piling contractors generally write off their rigs every three to five years, as manufacturers improve the specifications of machines. But smaller contractors may keep plant in use for 10 to 15 years, which has the disadvantage of continued maintenance and running costs – this will eventually slow productivity and ultimately be uneconomical.
Like commercial vehicles or cars, piling rigs are improving in safety and specification with each new model and usually pay for themselves before they are written off. The safety of rigs is of paramount importance on site and this is always a factor in construction managers’ and contractors’ choice of subcontractors.
Spotlight on piling - Tender prices
Tender prices for piling work have increased in every quarter of the past year at a level equivalent to 1% each quarter. This reflects the increase in the basic cost of materials, particularly steel, which is the second raw material component of piling. Piling contractors, like other steel product consumers, have been exposed to the rising price of raw materials and, once any stock or pre-ordered steel has been exhausted, they have passed on the price increases as a higher tender. Only the very large projects such as Heathrow Terminal 5 or Channel Tunnel Rail Link have significant amounts of pre-ordered steel for piling, which allows them to avoid cost increases.
The price of concrete – the primary material of most pile solutions – is due to increase this year, with further upward pressure on the cost of cement being reported. This is likely to be translated as an increase to the basic tender price of piling and further tender increases in the sector over 2005 are probable.
These increases in material costs are exacerbated by the continued demand for piling and busy order books. This demand is set to continue during 2006 – albeit at a slower rate – and peak in 2007 when the majority of contractors expect to be extremely busy. This reflects the current predictions that the commercial sector will be much busier later in 2006 and into 2007.
Contractors continue to refine their approach to piling solutions, with the most common method being the early involvement of and ultimate transfer of risk to the specialist piling contractor. This has led to an increase in professional indemnity insurance costs, the market price for which has been higher over the past two to three years for anyone carrying design responsibility.
Piling contractors are still keen to avoid retentions, particularly as their operation is completed right at the start of the project. Several contractors are offering discounts to tender prices for reduced retention amounts and conversely adding premiums for the cost of financing through the holding of retention to a project’s practical completion. It is crucial for anybody procuring piling work to look into the options in financial guarantees and retentions to improve value for their clients.
Pricing for piling should consider the following factors:
- Site establishment
- Working pile test
- Piling installation including phasing/programme
- Integrity testing
- Allowances for standing time
- Pre-boring/obstruction removal
- Working platform and maintenance.
- Site constraints
- Safety and environment
- Ground conditions
- Design responsibility
- Contractual requirements.
Spotlight on piling - Future developments
The use of vibro-compaction is increasing in popularity as a ground stabilisation and foundation solution. Obviously, its use is dependent on the site conditions and the ultimate applied loads of a specific project. However, the principle of modifying poor quality ground (unlike piling, which effectively bypasses the problem through penetrating the ground to loadbearing strata) is being embraced on more projects. Advantages are seen in ground reclamation schemes and projects that are environmentally sensitive, principally due to the elimination of spoil and its disposal. This can be a significant cost economy particularly in any area of contaminated ground, both in terms of working practices, transporting off site and disposal to licensed tips. The avoidance of disposal off site also scores highly in environmental terms.
The controls and expertise of a contractor installing vibro-compaction are much greater than that of conventional pile driving. The integrity of the final solution depends on the quantity of stone placed in the ground and the care with which the layers are packed. The method also lends itself to the use of enlarged pile heads, thus avoiding the cost and programme implications of forming pile caps. This also obviates the need for cutting down pile lengths, which is a further economy and provides a clearer working site area for machines to start tracking around, avoiding the risk of damaging any protruding heads.
Although there are no published statistics for the various types of piling being installed in the UK, it can be assumed that the increase in popularity of vibro-compaction will continue over the next decade.
Another area of improvement is the Federation of Piling Specialists’ scheme for Working Platforms Certification.
A working platform is the foundation for a piece of machinery that may weigh anything from five tonnes to more than 150 tonnes. Although stable when on a firm surface, a 1 m2 soft spot can be sufficient to unbalance the rig and cause it to topple over. Piling rigs do occasionally fall over, and near misses are even more common.
The certification scheme does not seek to transfer any existing responsibility – the principal contractor and the piling subcontractor have responsibilities under the Construction (Design and Management) Regulations and the Health and Safety at Work Act. The scheme highlights these responsibilities by increasing awareness of platform safety and the importance of maintaining the platform in good condition throughout the contract.
The use of the platform can continue after the piling contractor’s operations have finished. It is important that maintenance is continued as the working platform can deteriorate over time. Additionally, excavations, trenches or other holes dug in the platform surface must be properly backfilled to avoid creating a soft spot that might give way under the tracks of a piling rig or other plant and equipment. The edge of the platform must always be clearly defined and should be regularly inspected to ensure that there has been no degradation.
The initiative has the support of the Health and Safety Executive and is seen as a practical tool to reduce accidents via the certification of proper design, installation and maintenance.