Developers try to reduce costs on £100m Oxford Street and £140m Newport projects

Sir Robert McAlpine has been dropped from two major developments, including a flagship £100m Land Securities scheme in central London.

Land Securities has replaced McAlpine with Mace on its Park House project on Oxford Street, where McAlpine was appointed as main contractor just over a year ago. The decision came after the developer changed its procurement route from design and build to construction management to cut costs.

It is also understood that McAlpine has been the victim of cost cutting on a £140m retail development in Newport, south Wales. It is understood that developer Modus is rebidding the project as a management contract, thereby taking on more risk itself and reducing the money it will pay to the contractor.

Steve McGuckin, Land Securities’ development director, said of the Oxford Street scheme: “To do design and build in London you have to pay a high premium, and the risk was just too high for us. Construction management isn’t Sir Robert McAlpine’s core expertise, so we made an educated decision as a client. We’ll still work with them, and it hasn’t damaged our relationship.”

Park House, a mixed-use scheme designed by Hamilton Associates, is due for completion in 2010. The project involves replacing a sixties office block with a development that includes 9,300m2 of retail space, 15,300m2 of offices and 39 flats. It has just started enabling works.

A spokesperson for McAlpine confirmed that it was no longer working on Park House or the Newport project. He said: “In London, the client decided to go down the construction management route, and there’s nothing more to it than that. In Newport, it was simply because we couldn’t agree on a price. We had a price we thought was fair, but in the end it didn’t work out.”

It is understood that Mace is on the verge of two other significant contract appointments in the capital. Sources close to the Shard, at London Bridge, said that the £350m Sellar Properties development was “on the brink of securing funding” this week. He said Mace would be appointed to built it on a fixed-price contract “imminently”.

It is understood that Laing O’Rourke, which was approached by Sellar when Mace was offering to build the scheme only as a construction management job, will not have a role.

Mace is also on the verge of being appointed to build the £130m extension to the Tate Modern, known as Tate 2, designed by Herzog & de Meuron.