Profit from contract management

Administrator Deloitte said that the contract setbacks and high overheads led to cashflow problems and a breach of SIAS’ banking facilities. When the company also faced a number of winding-up petitions, the directors had little choice but to call in the administrator.

All contractors will be feeling the strain at the moment. Even the biggest of the big boys, NG Bailey, has had a tough year, despite hitting a record turnover of £600m in the year to end-February 2009. A pretax loss of £10.8m was put down to stock market decline, payments to top up the pension scheme and write-downs on acquisitions.

T Clarke has also seen profits dip, forced down in the main by restructuring costs and redundancies. A strategic review has seen the group winding down its subsidiary in Altrincham, Cheshire, the likely sale of its business near Birmingham and a reduction in staff in the London area. Bad debts are always a bugbear for a contractor, and T Clarke took a hit on profits in this trading period.

Like SIAS Building Services, NG Bailey was also hit by problem contracts. Its building services arm in Scotland experienced a number of setbacks in the education sector and its maintenance arm underperformed when certain contracts proved impossible to deliver under the tendered cost structure.

The warnings are there for contractors of all shapes and sizes. Contract management is more important now than ever: be wary of accepting those problem contracts and choose your clients carefully.