Opinion: Contractors give clients a reality check on costs

Aaron Morby 2 years ago
Share

The decision by three top ten contractors to walk away from major projects in the last week is an overdue wake up call for the industry’s big clients.

For too long client cost advisers have got away with strong-arming contractors into accepting unrealistic target prices in lump sum contracts.

But with rampant cost inflation and a scarcity of good subcontractors around in London, the brutal fact is main contractors have no choice but to take a stand on price.

Bouygues, Kier and Morgan Sindall have left jobs after bearing the cost of bidding and mobilising teams for a morsel of enabling works.

Gutsy directors don’t get a slap on the back for walking away – particularly when they are dealing with blue chip clients.

This alone must signal to clients that construction costs today really are higher than the dusted-down costings of QSs indicate.

This week’s reality check is all the more courageous because it comes against a background of growing unease about where the market is going in six months time.

The vaunted forest of 200 high-rise residential projects in the capital is now a pipe dream.

Demand for prime homes has vanished in an instant, leaving developers with major headaches on grandiose London schemes.

This has left some big building contractors quietly wondering where major new orders are going to come from in 2017.

Despite this main contractors have held their nerve and avoided taking on cut-price jobs.

It is a bold decision and the right one for the whole supply side of the industry.

Cost consultants may now look up from their spread sheets and start to grasp what it actually costs to deliver jobs in the real world. 

Standing firm on price also protects subcontractors from getting battered for savings further down the line.

It is good to see sanity prevailing and contractors making a stand against clients.

The big question is can it last?

Latest news

Contest for radical rethink of rail footbridge design

Network Rail challenges engineers and architects to design the next generation of structures
2 hours ago

Bristol Arena builder confirms project will be on budget

Crunch meeting to decide fate of stalled Arena project in two weeks
10 hours ago

Galliford Try snaps up sites as Bouygues exits low rise housing

Partnerships arm will deliver more than 200 council and private sale homes in Wolverhampton
9 hours ago

Mobile app means contractors can match paint in seconds

London contractor Lucas launches device to revolutionise trade decorating industry
9 hours ago

Murphy makes switch to cleaner fuel on HS2 site

Contractor becomes first firm to switch to greener alternative to diesel
10 hours ago

Brighton Uni starts £20m academic building bid race

Six-floor building will be located next to the Preston barracks redevelopment site
11 hours ago

Speller Metcalfe wants to meet new subcontractors

Contractor keen to talk to new suppliers across Cardiff: Register now
10 hours ago

Contractor fined over unsafe fleet of cherry pickers

HSE investigation finds lack of maintenance regime
1 day ago

Gary Neville £200m Manchester tower gets the final nod

39-storey Deansgate skyscraper complex will be home to a 5-star hotel, luxury flats and offices
1 day ago

Thames Tideway TBMs placed for big drive

Tunnelling to start later this year on 12km central section - picture special
1 day ago

Network Rail bans retentions to support supply chain

CP6 overhaul sees switch to project bank accounts with Tier 1 firms told to pay in 28 days
2 days ago

ISG clinches £34m Twickenham campus scheme

Firm to deliver 160,000 sq ft teaching block for Richmond upon Thames College
1 day ago

HB Reavis raids Argent for major Waterloo scheme boss

Joe Martin joins as UK construction director for 1m sq ft Elizabeth House job
2 days ago

Scotland to require sprinklers in all new social housing

Sprinklers to be compulsory in all social housing of over 10 people
2 days ago

Perfect Circle wins £300m Bristol Uni campus

AECOM, Gleeds and Pick Everard JV signed up for Temple Quarter Enterprise Campus
2 days ago

Single alliance plan for all smart motorways work

Highways England floats radical alliancing plan using three main contractors
2 days ago

Berkeley Group warns profits to drop 30% next year

London house builder's profit hits high water mark of £935m
2 days ago

Boost your online presence – join the new Enquirer Directory

New site for suppliers and buyers will showcase their products, services and latest stories
2 months ago

£400m north west small projects framework launched

Procure North West (Lite) framework to cover projects up to £1m and M&E work
2 days ago

More than half of construction workers in London from EU

Brexit alarm over Capital's reliance on foreign labour
2 days ago

Severfield margins restored to 8% target

Steelwork contractor's profit rises by nearly 20% to £23.5m
2 days ago

Galliford Try bags £45m Leeds Beckett sports research hub

Demolition to start next month at the Headingley campus
3 days ago

Mears to help homeless in £75m housing deal

Contractor to buy and refurb 365 homes in Waltham Forest
2 days ago

Sellafield teams cut budget overruns in half

Sellafield clean-up facing £900m overspend despite improved delivery
2 days ago

Network Rail starts race for £5bn trio of trackwork deals

The 10-year alliance deals will be let to designer/contractor JVs
3 days ago

Multiplex bags £400m New Scotland Yard redevelopment

Multiplex to start six-tower Westminster Broadway scheme in January
4 days ago

Kier defends fire safety strategy after Glasgow blaze

Contractors had agreed safeguards in place as repair estimates hit £100m
3 days ago

McCarthy & Stone boss to step down after profit warning

Retirement home builder to streamline after poor spring sales
3 days ago

Capita sells Constructionline to private equity giant

Procurement and supply chain specialist sold for £160m
3 days ago

McLaren lands new HQ for consultant Dar Group

John F Hunt to start demolition work in August to make way for new nine-storey scheme
4 days ago

Contractor services