Opinion: Contractors give clients a reality check on costs

Aaron Morby 3 months 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

WSP swoops to buy rival consultant Sweett

£24m deal sees WSP continue on the acquisition trail
46 mins ago

Leaking mobile crane closes Blackwall Tunnel

Traffic chaos across South London as contractors battle to resurface damaged road
12 hours ago

Sixteen firms win national £1.5bn RE:FIT framework

National retrofitting scheme to lower public sector energy bills
4 mins ago

Didcot recovery operation hit by further delays

Bodies of disaster victims still not returned to their families after three months
8 hours ago

Swansea Tidal Lagoon developer dumps Chinese contractor

Swansea Tidal Lagoon developer to retender £300m sea wall contract
16 hours ago

Brexit fears send site wages soaring to £1,000 a week

Bricklayers now earning £25 an hour as skills shortages set to intensify if UK votes to leave Europe
23 hours ago

Small companies being left behind by “BIM divide”

Smaller firms missing out on the benefits of computer modelling warns Morgan Sindall
18 hours ago

Local contractors urged to chase £6bn schools deal

SME leaders encourage member firms to go for places on massive education framework
23 hours ago

Renew hits acquisition trail as profits soar

Engineering services specialist delivers record results in first six months
23 hours ago

Green light for £2.6bn Scottish windfarm

Construction to start this year on huge infrastructure investment
2 days ago

Skanska jv wins £100m National Grid Humber tunnel

Gas pipeline will be the longest in a tunnel, inserted in a single string in the world
2 days ago

New finance director for Clugston

Ian Pattison joins from Aim-listed office services group Restore
23 hours ago

Gilbert-Ash seals £21m Oldham theatre revamp

Work to start on Oldham Coliseum and library revamp
24 hours ago

Demolition starts for £400m Marble Arch Place

Brookfield Multiplex will replace 1960s Hyde Park tower with mixed-use development
2 days ago

Manchester Uni suspends £170m student halls as bids soar

University goes back to the drawing board as builders fail to meet target price
2 days ago

Wates lands £30m Farnborough exhibition centre job

Construction to start in September to expand home of famous airshow
2 days ago

Famous film labs to be turned into £120m resi scheme

Weston Homes to start revamp of Denham site where Star Wars and James Bond were created
2 days ago

Farrans bags £33m London special needs school

Oaklands 224-pupil special needs school will be built in Hounslow
2 days ago

Rowecord returns to structural steel fabrication

Group's Braithwaite Engineers business sets up new facility in Port Talbot
2 days ago

ISG wins Oxford Uni laboratory scheme

Work due to start in next few weeks on the complex new-build and refurbishment project
2 days ago

Russells to start Manchester £40m Axis resi tower

Work set to start on 28-floor block of flats almost a decade after plans first approved
2 days ago

Jail for phantom house builders

Fraudsters swindled tax man out of £500,000 for bogus building materials
2 days ago

Northern Line Tube Extension cost to soar by £240m

Battersea Power station developer in talks with TfL over who should foot major design change bill
5 days ago

Builders confirmed for £14bn Wylfa nuclear power station

Hitachi, Bechtel and JGC Corporation JV signs deal for Anglesey project
5 days ago

Bid race starts for £135m Dover Harbour revamp

Western Docks construction programme to start before the end of the year
5 days ago

Construction employers in “final” 5.25% pay offer

Contractors claim they have been 'pushed to the limit" during pay negotiations
5 days ago

Miller Homes fined £100,000 over silt pollution in river

Storage lagoons at Huddersfield site discharged silt into Grimescar Dyke
6 days ago

Huge vibration fine for construction pipe maker

£200,000 fine is latest massive penalty since change to sentencing guidelines
6 days ago

Plans for £150m shed scheme in St Helens

Bericote Properties is planning a 1.4m sq ft shed scheme next to Haydock Industrial Estate
5 days ago

EFA plans new £6bn schools construction framework

Nottingham 'boot camp' days planned for revamped Government schools framework
6 days ago

Contractor services