Opinion: Contractors give clients a reality check on costs

Aaron Morby 7 years ago
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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?

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