Construction consultant Len Bunton, who is also co-chair of the CICV procurement and commercial group, reflects on a ‘tumultuous’ year for the industry and considers what might lie in store in 2024Â
As we get to the end of 2023 there is no doubt it has been a tumultuous year for the industry in the United Kingdom. We have experienced some significant business failures which regrettably have left a mountain of debt due to a wide range of subcontractors across the industry. Fortunately, so far at any rate in Scotland, we appear to have avoided the impact of businesses stalling and going into administration and fingers crossed during 2024 that we do not experience any casualties.
The results of the recent CICV Payment and Cash Flow Survey made grim reading, but the responses really were not surprising as many of us who advise contractors and subcontractors, felt that recently reflected what the supply chain was experiencing across Scotland this being a general slowdown in payment periods, and a reduction in the amounts that the supply chain were due. Anecdotally, some clients say that they are currently experiencing a downturn in work opportunities, coupled with a tightening of margins and there are now definite concerns emerging regarding pipeline of work in 2024.
I have set out some positives with the hope that we will see some of these issues been delivered to see a general improvement in the construction industry in Scotland. In 2024 the process of educating the industry on the Best Practice Guide which sets out some of quite simple recommendations to contractors and subcontractors to improve the way in which they manage the commercial aspects of the construction projects.
Getting contractors to buy into this is especially important and in embedding these recommendations into their businesses, and already there are several pilot workshops been planned and the feedback will hopefully be positive that lessons are being learned from the solid advice that has been provided. In addition, several contractors are seeking to have internal workshops to bring their commercial and contract management teams up to speed on the SBCC Forms of Contract.
The Quality Initiative is also a great idea and I know that CICV will be supporting this and again this initiative needs to be brought in at site level to ensure that less and less projects have issues concerning non-compliant workmanship which inevitably results in the costs associated with rework and contra charges, from the contractor and the clients. It really is up to everyone reading this article who runs a construction business, to make sure that their focus is on quality, and to end the criticisms experienced by the industry because of non-compliant workmanship and defects.
There is no doubt that there is a surge towards more collaboration in the industry and as to what form that takes remains to be seen, but it strikes me from sitting on the fence that the industry does want to collaborate more closely with the employers, contractors, and the supply chain to improve performance on construction projects. This is going to be a never-ending and a long term process and needs energy and dedication to drive these changes through.
Much work is happening behind-the-scenes on the Construction Accord and in my personal opinion it is essential that the Scottish Government and the construction organisations work very closely together to achieve the objectives of the Accord, and there is no doubt that this is going to take a number of years to come to fruition, but the positive side of this is that discussions are underway and some very positive ideas and objectives are emerging.
Again, on a positive note the Conflict Avoidance Process and the Conflict Avoidance Pledge are gaining traction and we are now seeing a number of major projects having CAP incorporated into the building and engineering projects from the outset. In addition, the level of approaches to the RICS are increasing, to have 1/3 party brought in to try to resolve issues at the initial stages and avoid issues escalating into expensive and time-consuming disputes. The Conflict Avoidance Coalition will come forward in 2024 with a new structure which will focus on promotion and growth, and developing guidelines and processes, and a major conference will be held in 2025 which hopefully will attract major clients users of the construction industry and consultants, contractors, and subcontractors.
I have also been encouraged by the work of the finishes and interiors sector who have appointed experienced individuals to provide contract reviews to FIS members. This means that when a tender enquiry comes in a tenderer can have the conditions of contract reviewed to identify any high risk clauses that might require financial recognition but hopefully the parties can negotiate out some of the unacceptable risk transfer amendments and thus start the project with a balanced and fair set of conditions of contract. It is beyond my comprehension why public and private sector clients continue to have pages of amendments to the standard forms and the industry needs to stand up to this type of conduct.
One question I was asked recently was – are attitudes changing and so the answer to that is yes. In my own work with a number of clients I have noted that they are walking away from employers who are only interested in lowest price, they are walking away from employers who as I say produce ridiculous amendments to the standard forms and there are walking away from both public and private sector clients who are either late payers, or who continually reduce the amounts due to contractors and the supply chain. I find that approach to be refreshing and hopefully it will spread throughout the industry.
So, let us take a positive view moving into 2024 and let us hope that the industry can take on some of the many recommendations coming forward, to make the industry in the United Kingdom a positive and profitable sector to be in.
