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Who’s doing the bad bidding?

Zak Garner-Purkis

This week NG Bailey’s chief executive David Hurcomb told me the decision to “walk away” from bids had been a key reason behind his firm’s profit growth.

“It may hurt you in the short term, but the reality is better [in] the long term,” he argued.

Mr Hurcomb is hardly the first construction boss to talk up the benefits of having the guts to turn your back on work.

In June, Bam Construct’s CEO James Wimpenny told CN how he wanted to create an atmosphere where staff spoke out against certain deals.

“We need a culture of people speaking up and saying, ‘This is not the right project to go for’,” he said.

Galliford Try’s construction chief Bill Hocking has also told CN he wants his team to “refuse to bid” on certain jobs.

All of which begs the question: is this translating to more contractors walking away from deals and, if so, who’s stepping in?

There has not been any obvious overall decline in the number of big names lining up for major frameworks or high-profile private sector jobs.

All of Carillion’s contracts, bar the two complicated PFI hospital jobs, have now been hoovered up by competitors – the potential pitfalls of which CN editor Tom Fitzpatrick highlighted in the immediate aftermath of its collapse.

Given the huge difficulties Carillion got itself into during the firm’s final months, it is perhaps surprising that there have been far more contractors snapping up its jobs than explicitly turning them down.

More generally, the trouble is that it can be difficult to identify projects that have been underbid until the problems emerge mid-construction.

Industry gossip always provides a bit of a guide – you’ll frequently hear how two firms had been, says, £20m apart in their valuation of a job.

It’s an indicator, but it’s hardly a science.

You don’t know the strategy that’s being pursued by a particular firm – maybe they have priced it better than their rival; maybe they plan to hit the client with a load of hidden costs; maybe they have just got it wrong.

Many winning bidders only get a sense of whether a job will be profitable once they are past the halfway mark, when they [hopefully] start to make more money than they are spending.

For the outside world, we often only have confirmation that a contractor has priced a job poorly when there is a writedown in their accounts or onsite problems become public.

All of which brings us to a slightly frightening conclusion: that we may only know who’s picking up work at unsustainable prices when it’s too late.

Readers' comments (3)

  • What is a bad bid for one company is not necessarily a bad for another. Each company has its own strengths and weaknesses, and while there are some bad contracts out there everyone should avoid, most contracts will fall into at least one companies 'sweet spot'.

    The problem comes when companies chase contracts, either to maintain or increase turnover, and think because a competitor can do it profitably they can as well. Sometimes it works and the company learns new skills, other times they get badly burned.

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  • Hugh Graham

    Building on the first (anonymous) comment what "the right price is" to a business depends on a number of factors, such as how much it needs the £ revenue from the contract at the time - in other words if they don't win this what else is there in the pipeline?
    Sometimes what appears to be "the right price" turns out not to be at a much later date - perhaps when its too late to do anything about it!

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  • If you wanted to see another example of the market turning its back on an opportunity you need look no further than the A303 where the lack of interest from main contractors capable of delivering is deafening.

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