We hear a lot about the power that clients have over contractors, but there is evidence the balance is starting to shift.
A survey by Aecom of 11 of the UK’s top contractors operating in the central London commercial market, shared with Construction News, paints a heartening picture.
We all know confidence has been increasing, but there have been false dawns before. What is different this time is that contractors’ improved sentiment is reflected in their order books.
“In these circumstances, contractors can afford to be more selective about the work they choose to bid for”
This time two years ago, when Aecom last carried out its contractor survey, it found that pipelines were less than 40 per cent confirmed for the following year. Today they are more than 70 per cent booked for 2014.
Those contractors surveyed report increasing certainty of opportunities and increasing workloads.
With this, unsurprisingly, come increasing input costs and a forecast rise in tender prices - contractors are anticipating tender price inflation in London of 3 to 4 per cent over the next two years.
Pick and choose
In these circumstances, contractors can afford to be more selective about the work they choose to bid for.
London commercial developers must wise up to the fact that the top contractors will be looking to form long-term relationships with clients that will give them repeat business, fair contract terms and a visible pipeline of future work.
“As contractors alter their behaviour in line with rising confidence, how quickly will clients respond?”
As contractors become more confident, they’ll be more inclined to bid only for projects they believe they will win against similarly sized competitors and might not bother with single-stage design-and-build tender jobs, which can be expensive.
Of course, conditions in London are different from those elsewhere in the UK. It’s still hard to see similar confidence or behaviour taking hold outside the capital.
But it will come. In the meantime, London will be an interesting test case. As contractors alter their behaviour in line with rising confidence, how quickly will clients respond?
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