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M&E sector: Stability after turbulent year despite specialist contractor shortage

Last year was marred by turbulence throughout the M&E sector and, while signs of greater stability are starting to emerge, the outlook for M&E in the first half of 2014 remained sluggish.

However, an encouraging number of projects are likely to come to fruition over the coming months, which should result in a strong Q4 and 2015 for the sector.

A widespread shortage of specialist M&E contractors in the capital has caused many bigger players to reconsider how best to tackle complex projects.

As a result, self-procurement processes have entered the mix as a way to address this particular conundrum.

Regional imbalance

But the picture outside London is more mixed: M&E capabilities in many regions remain limited and restrict the type of work that many major contractors can take on.

“Construction needs to bear in mind the need to instil good supply chain management at the earliest possible stage of projects”

Until growth in the regions speeds up, this situation is likely to remain a problem, further entrenching distinctions between sites outside and within London.

However, many in the industry are also finding a fluidity to the market in terms of people. In many cases, the base salaries of engineers and project managers are increasing as the dynamic of supply and demand reverses.

This will be a major trend over the next year and the sector will be waiting to see whether it continues into 2015.

Suicide bidding solution

Furthermore, ‘suicide bidding’ has proven a pitfall for major contractors. To deal with this problem, construction needs to bear in mind the need to instil good supply chain management at the earliest possible stage of projects.

In adopting a ‘state of readiness’ on this issue from the outset, the chances are that fewer contractors will fall foul of project disruption.

“Too many industry players have shown a willingness to underestimate the cost of difficult jobs, and as a result have encountered a series of problems later on”

The upsurge in activity across the M&E market that we’ve seen over the past 12 months has been caused by innovation coming to the fore from contractors during the bidding process.

But with many of these projects coming to site, inflation and a rising market have caused the original angle of delivery for some of these players to disappear.

Difficult choices

Some M&E contractors are often burdened with bad projects and as a result they are faced with a choice of either quitting these projects and causing disruption for their partner contractors, or ploughing on and increasing the risk that they will encounter conflict and delivery difficulties further down the line.

Too many industry players have shown a willingness to underestimate the cost of difficult jobs, and as a result have encountered a series of problems later on when looking to cost projects appropriately.

Being in a state of readiness to gauge the best possible solution on a project-by-project basis is increasingly viewed by contractors as one of the best ways of injecting certainty into their M&E capabilities.

The watchword needs to be vigilance: vigilance about supply chain management, vigilance about cost and, above all, vigilance about service.

Jason Knights is building services director at Wates Construction

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