Wates chairman and chief executive Paul Drechsler on supply chain relationships and valuing skills.
Figures published by PwC in January revealed that 2,688 construction companies went into administration in 2011, 6 per cent more than in 2010, taking the number of firms to have entered insolvency in the last two years up to 5,215.
The research suggests that this trend is going to continue unabated during 2012. This seems inevitable and early indications may suggest some bigger company failures in 2012.
This poses a threat to all in the industry and, of course, will adversely impact performance in terms of delivering projects on time and on budget.
More importantly, at a time when the UK is showcasing brilliant project management and construction on the Olympics site, it seems there are other forces at work which could harm the industry’s reputation.
The failure of so many companies in the supply chain is the inevitable consequence of the industry lacking appreciation of the talent and skills required to deliver projects, and also failing to value risk.
At the same time, many construction companies are responding by lowering prices and margins, even as the risk in the business system increases. This is done in the vain hope that, if you hang in there with your eyes shut, all will be alright.
But the laws of economics say not; for many, it will end in tears – for investors, customers, contractors and supply chain.
That’s not all. Construction Skills is forecasting another 45,000 job losses in the industry that offers some of the best prospects for growth and jobs in the whole UK economy. This at a time when the number of young people not in employment, education or training is rising.
So what’s the solution? Firstly, conditions that promote private sector growth and public sector investment are essential. Next, a focus on a common purpose: value, quality, safety, on time and on budget for all.
At the heart of this is an alignment of values and relationships that promote deep understanding of needs across the supply chain; starting with the customer.
Dynamic, open, honest relationships will ensure good lines of communication, so vital to identifying risk early and managing the consequences effectively.
Partnerships are a long- term concept – transactional relationships seem risky in these volatile times. A mindset of sharing a long-term common purpose is ultimately the key to success for all.
By making sure our relationships are open and honest, we can deliver greater certainty for customers on programme and costs, encourage innovation, and get back to doing what this industry does best: delivering quality, and customer satisfaction – safely, no matter how challenging or complex the project.