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Bam Construct boss: Tier one model 'under threat'

The chief executive of Bam Construct has said the tier one model is “under threat” from a combination of tight margins and the changing nature of construction.

Speaking during the leaders’ panel at the CN Summit, James Wimpenny said: “Is the tier one model under threat? I think it probably is.

“Industry needs to recognise that it needs to change; the key issue is how quickly it is able to change, and the environment around it able to change.

“The model of the tier one getting squeezed in the middle has got to stop, because if that is the way it continues then it will be under threat.”

Mr Wimpenny suggested that a tier one’s role would change to more of an “integrator”.

“The tier one model will be there but it will be in a different guise,” he said.

“I think it will be more of an integrator-type model, and I think it will be more of a model to do with the preconstruction process because in reality that is where the money is.”

The Bam Construct boss also suggested large contractors had been given a wake-up call following the collapse of Carillion.

“I think it [Carillion’s liquidation] is about big business generally and ethics; it’s happened in our sector and it’s happened in other sectors.

“It’s about how accountable businesses [are] for their performance.

“I think ultimately businesses are there for people and shareholders and also for the country, providing services that add value. You’ve got to know what you are and what your purpose is.”

Mr Wimpenny told delegates that Carillion’s downfall was partly due to its change in focus.

“If you don’t know what your purpose is then you can end up in a situation where you lose your core skills and your core focus,” he said.

“I think Carillion morphed into something very different to what it originally was.

“I think Carillion lost its focus and wasn’t brought to account on whether it was still sustainable. Everybody thought it was ‘too big to fail’.

“Businesses should never be too arrogant as to think they are too big to fail. That leads to a bad place.” 

Readers' comments (6)

  • Under threat because they add no value and drag on the cash

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  • James Wimpenny is quite right.
    The risks tier 1's take compared to reward is unrealistic. No other industry would tolerate it.
    The question is when will the next tier ones go under, not if.
    The industry needs to get back to standard unamended 'fair' forms of contract.

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  • Squeezed in the middle?

    Do you mean you look to the smash the supply chain to cover your cut throat loss-leading bid processes, then use our valuations and retentions to prop up your bank and balance sheets?

    There is a massive amount of work in the UK yet you are still slashing each other to bits expecting those actually providing those services to make up the shortfall.

    Madness.

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  • James also commented that the role of the Tier 1 should really be to add value, rather than pass-on cost & risk. He noted that low margins should be addressed by tackling inefficiencies and re-engineering processes to design-out waste, not simply by 'cutting costs'. There are significant challenges, but I took away from his comments that he believes a sustainable future does exist for Tier 1s which are able to embrace digital and new ways of working.

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  • Tier 1's squeezed in the middle...….. Is delusion a required qualification to sit main board for a Tier 1. Very similar "sad song" played by the Kier FD.
    The reality is that a Tier 1 only gets squeezed after they have squeezed the last drop of juice out of the supply chain.

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  • “I think it [Carillion’s liquidation] is about big business generally and ethics; it’s happened in our sector and it’s happened in other sectors.

    ... Ethics, morals, accountability, responsibility, fairness, common courtesy, respect ..... this list goes on.

    Many of these, and in some companies all of these, are missing from the UK Construction sector, particularly in Tier 1's.

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