Galliford Try will seek to win 90 per cent of its contracts through frameworks in an effort to boost margins in its construction arm.
Chief operating officer Ken Gillespie told Construction News that the group took in 70 per cent of its total £2.34bn revenue through frameworks in 2014/15, up from just under 60 per cent in the previous 12 months.
However, the firm now wants to push this figure towards 90 per cent in the near future, according to Mr Gillespie.
The COO warned against what he called the “high risk” strategy of bidding for a range of work with new clients or ones with which a contractor did not have an established relationship.
“Our focus is on long-term relationships with clients we understand in long-term frameworks, because you can make the investment to understand them,” he told Construction News.
“There’s no doubt we see better returns from that than from what I’d call the ‘win and do’ environment.”
Galliford Try set out last year to hit £1.5bn in construction revenue and a 2 per cent margin in the division by 2018.
Following the acquisition of Miller Construction in July 2014, Mr Gillespie said the firm was ahead of schedule on both targets, with the division’s turnover hitting £1.3bn for 2014/15 at a margin of 1.2 per cent.
Turnover is anticipated to go beyond £1.5bn by next year. However, Mr Gillespie admitted that margin growth in construction would be more difficult.
“In our 2018 strategy, the whole focus was on growing margin not volume; so it’s a clear focus but it’s a very challenging thing to achieve,” he said.
“There’s no doubt in my mind that the way to improve margins is all about how we interact with clients and with supply chain.
“The earlier we can be involved in the client’s business and the earlier we are involved with the supply chain the better results everyone gets.”
Mr Gillespie added that one of the ways to ensure a better relationship with the supply chain was by guaranteeing that payment to subcontractors is made when promised.
He said that, during workshops run by Galliford Try, suppliers “spend the first two hours talking about payment”.
“What worries them is not necessarily the time, but the certainty,” he added. “That undoubtedly has an effect on the attractiveness of that contractor to that supply chain.”
The comments come two weeks after a Construction News survey found that more than a quarter of subcontractors were waiting more than 60 days, on average, for payment.
However, Mr Gillespie insisted that poor payment practice was not as endemic as reports suggest.
“The amount of headlines and commentary it gets is disproportionate to the number of people complaining,” he continued.
“We could not run a successful business with poor payment profiles because the supply chain wouldn’t work with us.”
Mr Gillespie was speaking after Galliford Try announced a record pre-tax profit of £114m, with its housebuilding arm, Linden Homes, performing particularly strongly.
In the wake of the results, Galliford Try chief executive Greg Fitzgerald described as “shameful” the fact that other construction firms have made losses after taking on a series of loss-making contracts.
“I don’t like to see the landscape littered with competitors making losses,” Mr Fitzgerald told the Evening Standard. “You could say it is shameful… As a sector we need to really, really learn from the last few years.”
The housebuilding and partnerships businesses combined achieved a profit margin of 16 per cent on the back of £1.1bn revenue, up 11 per cent on 2013/14.