Contractors and suppliers say the future is looking up. But the supply chain is reporting confidence around future workloads as tender opportunities become more plentiful. What impact is this having?
There is growing inconsistency between client and contractor interpretations of market conditions, according to the Q3 Market Intelligence Report from cost consultants Gleeds.
This is leading increasingly to frustration on both sides as suppliers react to competitive tendering.
Contractor tender prices are rising as a result of inflation and there is a push for clients to adopt two-stage tender processes. However, client pricing expectations remain low, fixed, single-stage and competitive.
Heightened construction activity means greater choice for the supply chain, allowing them to be more selective.
The data indicates a perception that clients are being slow to accept that that there is less competitive desire to win work and that supplier capacity is still limited following the recession.
This means that it is likely procurement strategies will need to change.
Two-stage tender push
While there is a need to ensure the supply chain is operating in a more realistically competitive market, clients should be reassured that they are getting the output and value they are looking for.
This accounts for the push towards two-stage tender routes. It enables more robust pricing to accurately account for inflation and pricing movement – though care should be taken to ensure this does not inhibit value-for-money solutions.
Analysis of tenders by sector shows that commercial is highest by volume – 73 per cent of respondents were active in the commercial sector, with 63 per cent tendering for offices work.
Schemes with pre-agreed tenancy agreements secure funding quickest and are first off the ground.
The residential market ranks second – 52 per cent of respondents were tendering in the sector, with 58 per cent being active.
There are murmurings that high levels of construction activity may not be sustained for long, despite there being no evidence of this in the market at present.
There is a consensus that schools frameworks set up at the lowest point of the recession are no longer competitively attractive, making it increasingly difficult for clients to procure through these routes.
In contrast, universities and colleges have maintained investment, resulting in a healthy pipeline of construction activity across the UK.
Recruitment drive sees slim pickings
Skills shortages continue, with most trades and professions now running low in terms of supply.
Three-quarters of the supply chain are recruiting, but with difficulty; finding candidates with the right skills, qualifications and experience is proving challenging.
Seventy-seven per cent of the supply chain reported rising labour costs and 90 per cent expect this to continue on an upward trajectory.
The skills shortage involves bricklayers most significantly, but this has now filtered through the industry and extends to plasterers/dryliners, project managers, cost managers and site managers.
Over the past six months, 84 per cent of the supply chain said the price of materials had increased.
Those most severely affected include bricks and blocks, steel timber, cladding, glazing and aggregates. Manufacturers are upping production, but prices are expected to rise over the next 12 months while there is a period of catch-up.
BIM uptake stalls
The industry is seeing fundamental changes in the way we plan, design, construct and operate buildings through the use of Level 2 BIM for all centrally procured projects by 2016.
Awareness and adoption to Level 2 hasn’t changed shape a great deal since the start of the year. Without complete project team and client commitment, BIM is difficult to implement.
The reasons for the lack of take-up varied from lack of client willingness to cost, in addition to consultants’ inability to use BIM and lack of supply chain awareness.
Thirty-six per cent of respondents cited cultural change or a learning curve as the largest barrier to BIM, while cost – both capital and training costs – was cited by 31 per cent of respondents.
Across the year, there has been little change in respondents reporting that very few of their projects were designed or built using BIM - 40 per cent of respondents said this was the case in both Q1/Q2 and Q3/Q4.
However, the latest survey shows 3 per cent of respondents said they used BIM on all of their projects in Q3/Q4 – up from zero in the first half of the year.
Quite often with BIM there is apprehension and focus on the technological application of 3D modelling.
In actual fact, BIM is really about better information management, creating processes pre-design that will ease collaboration, risk management and problem solving.
As an industry, we need to start being a little braver and help advocate the benefits of BIM to our clients.