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Awarning even the mighty can't ignore


CONTRACTING is a difficult business. One minute you are everybody's dream, the next nobody wants to know. At least that's how it must feel if you are working for Germany's second biggest contractor, Holzmann.

Last week, it would be difficult to have found a better example of how to run a construction business. Holzmann's influence spread beyond its national borders. It commanded respect from UK contractors, working on private roads with Balfour Beatty through DBFO joint venture, Connect. It was even touted as an ideal candidate to buy a struggling UK contractor. Now the tables have turned and it is battling for survival after a shocking announcement that it faces a £800 million loss because of 'massive breaches of duty' by former managers.

Details are still emerging of what went wrong. But the 'Holzmanngate'scandal raises the question of whether it could happen here. It is tempting to say no.

But sadly, there have been some warning signals. Afew weeks ago ready-mix concrete giant RMC was hammered with a £34 million fine for market fixing. At the root of the problem were local managers rigging prices behind the back of the main board. The offence, which took place in Germany, highlights the dangers faced by big construction firms trading across Europe.

Closer to home, Laing's heavy losses on the Cardiff Millennium Stadium sent a shudder through the industry. It was not that they arose from any wrongdoing. There is no suggestion of any impropriety on the job. Cardiff could happen to anyone in the industry. The precise difficulties of this particular job were complex but the depth of the disaster appears to lie in poor management systems.

Unfortunately, it seems a characteristic of construction that management has difficulty exerting strict control. This is exacerbated by the remoteness of many sites and the fashion for stripping out tiers of management.

Disasters are not always about dishonesty. They are often about wishful thinking at a local level. The risks caused by poor lines of local reporting and management is as much a threat to fast-growing small firms as it is to headline-grabbing major contractors.

Never mind talk of benchmarking and rethinking construction.

Let's not forget the straightforward science of avoiding nasty surprises.

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