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Making Laing's list

News that Laing O’Rourke is slashing its supply chain by three quarters is evidence of another main contractor tightening its belt, and chances are if you haven’t heard from them, it’s unlikely you are still on their list.

David Whatham, procurement director at Laing O’Rourke puts it simply: “We want to work with fewer, better suppliers. You can’t have relationships with many thousands of suppliers,” he says.

He feels that the more people you use, the greater the variation in what they deliver. And he confirms that if your name’s not down, that’s likely to be it: “Very broadly speaking those on the list have already been spoken to,” he says.

The Federation of Master Builders says the cull by main contractors has been on the cards for some time. Ron Wilson, regional director for Yorkshire and Trent, says: “I think this sort of situation may have been coming for a while, it’s been fairly lush for about the last 15 years. There’s been a shortage of contractors for the supply chain and some of the major contractors might not have been as picky as they are now.”

For some subcontractors this may be an opportunity to concentrate on other work, but for others, these could be uneasy times. We all know that a main contractor is only as good as its subcontractors, but how do you actually stay in the chain itself?

Adrian Blumenthal, special projects director at Constructing Excellence, says that you have to listen to your client: “Subs have really got to understand the client and their business. You can collectively improve the supply chain.” It may be up to the sub-contractor to be really proactive on this, as Mr Blumenthal says: “The main contractors don’t do enough to understand their suppliers better.”

Overbury is one firm that does not have imminent plans to cut its suppliers, but Patrick Westbury, its supply chain manager, agrees that improvement is always needed. “Gone are the days of ‘the victim sub-contractor. If that is your attitude you need to raise your game. If you ask a client what do you want me to do – it’s simple, and then all you’ve got to do is do it,” he says.

The firm regularly reviews its suppliers’ performance using a balanced scorecard and it expects subcontractors to ask questions. “Before a job starts, we will discuss their scores and would expect them to ask what do you want me to do, what’s important, how do you wish us to behave,” Mr Westbury says.

And think about what requirements the client will have of the main contractor. “You must think also about what drives the main contractor and the client. SMEs also need to deliver more innovation,” says Mr Blumenthal.

Innovation is something which often comes up when speaking to main contractors. But don’t feel you have to apply it to everything. Mr Whatham says: “We don’t want continuous innovation on everything, in early meetings we just need about a dozen people, and it’s not about innovating from the first principle. Ultimately it’s about what might deliver a better result for the client.”

Health and safety played a big part in Laing O’Rourke’s review of its supply chain. Mr Whatham says that quality, cost and delivery are crucial, but, he says: “It is not purely a commercial exercise. We have an increasing proportion of incidents which affect or are because of sub contractors.”

And he advises suppliers to be keen about early meetings. “Sub contractors should be involved very early on and that’s one of the areas they see as not productive. It’s something that is seen as a chore – by smaller businesses and larger ones. It’s asking what are the key tasks and how they are going to deliver these,” he says.

Whether you have a chance to get back on the list could be doubtful. Costain is also cutting its suppliers dramatically. Chris Squires, the firm’s procurement director, says: “There will occasionally be a need to bring in new entrants, sometimes driven by geography or new specialist areas, occasionally to replace companies that are not delivering.” But for the moment, the focus is on reduction.

If you are one of the lucky ones, don’t feel it’s time to sit back. The FMB’s Wilson says: “There’s nothing worse than complacency in anything. Sometimes the big boys become complacent and then the work suddenly stops. It’s continuous improvement you need to be looking at.”

What Costain will be doing:

Chris Squires, Costain’s procurement director says: “Moving forward with fewer supply chain partners challenges the traditional approach; there is an increase in interdependency and both contractor and subcontractor alike will need to adopt a different culture - one of collaboration. Largely, the reduced supply chain will comprise existing members - those that have demonstrated high levels of performance coupled with the right attitude and desire to be part of our team. The supply chain for projects is identified at an early stage in the work winning phase and we will work closely together throughout the project lifecycle. Gone are the days of rebidding once a project is awarded.”

The firm will be looking for:

• A high level of focus and demonstrable achievements in safety, health and environment.

• A proven track record in performance with Costain, or for the few new entrants, for other similar main contractors.

• The right mindset and desire through their team to work collaboratively throughout the project lifecycle, supporting the work-winning activity and then moving onto successful delivery.

• A culture of continuous improvement.

• Technology and ideas to challenge traditional ways of working.

Contractors chosen will become a preferred or strategic partner and will be given a larger share of the firm’s work.