Blog: Independent building firms hitting a wall when it comes to council contract awards
By Martin Peat, Director, Richardson & Peat
With school and local authority building contracts continually being awarded to the largest construction firms and best-known architects, proving that ‘biggest doesn’t necessarily mean best’ within the construction industry is becoming increasingly difficult.
Smaller, independent companies are being priced out of prestigious projects, particularly those tendered by councils. It means less-known contractors are not only missing out in terms of finance; the chance to carry out high profile work in the community and establish a reputation is also passing them by. It’s absolutely correct that local authorities or groups funding school building projects apply risk adverse policy and procedures when issuing contracts for tender.
Unfortunately, these unyielding terms are applied blanket-fashion regardless of project size or value. For instance, a recent school building scheme was put out to tender via a consultancy firm which required the construction firm awarded the project to provide £5 million personal indemnity cover - even though the scheme’s total build-cost was an estimated £500,000. On a build such as this, there is little or no chance of £5 million-worth of risk incurring. However it does rule-out smaller firms competing for such contracts despite being fully-qualified and able to carry out the work.
Big benefits of small firms
There’s a perception that small companies carry greater risk, and whilst it’s understandable funding groups adhere to tried-and-tested architects or contractors, there are many benefits to seeking out an independent firm. A company such as Richardson and Peat, which provides turnkey solutions for a range of new-build and refurbishment projects, has the flexibility to tailor designs and construction to a client’s precise requirements. And whilst larger contractors sub-contract work once a contract’s been procured at potentially greater cost to the client, Richardson and Peat takes care of every aspect of the construction process; from design and planning, through to building and the handing over of the property’s keys to yet another satisfied customer. Reduced costs and personal, face-to-face service are two very good reasons to look beyond construction conglomerates when it comes to contractor specification.
However, local governments are often bound by existing agreements with building firms, meaning planning committees’ hands are tied – they have no option but to offer a project to the name on the contract. It’s common practice, but maybe one that needs addressing if our cash-strapped councils are to get real value for money. For instance, I’m aware of a smaller building firm which recently tendered for a special needs school rebuilding project being run by a local council. It was work the company specialised in, having carried out similar refurbishment programmes at numerous such schools. Council members were astonished at the price quoted for the work – they couldn’t believe how low it was. However, as the independent building firm wasn’t on the council’s ‘tender list’ and didn’t meet its rigid criteria, the authority couldn’t appoint it. In cases such as these, where It makes financial sense to look outside ‘the list’, would it not be worth councils and the like appointing contractors or developers on a project-by-project basis? Perhaps the administration work involved precludes such an arrangement, but a degree of flexibility is worth considering.
Support for all
Of course, seemingly ‘open portals’, in which firms are invited to tender for work without the imposition of council-style procedures, may contain an element of favouritism – that’s life, I’m afraid. But there has to be scope for a more level playing field at local authority level regarding the issue of building contracts, especially in schools. After all, businesses are part of an area’s community that the council is employed to support.