FOCUS BUSINESS ADVICE
Follow the right path
How to steer a course through the many pitfalls in modern business – and how to avoid going down the road of costly and lengthy disputes
By Len Bunton FRICS FCIArb, HON FRIAS
F SEC Group Scotland
rom the feedback I receive, it’s clear to me that many SELECT Member firms are now looking at the markets they operate in and the employers and contractors they
contract with. The bane of the industry in recent years has been suicidal tendering, and I know that is an issue the Scottish Government is looking at in conjunction with the Construction
Industry Leadership Group, but there is no easy answer. My own opinion is that there should be greater concentration on a tenderer’s track record, on capability resources and the ability to deliver a complex project rather than focusing on price, but this will take a huge mindset shift, particularly in the public sector. One solution I think is for tenderers to be selective in the projects they are bidding for, and to seek out those procuring organisations who are interested in building long-term relationships for the procurement and construction of their projects. As an example, I was reading recently about a contractor in Scotland whose focus is on hotel projects. They are building up long-term relationships with some clients and achieving a steady stream of work with capability and “know-how”, and this is an important part of deliverability. The procurers benefit from having a project completed on time, to an acceptable level of quality and within budget, and they then move on to the next project with a degree of comfort. The issues concerning pricing have also impacted on design fees being tendered by design teams, architects, engineers and quantity surveyors, and
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the public sector in particular does not seem to wish to pay for the services required to procure and construct a major project. This is evidenced by the fact we are now witnessing a significant transfer of risk to the contractors at tender stage, which I touch on below.
Onerous contract conditions I have written before about contractors taking on unacceptable levels of risk which are set out within contract documents and I do not hesitate to repeat again that it is essential you thoroughly study the contract documents you are pricing to see if there are risks and further issues which need to be reflected in your tender price, and also to see if any of the conditions of contract are heavily amended and/or contain onerous provisions, particularly on payment terms. I am aware that some contractors tabulate the risks which are being passed on before the signing of the contract, and they utilise this schedule during the delivery of the project. I quite often get faced with situations where contractors have signed up to onerous payment provisions which are having a serious impact on their cash flow and there is very little that one can
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