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the negotiations. If we don’t go for it, then our competitors will.
In terms of transport contracts, the effect has just been exponential around the shift in fuel prices when we’re in a fixed contract, It’s been horrendous because a lot of those contracts, they do allow for a price review but it’s only annually. You have to suck it up till you get to that.
Our tendering and procurement process has got a lot more diligent. It is a whole team of people. If we look to put in contingencies, we may be pricing ourselves out.
It is a really fine balancing act to try and remain competitive. But it is quite difficult, especially when you’re dealing with local authorities, big tender contracts, because they are in a stronger position.
Nine times out of 10 you get the contract, and no amends can be made. The contract is what it is. It’s just going in eyes wide open.
ZP: There’s just massive uncertainty here and it’s really about who is best placed to shoulder the risk. You’ve got the challenge that the client wants a fixed price contract and the contractors want fluctuating prices. There’s competing interests.
NG: We talked about the importance of communication amongst all those involved. It is really important to understand where people are coming from. There does need to be a different approach and a different mindset.
NT: We all have exactly the same problem, whether we’re at the beginning of the supply chain or at the end. We’ve all got rising costs. We all understand everything has gone up. The old rules were that you passed it down the line and someone absorbed it, whether that was buying property, buying goods, whatever it was.
We’ve all got to understand we are where we are, we’ve got to work collaboratively. It is about strong communication. Ultimately you should be focused on the mutual objective. What is it that we’re all trying to achieve and how can we achieve that by working as true partners.
JB: Sometimes we find we’re the ones that are cut, not the materials, not the products. It’s the professionals. There’s this whole false economy. There’s a mess up with building regs and they’ve
got the wrong products. Then we get back involved down the line and we undo a load of work and our fees are twice as high.
ZW: It’s quite difficult trying to negotiate with an organisation where their standpoint is, ‘This is what it is and you will accept it because if you don’t, somebody else will.’ Because on top of the costs, everyone’s trying to remain in business, so they’re trying to win that work. It is a balancing act.
If you could actually have open, frank, honest conversations like this with the people in charge of these projects and say, ‘We hope it doesn’t happen, but this is what we anticipate, this is where we may need some flex.’
AC: We’ve noticed some clients that are actually asking for bonds. So, they are anticipating that companies may cease trading.
How does the sector come together to create better solutions?
JJ: A regular forum where all parties come together, similar to this. You could even do it on a larger scale, get different speakers in, driving education again, telling people.
You are in a better
place if you can work collaboratively
The employers won’t necessarily know the horror stories when things go wrong when you’re too rigid in your contract, your fixed price lump sum, contract rigidity. It would be a good idea to have someone coming along and saying, ‘Look, these are the kind of things that can happen. This is why we need to start being more flexible and this is how we do it.’
NG: It is the importance of relationships with those you are dealing with. You are in a better place if you can work collaboratively. It’s a very basic but fundamental point. Communication and working to develop relationships, because as soon as things become confrontational nobody wins.
JJ: I absolutely agree with that. One of the worst disputes I’ve seen, which went all the way to the high court, was because the relationship had broken down, but it had broken down before they even really started.
IP: The parties need to talk better. They need
to think creatively as well, give the contractors time to tender rather than leaving it to the last minute. They can think of creative ways, maybe some value engineering exercises, that maintain quality whilst reducing cost.
CE: It’s about the management of risk and who is best placed to manage that risk. It’s not always sitting contractually with the person best placed to do it. For me, it’s get round the table, solve the risk issue and worry about where, contractually, that sits later.
AC: There’s got to be more collaborative working, definitely. We talked about traditional contracts, there’s no fluctuation clauses. Will they be introduced? If I’m being honest, probably not. Openness is a big thing, being collaborative, bringing the contractor in early with the client and the design team, looking at the buildability of the project.
JB: We’re trying to have more on-site meetings with clients with drawings out, walking round site, touching stuff, feeling stuff, having that human interaction and avoiding Teams meetings. To be on site and having conversations means there is more confidence and more buy-in if you’re all in it together.
ZW: It’s openness, transparency, collaborating, actually being on site, not dictating from your desk. Go to the site and nine times out of ten you will actually be able to see the problem rather than somebody telling you there is a huge problem.
NT: Focus on the solution, not on the problem. If you’ve got subcontractors that are falling over on a particular point, their buying ability or their consultancy or maybe on their skillset and understanding, why not open up as part of those contracts and share resources? Because otherwise you will fail. There are no winners in this. If one part of the equation falls over, the whole thing does.
ZP: Thinking outside the box of the typical procurement methods, working and partnering with your professionals to come up with those creative solutions and how we can do the project differently. That’s really important, and keeping the payments moving to ensure subcontractors are paid on time to reduce the insolvency risk on your projects.
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