Record project delays as cuts bite
Neew research shos that two-thirds of projects have been delayed with start dates hit by funding pressures
According to the AJ’s sister publication Construction News, profitability for contractors halved to just a fifth of 2009 levels, reflecting the squeeze from falling tender prices.
The state of construction was laid bare in the latest key performance indicator report, shared exclusively with CN.
The research by Glenigan and Constructing Excellence, supported by the Department for Business, Innovation and Skills, was based on surveys and data from thousands of construction projects that were completed in 2011.
It comes as the Office for National Statistics corrected its latest estimates for new orders to show there are far fewer schemes in the pipeline than previously thought, while the Construction Products Association’s State of Trade Survey suggests a deteriorating market.
The KPI research shows that 83 per cent of customers rate the final product at 8 out of 10 or better. The bulk of work - 80 per cent - is being done on a repeat-business basis.
Eighty per cent of customers say they are getting value for money and the majority of projects - 58 per cent - are coming in on budget, if not better.
However, only 46 per cent of projects valued at £5 million or more were on budget or better, compared with 60 per cent for projects under £1m.
This is in contrast to 2011, when larger projects outperformed smaller schemes.
The report found only four in 10 schemes at construction phase were coming in on time, down from 60 per cent a year earlier.
Just 34 per cent of projects were handed over on time, representing the worst performance since the KPIs began more than 10 years ago.
The harsh economic climate, and limited mortgage and development finance, has hit housing in particular.
Glenigan economics director Allan Wilén told CN: ‘In a number of cases the harsh economic climate is likely to have contributed to the deterioration, with the commencement of construction delayed by funding difficulties and market uncertainty.’
New data in the report showed that companies have lost 9 per cent of their workforce but have seen a mere 2.1 per cent turnover in staff, suggesting employees were not being replaced.
In a boost for health and safety, the report also showed that firms were continuing to keep their workforce safer on site.
Just 8 per cent of the total construction workforce is under the age of 24, compounding concerns over a lack of young people in the industry, while women make up just 15 per cent.
Wilén said that reductions in staff ‘may now be constraining companies’ ability to respond promptly to the unanticipated demands during the design and construction phases of a project’s life and having a detrimental impact on its timely delivery’.
PwC head of construction Jonathan Hook suggested that problems with the supply chain, including subcontractor failure, could be holding up schemes, along with delays to overall funding, planning and project design.
He also warned that while clients were satisfied with projects overall, their service rating was slipping.
“This could represent a warning sign for the industry in an environment where relationships and the ability to generate repeat business are vital to maintain,” he said.
Contractors continue to be more satisfied with clients regarding overall performance, including information and payments.
Despite some contractors opting to extend their payment terms to their supply chain in recent months, the survey found that 80 per cent of firms are happy with the time it is taking clients to pay them.
Mr Wilén said it is unclear whether this means a structural, permanent change or is simply a reflection of recessionary pressures forcing clients and firms together.
Interserve construction associate director for sustainable business Richard Jones said delays on schemes were “concerning”, as the industry had been working hard to reduce timeframes by developing leaner procurement and promoting building information modelling.
“It is therefore clear that more work and education, in particular with new processes like BIM, is required to support better workflows,” he said.
Mr Jones highlighted environmental improvements, with more success in an end-to-end approach to waste.
Skanska UK executive vice-president Bill Hocking said there tended to be more collaboration and less confrontation when conditions are tight.
He said: “Contractors do have to be more innovative to deliver what the client wants, but we also see more alignment between client and contractor when it comes to the contract - it is more realistic.”
Costain chief development officer Mark Rogerson, formerly of Serco, told CN that strategic partnerships between clients and contractors have “come a long way” in the past 25 years.
“But I really don’t think that we have fulfilled the potential of what real partnerships mean,” he said. “To get a 100 per cent partnership, there can’t be a blame culture.”