- Project partnering, supply chain management, continuous improvement, achievements, value engineering, change management, capability, development process and local training/employment
- Efficiency and reliability
- Sustainability credentials
- Price, agreed maximum percentages on for fees and OHP, based on project types and values
To satisfy the above and become successful, various departments within the contractor’s organisation had a role to play.
Marketing
The contractors firm firstly would have a corporate strategy identifying the market segments from which they will aim to operate effectively. From this the business strategy will dictate the contractor’s stance/priority when bidding for work within the market segment. For success the contractor’s mission statement would have to reflect relativity to the sector they operate in, so the philosophy and attitudes of the contractor should closely resemble what a client will potentially be looking for.
Estimating
This department had to ensure that they price appropriately, in line with the business strategy and mission statement. Firstly to ensure that they remain competitive to get onto the framework in the first place, but secondly that they have the capability to service the framework for the four year duration in line with their mission statment.
Management (Department Heads & Directors)
Once the first phase was successfully passed all that remained was interviews and workshops with the contractor’s heads. This was in order to ascertain their understanding of the sector and opportunity in front of them and commitment for servicing the public sector. This stage is mainly for stimulating a positive start to the potential four year relationship but anything that is unseemly could be further investigated.
3. The Project Approach
Once appointed onto the framework the contractor then commenced delivery of actual projects, which clients called-off under the framework. Identification of projects can be sourced via two methods:
- Direct from public clients calling-off from the framework
- Direct from the contractors pre-existing public client portfolio (as this project was sourced)
Either way, the contractor needed to effectively manage the enquiry from conception to completion. The process and business units contributing to this post framework appointment stage include:
- Business Development (BD)
- Bidding (mini-tendering to ascertain bespoke rates)
- Project implementation & delivery
One point to note is that the marketing department is involved in every stage listed above, be it laying down the guidelines for initial publicity in line with business strategy, providing supporting material during the bidding phase, promoting success on award/delivery and post completion of contract. This also includes marketing review, for case studies, intelligence, strategy changes, what’s working well, what’s not and why etc.
Business Development
Once appointed onto the framework the BD team actively promote the framework in line with their marketing objectives to potential clients. This also assists with relationship building, in order to increase chances of success when mini-tendering for works under the framework (as the public client does not have to chose the lowest tender).
As the framework is open to any public body the contractor can also promote it to their existing clients, where they have built up good rapport, who in turn also spreads the word of the benefits to other public bodies during conferences etc. This relationship building has been recognised as a necessity by many contractors and thus most capable firms have BD units to maintain this aspect of the business. As Preece et al. (1996) stated that ‘word of mouth’ recommendations are as effective as any other type of marketing promotion. This point is imperative in such a short lived industry with numerous entrants and leavers and hence client confidence is swayed by market gossip...image/reputation is key!
On this occasion the BD team indentified the opportunity and engaged with the client, resulting in a commitment to use the framework. Prior to this the client was already engaged with the DTP and was in the process to procure traditionally, but time was a critical factor and this partly influenced the client to use the framework.
Bidding & Marketing
Once the BD team had concluded their part the client was ready to develop the design further, by conducting a 1st stage evaluation to maintain internal compliance. This would allow the client to proceed with the successful contractor to the second stage.
The second stage required marketing input to provide a stakeholder presentation day to discuss what added value and benefits would be available from each of the contractors along with their service capability and their understanding of the education sector. This process ultimately illustrated to the client the tangible benefits, apart from cost, that would be available and highlighting the points where the contractor and client share similar corporate cultures.
Rates were also part of the evaluation and the bid team had to work in line with the marketing strategy. The contractor’s 10 year business plan, which was in line with Smyth’s (2000) recommendation of 7+ years, no longer desired one-off contracts but for long term partnerships and repeat business from the same client. This was in order to acquire a dedicated pipeline of guaranteed works. This would minimise competition and increase market opportunities, as long as they delivered what they agreed on and they understood that this would only work for clients on the same wavelength. This would take time but once they had a few clients with similar thinking, they would have a predictable workload with better financial returns especially in the current declining market by minimising the short-term fluctuating demand of workload.
The strategy here was to secure the project on a minimal profit margin. Their ultimate desire was to demonstrate capability as the contract was compiled on cost plus works packages resulting in a lump sum total, it would ensure that they still make a profit after successfully working with the DTP on agreeing the design and costs. This would lead onto further negotiated works packages that the client had in their pipeline, which the BD unit had identified. Fortunately the contractor, who initially introduced the client to the framework was successful in securing the 1st stage as their fee was 1.5%, whilst the other two came in at 2% & 2.5%.
The second stage required the contractor to work with the clients DTP to negotiate and tender out the agreed packages to come to a true total works package cost, which the contactor would apply their fees/costs. After successfully tendering the packages and ascertaining true market cost the initial sum arrived at was below the original target cost. On this result the contractor was awarded the project on a NEC 2005 Option A contract.
Contract/project management
Once the contractor was successful at securing the project under the framework they then had to ensure they had adequate and capable resources to deliver the project from conception to completion in line with the agreed programme. This included the finance team ensuring there was adequate cash flow throughout the programme for mobilisation, setup, sub-contractor payments (in line with agreed client payment stages). Other key attributes required were: good communication, excellent client engagement along with first hand supply chain and project management techniques. In the main the contractor was very forthcoming in assisting the client where possible, with the long term plan in mind and not looking to make a quick buck or create barriers.
During the ground works it was discovered that part of the ground was unsuitable. The DTP was responsible (pre-novation) for geotechnical investigations, which they commissioned a specialist to carry out. The specialist advised that they could only test 50% of the site, as access was restricted to the remaining site by the occupying school for pupil safety reasons. This was reported back to the DTP whom made the decision that a 50% test would be a sufficient enough in most circumstances.
Due the ground issues the project has been repositioned, this added 8 weeks to the completion date and increased costs from the contractor along with additional costs for re-engineering/designing the project, totalling £400k.
The contractor assumed liability and is willing to work with the client, albeit the issue stems from the clients relationship pre-contractor involvement. The only option is for the contractor to claim from the PII of the DTP who could subsequently claim off the specialist.
Due to this the client on the future planned projects is going to opt for the full ‘Pure’ D&B package from the contractor, which will include fully assessed design and supply chain partners.
This type of project is the ultimate aim of the contractors and is different to the majority of the other projects they get involved with, which usually arrive via the traditional route and are very unpredictable...the outcomes are always based on the accessibility of developing relationships. Hence the key driver for the contractor is to develop better long term partnerships, not only with the client but also with their supply chain.
Alternative options
The alternative approach the client could have taken is the full traditional approach, which would have been cost focused on full design without any contractor participation/input. Thus the original savings made in the D&B approach from contractor recommendations would not have been adopted. The site issues would have caused major disruption as the DTP working for the client would have been liable and this would have delayed matters as the contractor would have charged much more for time, site plant etc. if they had mobilised.
Ultimately the successful contractor would have priced to win the job and this could in these times be a suicide bid in the hope to recover margin from charges and additional unplanned works.
This would have ended up with the client, DTP and contractor locking horns and only focusing on their element of need.
Conclusion
Fortunately for the client the framework was proposed, which avoided the client from going down the full traditional route, which would have resulted in an unpredictable ending with charges, delays, liquidation and litigation.
It supports the argument for the Latham Report (1994) where it is identified that the industry suffers from adversarial, incapable and fragmented delivery of projects whilst having no concern for mutual respect of each other’s needs. If all contractors where to become more open and willing to co-operate/participate, such as the contractor in this study, we would see a change the industry’s image with open and honest participation and stringer/longer strategic relationships being built for the benefit of all.
However it requires all involved to participate whole heartedly and improve the experience in order for the industry to see a change.
Word Count 2178
References
Latham, M. (1994) referred to in Cahill, D. and Puybaraud, M.-C. (2008) “Constructing the Team: The Latham Report (1994)”, in Construction Reports 1944-98 (eds M. Murray and D. Langford), Blackwell Science Ltd, Oxford, UK. doi: 10.1002/9780470758526.ch11
Preece, C., Putsman, A., and Walker, K. (1996) referred to in Simister, S.J. (2009) "Procuring Construction" (ICM Module 5 workfile), p. 2.19, University of Bath
Simister, S.J. (2009) Procuring Construction" (ICM Module 5 workfile),University of Bath
Smyth, H. (2000) referred to in Simister, S.J. (2009) "Procuring Construction" (ICM Module 5 workfile), p. 2.19, University of Bath