Will the Carillion news this week focus enough minds sufficiently to make a difference? Two angles have particularly struck me.
One was that a number of sector figures stepped up well to answer media interest. For example, Rudi Klein of SEC Group and Suzannah Nichol of Build UK provided good informative stuff to the BBC and other outlets, and our co-chair Mark Farmer answered a set of perfectly fair questions put by Sky News. You can see Mark’s interview via his twitter feed here. The sector doesn’t always get a fair hearing, especially in such crises, but these representatives did a good job of communicating the issues and implications.
The second was that, coupled with the Grenfell Tower disaster, it is surely beyond doubt now that the sector faces a defining change. Andy Walker of Infrastructure Intelligence captured it well in an excellent leader, under the heading Carillion is a wake-up call for industry and government. He writes as follows, but it’s well worth reading the whole piece.
“The fall of Carillion must be a catalyst for real and lasting change in the construction industry and to the way that government procures public sector projects.
In most of the analysis and comment following the demise of Carillion, a number of common themes have emerged. Chief amongst them is the almost universal view that the business model for the procurement of major construction and infrastructure projects (and public service contracts) is broken and not fit for purpose…..
A perfect storm of ever-tightening, already slender profit margins, under-bidding for projects, negative cashflows, poor management and highly dubious (to put it kindly) government oversight of its public sector procurement regime, has led to the UK’s second largest construction firm hitting the buffers.
Let’s be under no illusions here – this is a seminal moment for both business and government. It is surely a wake-up call that should bring about much-needed and long-awaited major structural change in the construction industry….”
This reminded me of Never Waste a Good Crisis, in 2009 we wrote:
“The low penetration of cultural change has been exposed by the current economic downturn, with evidence that clients and main contractors are now reverting to type (if they were ever committed to partnering the supply chain in the first place). Instead of drawing opportunity up from the supply chain, there is a determination by main contractors in particular to tender every package, every time, and select on the basis of lowest price.
We are seeing a return to long tender lists, firms chasing work at unsustainable margins, cost and time overruns, jettisoning of quality or sustainability initiatives and more of a claims-oriented approach. One major contractor recently reported in private that their strategy was “to bid low and provide in the budget for a claims consultant”. Other anecdotal evidence describes longer payment cycles, further fragmentation of supply chains and the practice of ‘subbie-bashing’ by retendering sub-contracts.”
So since 2009 it can truly be argued that we did indeed waste a good crisis. Are we going to do so again? I am sure we will discuss some more at the upcoming members events including the members forum on Jan 24th, members steering group on Feb 13th and ECI conference on Feb 21st.