2016 will be a defining year for specialist engineering contractors, according to Building Engineering Services Association (BESA) President Jim Marner.
Speaking at the Association’s annual press lunch, he said the market drivers and technical challenges faced by firms in recent times would be “magnified times 10” between now and 2018.
“We will do well just to keep pace with what is about to happen,” he told journalists. “The issues of skills shortages, labour costs, movement of resources, modern methods of design, project risk, procurement and quality control will all become even more significant in the coming months.”
He said the industry was facing its second ‘perfect storm’ in recent years with the growth in workloads coinciding with skills shortages and pressure on cash flow. Coming hot on the heels of the deepest recession in modern times, he said contractors would have to “step up to the challenge again”.
“It is a very exciting time and the next three years will be full of opportunity,” added Mr Marner. “The question is: Will we be ready and will we be prepared to invest and take the opportunity to grow and prosper.”
Many main [Tier One] contractors “reverted to type” and went back to awarding contracts based on lowest price during the recession, he added. However, he predicted they were already realising their mistake.
“In 2016-18 they will recognise how important the supply chain is and that good companies deserve to make a good margin in return for quality work. Everyone in our sector needs to recognise that profit is not a dirty word, but the mark of a successful industry.”
The BESA chief executive Paul McLaughlin added that it was a very exciting time for the sector and that the challenge for the Association and its members was to be “at the forefront of it all”.
However, he added that ensuring fair payment terms for contractors would be crucial to delivering success across the industry. “Payment retentions are fine, so long as people settle up in the end. It is the unsecured part of retentions that creates problems for contractors because the money can often disappear in a puff of accountants’ smoke.”
He said the Association, along with its umbrella body the Specialist Engineering Contractors’ (SEC) Group, had made significant headway on the issue, particularly with the introduction of Project Bank Accounts (PBAs) and was now leading a campaign for wider use of digital payment processes and for retention payments to be placed ‘in trust’ to guard against unfair practices and insolvencies.
The Association’s legal and commercial director Rob Driscoll said the industry was “as close as it has ever been” to solving the retentions and unfair payment problem.
“The government understands that putting working capital where it should be is the right thing to do,” he said. “That means getting it into the supply chain where it can be used to invest in skills and technology to improve business and the quality of buildings.
“The only argument is about the best solution for making that happen.”
Mr McLaughlin also welcomed the wider digitisation of the industry with Building Information Modelling (BIM), in particular, being a great opportunity to improve the design and delivery of building projects.
“It is always a good idea to design something before you build it, but sadly that has not always been the case in our industry,” he said. “BIM is a great opportunity to simplify and streamline the process, avoiding the continual re-designs and changes that add cost and delays; and actually give the client what they want and expect.”
However, Mr McLaughlin, who is about to take up the position of vice chair of the Build UK BIM Group, warned that BIM could end up further complicating matters unless the right people led its development and adoption.
“The problem with BIM is that it has become a technical exercise led by software geeks. The important issue is its potential impact on business and its ability to deliver cost savings and process efficiencies via true collaboration for everyone involved. That is what we will be focussing on at the BESA and in partnership with Build UK.”
The Association’s officers and staff also addressed the skills issue; concluding that there was an opportunity to plug some of the skills gaps in the short-term by encouraging existing workers to ‘upskill’ by taking additional training; and in the longer term by influencing the direction and content of the government’s new Trailblazer scheme that aims to deliver three million new apprentices in the next four years.
“The wider use of BIM along with off-site manufacturing of building engineering services means we will need new kinds of skills,” said Mr Marner. “We will be spending less time on site, but that doesn’t mean we need a smaller workforce – we need a smarter one.”
Mr McLaughlin added that specialist engineering contractors were responsible for 80% of the lifecycle value of buildings, but the wider public was generally ignorant of that fact.
“We need to promote the valuable role this profession plays as well as the wide portfolio of rewarding careers it offers. We want to attract young people, but also people from other industries to come in and share their skills with us,” he said.