The Building Cost Information Service are reporting that tender prices are not expected to return to pre-recession levels in the next five years. The next two few years were always expected to be tough but they predict that prices will continue to fall until growth returns in 2011. Worryingly though, building prices will rise steeply from then.
If their data turns out to be correct there is a small window of time to deliver extreme value on developments while build costs, land prices, interest rates and demand are all low. If developers are able to access funding the contracting industry is currently willing to price at cost just to stay in business. We would never advocate stripping out all profits because that is the road to disaster but open book tendering with pre-determined margins are increasingly attractive to both client and contractor alike.
We are seeing mounting evidence that clients are looking to dip a toe back in the market, so hopefully some of those unloved tower cranes will come back to life next year.
After five years the Office of Fair Trading has released a press statement and published the outcome of the investigation into cover pricing. The wording is interesting because while enormous fines have been issued, and the firms involved have undoubtedly been in involved in anti-competitive practices, the OFT does not appear to have quantified any losses. It remains to be seen if clients, especially the public bodies such as councils and health authorities, try to quantify potential financial losses and pursue contractors through the courts… if they are in a position to pay in these financially straitened times.
The decision follows an OFT Statement of Objections in April 2008 after one of its largest Competition Act investigations.
The OFT has concluded that the firms engaged in illegal anti-competitive bid-rigging activities on 199 tenders from 2000 to 2006, mostly in the form of ‘cover pricing’.
Cover pricing is where one or more bidders in a tender process obtains an artificially high price from a competitor. Such cover bids are priced so as not to win the contract but are submitted as genuine bids, which gives a misleading impression to clients as to the real extent of competition. This distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender.
In 11 tendering rounds, the lowest bidder faced no genuine competition because all other bids were cover bids, leading to an even greater risk that the client may have unknowingly paid a higher price.
The OFT also found six instances where successful bidders had paid an agreed sum of money to the unsuccessful bidder (known as a ‘compensation payment’). These payments of between £2,500 and £60,000 were facilitated by the raising of false invoices.
The infringements affected building projects across England worth in excess of £200 million including schools, universities hospitals, and numerous private projects from the construction of apartment blocks to housing refurbishments.
Eighty-six out of the 103 firms received reductions in their penalties because they admitted their involvement in cover pricing prior to today’s decision.
The OFT has also informed nine companies originally listed in its Statement of Objections that it will not pursue allegations of bid-rigging against them as it considers it has insufficient evidence to proceed to an infringement finding.
Related guidance issued today by the OFT in conjunction with the Office of Government Commerce cautions procurers against excluding the infringing firms from future tenders, as the practice of cover pricing was widespread in the construction industry and those that have already faced investigation can now be expected to be particularly aware of the competition rules.
Simon Williams, the OFT’s Senior Director for this case, said:
‘Our investigation has uncovered significant infringements of competition law on nearly 200 projects across England. Bidding processes designed to ensure clients and in many cases taxpayers receive the best possible choice and price were distorted, creating a real risk of increased prices. This decision sends a strong message that anti-competitive and illegal practices, including cover pricing, must cease. The OFT welcomes initiatives by the leadership of the construction industry to add weight to that message through a clear compliance code which we hope will help to embed more fully a culture of competition within the construction sector.’
Retail spend has experienced something of a mixed bag recently with some high street traders like Next seeing reasonable increases in profits alongside the supermarkets while French Connection and John Lewis are manning the barricades in the face of worsening figures.
Overall the retail figures for August remain flat with traders looking towards a Christmas boost to lift them out of the mire.
The Homes and Communities Agency £3m initiative to rejuvenate 57 town and city centres is attracting plenty of criticism. The number of vacant shops has tripled and there seems to be little prospect of a take up in retail space in the near future as large city centre retail schemes fall victim to the recession.
Ian Fletcher from the British Property Federation recently said ‘First we had Hazel Blears’ craft fair solution and now we have £50,000 hand outs that are barely a drop in the ocean compared to the extent of the problem.’
The intention seems to be to fill empty shops with amateur art galleries and community cafés. That might not impress the owners of commercial cafés and galleries and £3m isn’t anywhere near enough to make a huge difference nationally but it might provide lots of small catalysts for arts and community groups to keep the high street a little more active until economic times improve.
This might not be much of a shot in the arm for the beleaguered owners of empty properties as they battle with empty rates bills but it will provide some benefit for the third sector.Provesta is working with an art collective to set up a network of community art galleries in the South Yorkshire region. More of that in another post.
I had a great opportunity to attend the From Bees to Best Practice event organised by BITC at the beautiful Temple Newson near Leeds. That’s me far right, dressed to kill!
The purpose was serious though. The speaker from Leeds Beekeepers outlined the issues around colony collapse that has seen the European honey bee population decimated by half in Yorkshire, and more in some places. That might not sound like a problem but bees provide the pollination that’s vital for food production. Without them our dinner table would be bare.
The problem of colony collapse seems to be complex, and the result of a number of factors. Since its appearance in the UK after WW2 the Varroa mite has affected hives, killing bees and their young. Wetter summers and warmer winters have affected how bees hibernate over the winter. Pesticides also play their part. The combination weakens the colony often resulting in the complete elimination of a hive of maybe fifty thousand bees.
A visit to the ICON Business Centre highlighted some of the environmental protection measures that have been included. From chilled beams to grey water recycling and the sedum roof we saw a well designed example of the current tools coming into use, though it has to be said that the actual execution occasionally left a little be desired.
So far so good but of more interest to me was how the operators of the centre had bought into the green vision that their building provides. By occupying the building they have taken a real interest, almost to the point of evangelism. It really matters to them and their enthusiasm is infectious.
It’s still early days for the environmental building movement but these examples put it into the mainstream and people are absorbing the clues simply by being there. This can only help secure the investment potential of being environmentally responsible.
Agfa Graphics lithographic plate plant provided the last site visit. Recent improvements in technology have reduced energy and materials consumption, with significant reductions in waste, much of which is now recycled rather than going to landfill. They haven’t found a viable solution to dealing with some of the chemical effluents, but for now it is being managed safely while they look for a solution.
All in all it was a fascinating day looking at best practice… but the tiny bees were still the stars of the show!
People usually fall into two categories – those who enjoy project meetings and those who hate them. Both sets of people are right. The opportunity to get together with the rest of the project team is one of the most valuable events that you can schedule, but they have the potential for wasting huge amounts of time and money if they aren’t managed correctly.
You will know how to adapt for your particular situation but we have a few principles for running a productive project meeting.
Have the right person as chair
It sounds so obvious but all too often the most senior person in the group takes the chair rather than the right person. Clients are rarely the right person as they usually have issues driving them from outside the project rather than the day to day issues of the matter in hand. Choose carefully so that the chairperson has an overview on all aspects and can draw the group together and move them forward while avoiding getting bogged down with minutiae.
Think about your agenda
Any good agenda will have three key sections.
Section 1 – The basic information about the meeting.
Who should be there, where it is and the start and finish time. You can also put the date of the next meeting here.
Section 2 – What is being discussed.
By all means have a couple of regular items such as minutes from the previous meeting but remain focused on progress rather then past content or a rigid ‘system’. If there is a major topic for discussion don’t be afraid to put it down as a specific item and ensure that the group know that they should forward items for inclusion rather than waiting for the dreadedAOB. Consider which items are time critical and which require input from outside the meeting.
Section 3 – A schedule of attendees contact information and the future meetings.
Always set meetings dates as far in advance as possible, at least four weeks into the future. This should avoid those protracted discussions where everyone is looking at their diaries to try to find a day that works. A regular day, say every second Thursday at 10:00am, will allow the attendees to schedule the rest of their time. Including a contact schedule with minutes is just good old fashioned practice that will save plenty of time and excuses.
Accept that some people won’t be able to make every single meeting and ensure that each person has a ‘second’ who can stand in for them. The project should remain the focus, not the individuals delivering it. If your project meeting demands detailed information then include it in sequence, not as an appendix.
Start and end on time
9:00am means 9:00am so if you need tea and bacon sandwiches beforehand then feel free to have refreshments as the 9:00am agenda item. It might find it useful for some attendees to have a meeting beforehand with people such as suppliers or subcontractors so you can gave the latest information to hand. You might also want to bring one of them into your project meeting if there is a key issue that concerns them.
End times are equally important. Most meetings can be dispatched in an hour but you will get a feel for how long you really need if the chair is adept at keeping it moving along.
Resolve each item
Before moving onto the next item make sure that each item has an action point, even if it is ‘no action’ or ‘held over to next meeting’. Don’t be afraid to reschedule items for a later date if it is not time critical.
Distribute minutes within twenty four hours
That sounds like an impossible challenge but trust us on this one. How often have you distributed minutes the day before the next meeting? Late minutes are no good to anyone except in court.
Minutes aren’t a record for posterity, they a live working document that shows the decisions, actions and responsibilities held by the group. Unless they are with the people that are carrying out those actions they will not be focused or collaborative. Failure to get those minutes out will often mean that the next meeting is full of excuses, blame and panic about the delays that are stacking up.
All minutes will have an item number, the item itself, the required output or action and theperson who is actually going to be responsible, not an organisation. Include a draft agenda for the next meeting with a request for any items for inclusion by a specific date.
One final point that is worth remembering; all too often meetings are where minutes are kept and hours are lost. It doesn’t have to be that way.
If the futurologists are correct we are about to see a huge shift in how our buildings work. Cloud computing is still in the formative stages but I can see a trend developing that will eventually be able to replace the traditional model of tethered desktop working.
There is endless geeky debate about what cloud computing actually is, but the key feature that affects the built environment is that by putting data and even the applications onto the cloud a business and its people will be able to free itself from the geographic restrictions and therefore the need for a building to carry out those traditional functions.
We’ve all seen laptops scattered around coffee shops. Whereas a few years ago those people were seen as either hardcore road warriors or sales reps far from home, the changes in accessibility mean that those meetings are now equally likely to be about business deals, job interviews, or even architects working on drawings.
Those people aren’t just working remotely from the office. They have understood (even if they don’t realise it) that don’t actually need an office at all!
It’s early days and this new-found flexibility could easily be mistaken as the death knell of the traditional office but I think that is a little premature. We are social creatures and the fact that coffee shops are providing meeting places says a lot about the desire to get together with colleagues.
What seems more likely is that there will be a shift in how commercial premises are used. Rather than being stuffed full of tethered technology a new model (models?) look like emerging where the building acts as a venue for the human network within.
That might mean smaller buildings with more flexible layouts. Perhaps hot-desking principles will see a resurgence or perhaps we’ll see more collaborative office layouts where groups form and disband quickly around projects rather than corporate structures.
Using the construction industry as our example, we’ve already seen on-site design offices. In the same way project teams from different disciplines and different firms could come together in a place to work together – maybe even for only a couple of days a week if they are engaged on multiple projects, with multiple teams. The physical closeness of the people in the team should lead to a better output in a shorter time with fewer problems, delays and future defects.
The key factor is the flexibility to form groups, sub-groups and then disband them within the project context.
It follows that the building will need to adapt to follow suit. Most of us would recognise that a building in no more than a container for what goes on inside. If the insides don’t need lots of technology, plant, equipment, HVAC, wiring, etc then the requirements for that container will change fundamentally.
Cloud computing might be the driver of the next great leap in workplace trends.
