Tender prices to fall again
Forecast reveals no improvement in 2012. Stephen Cousins reports.
Tender prices are set to fall further next year as contractors scramble for work amid falling new orders, a new forecast is set to reveal.
Cost consultant EC Harris’s autumn market forecast will show that tender prices across the country are expected to drop by 2.2% in the year to the third quarter of 2012, then bottom out at the start of 2013, 22% below their peak at the start of 2008. In London, a slight 0.5% rise in tender prices in the third quarter of 2012 will be followed by a 2.8% rise in 2013.
That sentiment is shared by Peter Fordham, cost research associate at Davis Langdon. “Basically, there is a lack of commercial work and a lack of government work and that adds up to lower tender prices as companies chase fewer contracts,” he said.
The EC Harris research shows very few banks are lending speculatively, which is leaving many projects unable to get off the ground. A significant pipeline of planned commercial and residential work in London may also fail to materialise, warns Paul Moore, cost and technical research leader at EC Harris.
“Problems with banks lending are likely to prevent several London schemes from going ahead. For the rest of the country, workloads have been hit by private sector clients unwilling to invest outside the capital and swingeing public sector cuts,” said Moore.
Vance Babbage, director B&M Babbage, added: ”The industry’s flat, prices are crazy, everyone’s trying to cling on to a job, almost for any cost.”
The forecast drop in tender prices reflects continued pressure from clients to cut costs, says Chris Gilmour, design and marketing director at Bam Construct UK: “Look at government contracts, where they want 30% stripped from the cost of constructing schools. Around 20% of that figure has probably already come out of prices thanks to more competitive bidding.”
However, the latest figures could signal a bottoming out, he added. “We’re finding that most contractors and subcontractors are saying enough is enough and they are not prepared to take on any more loss-making work. Some companies are overstretched and either can’t take on any more debt or can’t service their current debt, so we could see more insolvencies.”
Builders have been afforded some leeway by reported falling commodity prices, which have dropped 5% over the past two months, the report said. Site labour rates were also lower in the third quarter of 2011, with bricklayers’ rates at their lowest since 2004. One bricklayer contacted by CM claimed he and fellow bricklayers were struggling to make £560 per fortnight.
The downward trend comes in the wake of falling workloads, the report reveals. New construction orders were down 16% in the second quarter of 2011, compared to the previous quarter, and down 23% compared to the same period in 2010. EC Harris’s forecasts follow other downbeat reports.
The Construction Products Association last month claimed the industry was experiencing its most severe drop in work for 30 years as it downgraded forecasts for the next two years.
Accountancy firm Wilkins Kennedy, meanwhile, claims 3,515 construction firms went bust over the past 12 months — although this was down from 4,305 two years ago.
In brief
Training levy to continue
Industry bodies and employers have voted to continue to back CITB-ConstructionSkills’ training levy. All 13 CITB member federations, plus 69% of non-member employers, backed plans to fund the levy/grant system, designed to support construction skills and training development, for a further three years. The vote comes ahead of a parliamentary review of legislation to enable the levy in early 2012. In related news, new funding secured by the ConstructionSkills will be used by the National Construction College to train up to 350 extra female construction workers this year.
Aberdeen joins with Qatar
The University of Aberdeen has signed a Memorandum of Understanding with the Qatar-based Gulf Organisation for Research and Development (GORD), which has developed a new environmental benchmark — the Global Sustainability Assessment System (GSAS). This month scientists from university will be going out to Doha to pool their expertise with Qatari scientists to research new building materials and methods, aiming to make the country the most sustainable in the region by the 2022 FIFA World Cup.
Centre for ‘lean’ research
Nottingham Trent University has set up a research centre to help design and construction firms improve project management and delivery. The Centre for Lean Projects was developed by the university’s school of Architecture, Design and the Built Environment to investigate how lean approaches to project delivery can help firms maximise value and minimise waste.
Retail consultancy set up
A new consultancy set up to focus solely on the management and delivery of retail construction projects has been set up by CIOB member Paul Tattum. Paul Walters, co-founder of Manchester-based Future Projects, said: “Our market research has identified a need for a knowledgeable and skilled practice focusing just on retail schemes”.
Small applications continue to stifle planning system
If the government is serious about simplifying the planning system it should end the need for approvals for minor or insignificant works, according to a planning intelligence provider.
Paul Graham, managing director of Planning Pipe, claims that more than 100,000 businesses a year submit planning applications for minor refurbishment work. A recent analysis of 4,200 planning applications for new commercial developments (excluding housing-related, householder and government applications) submitted during September 2011, revealed:
- 120 applications relating solely to air conditioning or similar plant equipment;
- 160 applications relating to the replacement of windows or doors;
- 390 change of commercial use applications;
- 3,800 (90%) projects overall with an estimated construction value of less than £100,000.
“Reformers should be demanding the elimination of insignificant minor commercial work from the planning system altogether. They are not,”
said Graham.
The 2008 Killian Pretty review of the planning system targeted a 40% reduction in full applications for minor non-residential work. The aim was to simplify the process for the applicants of small-scale developments while freeing up resource in planning departments to work on major projects. “Since Killian Pretty, there has been no demonstrable relaxing of controls and virtually no change in application requirements,” said Graham.
The introduction of “prior notifications” for some narrow types of development have replaced the more onerous full applications. But for most small commercial work the planning process remains, maintaining most of the expense for most of the applicants.
Planning Pipe is a new free to use planning search engine containing information on all new applications. It also offers a paid-for leads service for a modest fee. Planningpipe.co.uk
Welsh music college opens
Opening onto Cardiff’s Bute Park, the new 4,400m2 Royal Welsh College of Music and Drama opened to the new intake of students last month. Designed by architect BFLS, the scheme comprises a 450-seat chamber recital hall, a 180-seat theatre, four rehearsal studios and an exhibition gallery, as well as generous foyer areas, a terrace overlooking the park and a new cafe bar.
The £22.5m building, £4m of which was funded through donations, was built by contractor Wilmott Dixon. The engineer was Mott MacDonald, cost consultant Davis Langdon and acoustic engineer Arup Acoustics.
Picture: Joe Clark
Call to act on social housing row
The Home Builders Federation (HBF) has urged the government to break the logjam that has delayed the Homes and Communities Agency’s £1.8bn social housebuilding programme after housebuilders warned the row was hampering private development, writes Michael Glackin.
The HBF plea follows criticism from a number of housebuilders who claim private schemes are being delayed because of the continuing argument between local authorities and housing associations over rent levels for affordable housing.
It also comes at the same time as the NHBC revealed new build levels in the private sector remain well below the government’s annual target of 200,000 private homes, with just 93,870 registrations in the first nine months of this year.
A spokesperson for the HBF said: “The government needs to work with industry and find solutions to address this barrier to delivery. The delivery of private sector housing and affordable social housing are inextricably linked now. Without one, you don’t get the other.”
Housebuilders work with housing associations and local authorities to construct a specified amount of social housing on private developments, primarily through Section 106 agreements.
But just 41 out of 146 housing associations, or registered providers, have signed up to the new funding programme with the HCA because some local authorities are refusing to allow the associations to charge higher rents in their areas. This has resulted in a knock-on delay to private developments.
Rose Sandell, group partnership director for Redrow Homes, said: “Since the announcement of changes to the delivery of social housing, we have been frustrated by the lack of clarity and commitment to schemes from registered providers.”
Colin Smith, director with Crest Nicholson’s Partnership Homes, said his company had to delay construction on several of its sites because it lacked a housing association to work with.
Chris Moquet, housing partner at Calfordseaden, said that more delays were the last thing the industry needed. ”These delays have knock-on affects for all in the supply chain.”
It is estimated that around half of all new social housing is built through Section 106 agreements, although the government is considering scrapping them as part of its overhaul of planning.
The programme was introduced by government to reduce spending on social housing by 50%.
Last month housing minister Grant Shapps asked civil servants to investigate the dispute.
Under the new system housing associations make up for the shortfall in government funding by raising more cash for development through charging up to 80% of market rent on new homes. But many local authorities are refusing to agree to the rent increases.
A spokesperson for the HCA said: “We anticipated that signing contracts under a new system could take longer. But £500m worth of contracts delivering nearly 28,000 new homes have already been signed.”
Part-time study on the increase
Part-time post-graduate construction management courses are continuing to enjoy a recession-fuelled boom, writes Michael Glackin. Colleges say demand for courses is increasing as employers look to ensure staff are “skilled up” for when the economy picks up, and students take advantage of the expansion of distance learning programmes.
Aled Williams, programme director for the MSc in Construction Management at the University of Salford, said: “We’ve actually doubled the amount of learners on our part-time post-graduate and distance programmes and they are all people who are working in the industry.”
Williams’ comments were echoed by Stuart Green, professor in construction management at the University of Reading, who said courses at Reading were “oversubscribed” this year. “I think employers learnt from the last recession that if they stop training during a downturn they will lack the capability to win work when the recovery comes,” said Green.
To this end, many colleges have overhauled construction management courses to include new innovations and disciplines, such as Building Information Modelling and Low Carbon Construction.
The growth of distance learning, has also boosted demand for part-time post-graduate courses.
Williams said: “Employers tend not to be overly concerned about the cost of a course, but they are concerned about the amount of time they have to release employees from the workplace to attend college. Online courses obviously help in that respect.”
Josh Fairweather, marketing officer at the University of Plymouth, said: “We now offer two part-time postgraduate CM courses. These three-year courses are delivered via distance learning, a combination of online and face-to-face delivery, with core compulsory weekends where students attend lectures on the Plymouth campus.”
Williams added that demand for part-time post graduate construction management courses was also being boosted by industry professionals keen to add to their qualifications.
However, he warned: “There is a concern that as more people leave university with large amounts of debt, their primary focus will be on getting and keeping a well paid job. I believe that will result in less of them opting to do PhDs in the future, unlike emerging economies such as China, India and Russia.”
MSc course director for Project and Enterprise Management, Dr Stephen Pryke, at UCL’s Bartlett School, said intake was up 50-100% on some post-graduate construction courses. “International construction firms are moving into the UK market, and while bringing key players in from their bases, are looking to recruit the best from the UK,” said Pryke.
Undergraduate degree entries into Building and Construction Management has been fluctuating during the recession. UCAS figures put UK-wide undergraduate entry in 2010 at 3,800 as opposed to 4,159 in 2009 and 4,165 in 2008.
Volcanic activity
Artist Olafur Eliasson’s amazing south facade is the icing on the cake for architect Henning Larsen’s new Harpa Opera House and convention centre in Iceland’s capital Reykjavík. Effectively a double-skin facade, the complex 3D geometry of its “quasi-bricks” needed 1,500t of steel to build, and was based on the crystalline basalt formations typical of the volcanic island. The 28,000m2 building has four concert halls conference spaces, restaurant and a bar.
Picture: Nic Lehoux
