How to cure clients’ insomnia

Contractors are well known for their prowess in the ancient art of moaning, matched only by farmers and safety officers in their ability to lament.

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By  Sean Cronin Published  September 23, 2006

|~||~||~|Contractors are well known for their prowess in the ancient art of moaning, matched only by farmers and safety officers in their ability to lament.

But there is good historical reason for it. Take a look at the insolvency statistics of countries where insolvency statistics exist and it is clear to see that construction companies go bust a lot. Receivership, like apprenticeship, is almost a rite of passage in the trade. The cheque is always in the post.

It may also explain why as an industry we are so adept at seeing the downside and why, even in the midst of the current building boom, we haven’t quite lost that pessimistic caginess.

Two words that will elicit the same twitching response from a self-employed plumber and the commercial manager of a multi-billion dollar contracting organisation, are “How much?” It’s not so much a response as a sharp intake of breath between the teeth and it means “I haven’t got a bloody clue.”

And who would have a clue in an industry where the difference between profit and loss can have less to do with contractual performance and more to do with geo-political events?

How can you predict that on the day you sign your contract, there will be a strike in a Chilean copper mine, or a spike in the oil price that will both conspire to obliterate your profit margin?

It may be why clients in this market are still clinging to the fixed-price approach to the procurement of major projects, at a time when the cost of many key construction materials is spiralling.

Of course even they know they’re not getting value for money because contractors are factoring this risk in to their bids and adding a healthy margin on top for good measure.

I asked a developer this week why the local industry insists on maintaining the fixed-price model when prices for many key construction materials are rising on a weekly basis.

He said it was because he needed to know precisely how much the job would cost even if it was more than he really needed to be paying.

In fact, that is to paraphrase what he really said to me, which was simply this: “It allows me to sleep at night.” Fair enough, but what’s wrong with a mug of Horlicks?||**||

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