Business Breakfast Summary

For a long period and arguably gathering momentum, the façade industry has and is a risky business, borne out with a steady stream of business failure over the years.  Colorminium brought together market leaders from all disciplines of the industry to debate what the root causes of this are and what needs to change moving forwards.

Participants

Steve Mudie – Partner, Alinea Consulting |  Wayne McKiernan – Partner, PLP Architecture |  Eamonn Wall – Divisional Director, ISG Plc |  Harry Badham – UK Head of Development, AXA Real Estate |  Paul Spiller – Regional Commercial Director, Sir Robert McAlpine | Damian Rogan – Director of Façade Engineering, Eckersley O’Callaghan |  Tom Bishop – Senior Project Manager, Future54 |  Roscoe Price – Managing Director, Colorminium |  Kieran Mallinson – Preconstruction Director, Colorminium |  Gareth Baker – Commercial Director, Colorminium |  Ronnie Myatt – Business Development Manager, Colorminium

 

Future proofing and sustainability is key for the construction industry and with some large shocks in recent months with Carillion and Lakesmere entering administration, the spotlight is on the market leaders to drive collaborative change.  The resultant upheaval from such large players leaving the market and the wake of destruction impacts multiple parties from funders to manufacturers.  Such challenges are magnified in cities such as London where the scale and complexity of the projects is arguably the greatest in the country and enhanced again, when considering further factors of market volatility with Brexit looming and uncertain economic conditions.

With Colorminium sitting at the forefront of London’s façade market, the challenges of the disparity between cost plan expectations and design intent, the increased design and co-ordination responsibility falling to key trades, the role of the main contractor and the aftermath of Grenfell were focal points during the debate.

Statistics show the average life-span of a façade contractor is 7 years, and although it was quickly pointed out the diversity of the market needs to be taken into consideration, the point remained nonetheless, that it remains one of the highest risk packages of any project.  Often attracting up to 25% of the building cost but attributing up to 50% of the risk when considering performance and programme, it surely is worthy of far more attention than the industry has been given?

An early point highlighted was the challenges that cash flow represents with high initial outlays and often onerous contract terms imposed that make collecting the money difficult.  This was quickly pushed aside though with strong opinions that the businesses are often not well run.  Technical expertise is often fastened on as the number one factor when procurement decisions are made, but not enough attention is given to the competence of the specialist contractors management team to run the business.  If you were to build a landmark city scheme, surely only an established brand should be considered with a like-minded management mindset and a good business model?  If these pieces are in place, then the technical expertise is often there, and if not, can be supplemented by consultants.

A huge challenge façade contractors face is the cost of mistakes are huge.  Cash management and cash flow are essential business principles, but even when these are carefully controlled, mistakes can disrupt that very quickly.  A misunderstanding of the design intent or the technical performance can quickly erode any conservative margin position, and under the contract this will fall into the lap of the façade builder.  Add to that an irresponsible main contractor or client who’s not prepared to pay for product until it’s installed, a cash flow that could already be under pressure is severely compounded.  It was heavily argued that if the façade contractor found themselves in that position, then the tender process must be wrong to enable that misunderstanding or mistake.  This gave rise to the debate that complex facades shouldn’t be competitively tendered.  How can any business be expected to put a fixed price offer on the table in a matter of weeks when a consultant team may have been working on it for months?  This archaic and treacherous area of the industry must be re-thought.

Early design decisions are also a key influencer.  The point was put forward that every problem you have is related to the supply chain.  When embarking on a procurement process with a façade contractor, resulting in entering into contract, the essentiality of understanding who and what lies further down the chain is very important.  The cladding contractor is taking just as much, if not more, risk than the main contractor with up to 15 sub-sub-contractors to help deliver the scheme.  Complex designs drive a very narrow procurement route with finishes and specifications often only being provided by single source entities in Europe.  It’s rarely the product itself that causes the issue, but a supply chain so long and bespoke that you never know where it’s going to hit you next…every problem is a new problem!

Debate swung vigorously back to commercial management as the process that capitalises on a feeble and changing supply base.  Good commercial management and a sympathetic understanding by main contractors of the façade contractors exposure is where a dispute is provoked or settled.  The balance sheet position of any contractor or supplier is always essential, but an understanding of terms, exposure, concurrent work and workload is just as important for stability.  The client and main contractor angle on this was that more favourable terms are more likely to be agreed if they have comfort that the business they are contracting with is financially sound.  Again, this came back to profiling and business-to-business interaction to ensure a responsible position is taken to not over-stretch capability of any supply chain member.

Route to market then came into focus with a perception that ‘competitive tendering’ led to uninformed decisions and commoditising of one of the most complex build elements.  The ability to take a technical product and service, push it to a column on a spreadsheet and make a bottom line decision is counter to every thought of collaboration.  Whilst competitive tension and best value are recognised and needed, a more collaborative approach with early engagement is a far safer position.  The strong opinion was this is a client led issue, but the other side of that coin was that a position of trust is often abused, with clients and funders often picking up the bill for the misuse of this process.  Layers of consultants and ‘checkers’ are often then introduced to balance it out but this in itself gives rise to levels of compliance that push schemes beyond the reach of what is best value and a market position.  The unanimous decision reached on this point was that unity and trust through collaboration is the way to go.  Trust is engendered from the top down and needs a powerful responsibility at every level to make it work.

The designer-led view pushed failure to the overall responsibility for how building facades are procured. Designers, including architects and façade consultants, are often pivotal in pushing the packaging of strategic procurement, yet this is often changed or ignored by contractors.  Take a façade with 7 or 8 different treatments; to carve it into individual packages with layers of fees is heavily reliant on the co-ordination skill of the designer or contractor and in the event this breaks down or is incomplete, the responsibility flows back up hill.  Whereas a strategic, collaborative process that is closely managed with one point of supply allows you to responsibly work through design intent, cost plan/management and delivery avoiding those pitfalls.  The safety net of PI is not sufficient to drop co-ordination.

The event was summarised concisely by Harry Badham of AXA in coming forward as a client to state they are happy with no competition as long as there is transparency.  This was supported by all in asking for more transparency from the outset with costs and risk identified enabling collaboration and more informed decisions.  As with many complex processes, we need a layer of common sense at every stage – what is right for our business, how do we make our money and how do we find the fight collaborative method to communicate from the outset?  Absence of trust is what drives the cost up.

 

Testimonials

Harry Badham – “Pleasure – I enjoyed catching up. Useful to get a wide range of views from across the sector at this level of detail.”

Tom Bishop – “The roundtable was excellent, interesting topics, more importantly learning from a great group of peers sharing their knowledge and opinion. Thank you Colorminium.”

Eamonn Wall – “The breakfast session was a great opportunity for me personally to check in with the Colorminium team, meet some new relevant industry contacts, and to gain an alternative insight to facade contractor issues in the broader market sense. The conversation generated was a lively debate, this was made possible by the diverse mix of disciplines that attended.”

 

Wayne McKiernan – “Great venue, inspired choice as so many people round the table are involved in, or have been involved in buildings one could look out of the window at….