Lead times: January - March 2015

Spotlight: Bidding and design

Construction lead times show no sign of decreasing, despite a slight cooling down of the market. Could part of the reason be a shortage of technical expertise to meet demand at the design and bidding stage of projects? Brian Moone of Mace Business School reports

Despite talk of the market cooling, construction lead times continue to increase with no signs of any specialist contractors experiencing a relaxation in the market. While most people recognise shortages in labour, plant or materials as the main cause of increases in lead times, there are also the technical aspects that often need to be undertaken ahead of production where delays can occur.

Analysis of the current rise in lead times has shown that over half of the specialist trades in our survey have increased their lead times over the past 12 months. Five specialist trades are at their highest lead time in the last 10 years including brickwork, blockwork, piling, soft floor finishes and internal/external stonework with several others set to follow.

The underlying factors for these increases are often due to shortages of labour, plant or materials, for example the most notable material shortage recently has been brickwork and blockwork, with lead times at an all-time high of 11 weeks due to availability. While shortages of plant and equipment have been responsible for the long lead times for piling, particularly large or specialist rigs in and around London, labour is the most common factor and is well recognised in relation to resourcing the project.

However, underlying all of the usual factors is one which is often overlooked but affects many of the specialist contractors: the up-front bidding, technical support and expertise. With the pipeline of work on the increase, the first area of impact is at the tender stage, with the bid teams that put together prices as well as the technical solutions and methodology currently being stretched.

While the bidding process is not directly measured as a factor in the lead times, the failure of a specialist contractor to return a bid or to submit a non-compliant bid due to inadequate resourcing can lead to the tender process being delayed or repeated. This can lead to late placement of orders which can critically affect the programme and compound any lead time issues.

In the current rising market, many clients and main contractors are keen to procure the specialist contractors as early as possible to secure competitive prices as supply and demand inevitably drives up costs. This means that specialist contractors are facing the challenge of coming out of a recession and investing at bidding stages for future growth, often several months or even a year ahead of when income might be realised. Inevitably this means resources for bidding are limited and it is even more important that clients and main contractors work closely with their supply chain and give early visibility to the opportunities arising. Careful management of this will ensure that the supply chain can resource the tender process most effectively, avoiding errors in the bidding process that can be damaging to the specialist and his client and lead to project delays.

The other main underlying area of delays in lead times at present, which is often not highlighted, is around the technical submittal and approval process. Specialist contractors are increasingly required to take on the responsibility for technical design requiring them to produce technical drawings or calculations for approval by the client’s architects and engineers ahead of any work being undertaken on site. While this shift in responsibility has been introduced to utilise the expertise of the specialist contractor during design stage, little consideration is given to the additional time required within the programme to allow for this. Half of the increases in lead times reported this quarter were due to increases in design or approval stage of the lead time, and a number of other organisations reported that increases in this area were currently being absorbed in other parts of the lead time programme.

Moving the design and approval process from the client to the contractor is more likely to place the design and approval onto the critical path of the contractor’s work as it will need to be completed prior to any fabrication or construction. Delays in this area will have a direct bearing on the overall construction programme.

Many of the specialist contractors are reporting that they are experiencing difficulties in recruiting skilled people to undertake work in this area. They believe many people with these skills are opting to work for clients rather than specialist contractors. This is creating bottlenecks during the lead-in period, which contractors report is being compounded by delays in the time taken to approve designs by the client’s design teams.

Clients and main contractors need to be aware of the pressures that their supply chain are under during bidding and make appropriate arrangements to manage this. This will ensure that the requisite bids received are fully compliant and competitive, in order to avoid unnecessary delays in rebidding the works. Adequate provision also needs to be made in the programme to allow for technical design and approval. This is an area of work for the specialist that is on the increase and is proving difficult to resource, leading to inevitable increases in lead times.