Contractors are handling large numbers of business enquiries but are converting fewer into actual tenders, according to new research from the HVCA.
The latest State of Trade survey carried out by the association’s Ductwork Group showed that the rate of converting enquiries into tenders had worsened in the past 12 months. On average, specialist contractors are now converting just one in 10 enquiries and the total amount spent on tendering has increased from four per cent of turnover to seven per cent.
Ductwork Group chairman Kevin White warned that this was a worrying trend.
“There is more competition out there for less work,” he said. “For a time, some companies seemed to believe that there was more work around, but in reality it was the same work being quoted over and over again as clients sought to take advantage of the economic situation and drive down prices even further.”
Mr White, who is also managing director of the major ductwork company Senior Hargreaves, advised companies not to panic.
“People have to be more selective - it is a matter of survival,” he said. “When things are difficult contractors are more inclined to take risks and go for work they should leave alone. They are going into projects looking at how to minimise their loss rather than focusing on profit - there is no future in that.”
Not surprisingly, 59 per cent of respondents to the HVCA survey were less optimistic about the future and there is considerable concern that the forthcoming cuts in public expenditure, to be announced in the government’s spending review on October 20, will make things worse.
“You can see the dilemma for ductwork contractors,” added former HVCA president Gareth Vaughan. “A factory is a big animal to feed and so some companies will be tempted to bid lower and lower. This can only go on for so long before they find themselves incapable of completing the work.”
However, Mr Vaughan said many contractors were keen to help in the process of reducing construction costs, but “late appointment based on lowest price provides no opportunity to do this”.
HVCA deputy chief executive Roderick Pettigrew suggested reform of the procurement process could create a good basis for “negotiated cost reductions that add value to a project without undermining the ability of suppliers to make a fair margin”.
He added that the Working Together guidance document produced by the HVCA outlined a basis for greater co-operation between different members of the supply chain, and this approach was being encouraged by chief construction adviser Paul Morrell.
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