Construction trade body voices fears over safety

Published on Sunday 21 June 2009 21:42

QUALITY and safety standards in the building industry are at risk as construction firms are forced to cut costs to win competitive tenders, a leading industry body warned today.

Projects in Scotland are so few and far between that companies must slash margins earned on the costs of jobs – leading to the possibility of "shoddy work" and "unscrupulous" behaviour by firms desperate to win work, it said.

The majority of Scottish building firms are operating on "razor thin" margins of no more than 3 per cent as the economic downturn continues to hit the construction industry hard.

The findings come from a new survey of the sector published today by the Scottish Building Federation (SBF), the industry body and employers' federation.

SBF chief executive Michael Levack warned margins risk being eroded further over the coming months as competition for contracts becomes ever fiercer.

"The competitive pressure on many SMEs at the moment is immense," he said. "In the public sector, we're seeing upwards of ten firms being invited to tender for each new contract. I've heard cases of recent local authority tender lists that have run to more than 20 companies, which is frankly ridiculous.

"In such a fiercely-competitive environment, one of my greatest fears is that responsible construction companies risk being undercut by less scrupulous firms, who can offer lower prices by cutting corners on quality and safety."

Colin Woodward, managing director of building industry recruitment firm Contract Scotland, estimated that one or two subcontractors in Scotland fail each week as a result in the dearth of work and that this is set to worsen.

He said the problems facing the construction industry are even tougher in Scotland where government delays to implementing the Scottish Futures Trust – a not-for-profit scheme designed to replace PPP and PFI – mean that its 1.25 billion schools programme is not likely to get projects off the ground well into 2010.

Woodward says the fall off in construction projects is driving out experienced workers – many of whom work on a freelance basis – to other industries.

Since June average wages earned by freelance site engineers and managers has fallen from about 48,000 per annum to less than 35,000.

"If you lose skills out of the hard construction sector, they are going to be hard to replace," said Woodward. "Everyone has got to make costs savings, but the problem the construction industry has is you can't bring back the expertise of people who have been doing it for 20 or 30 years."

This, and a dearth of jobs for new graduates, might put at risk future infrastructure projects, such as the second Forth road crossing.

Woodward said: "We might find in a year and a half there isn't the skills to actually build them."

Levack said the responsibility to ensure standards were met lay with contractors.

"Contractors – both public and private sector – need to be vigilant and make sure that by pushing for construction work to be delivered at the lowest possible cost they don't price out reputable firms and end up instead with shoddy work carried out unsafely," he said.

The survey also suggests that confidence within the industry remains weak, with more than 60 per cent of those responding either slightly less confident or much less confident about the prospects facing their business over the next 12 months compared with the previous 12 months.

FORCED TO CUT PROFIT EXPECTATIONS

TWO-thirds of construction firms responding to the latest Scottish Construction Monitor, indicated that recent contract tenders were typically secured on the basis of margins – profit above costs – of 3 per cent or less.

More than one firm in three is typically operating on a margin of 2 per cent or less, while more than one in seven has seen its margins cut to 1 per cent or below. Michael Levack, chief executive of the SBF said: "These figures suggest that, in the current climate, a growing number of firms are being forced to work to razor-thin margins in order to be able to win new contracts."

The new data comes from a quarterly survey of the Scottish Building Federation's membership of more than 700 Scottish building firms.