Construction industry suppliers and their clients should have strategies in place as work escalates. Keeping experienced staff, a straightforward tendering process and good client-supplier relationships are important.
WITH THE WALL OF WORK looming as a result of the Canterbury rebuild and the pick-up in construction and housing in Auckland (see Figure 1), what measures can organisations take to ensure that the gains enjoyed will continue?
Monitor project performance
First, organisations that monitor their project performance should continue to do so. They already have data to compare future projects against and can see if there is a fall-off in performance.
Organisations not already monitoring their project performance should begin to do so and compare themselves against the national average. If they are below this, it is an indicator they could find it difficult to compete for work and should invest in improving their delivery methods.
Quality may come under pressure
In a boom, more work is brought to the market and suppliers can be selective about what they take on due to demand outstripping supply.
Some suppliers may see opportunities to take on more work than they are resourced to deliver on, hoping to find additional resources when the time comes.
However, if skilled labour resources are scarce, these suppliers may then be unable to deliver to the standards that they would normally achieve.
Quality may be sacrificed as work crews fall behind schedules and are then driven to complete the work. Stress and pressure could end up being carried by a few trusted, competent and long-serving staff.
Keep hold of valuable staff
As the amount of work available creates opportunities for other suppliers to enter the market, disgruntled skilled employees will have options and could be enticed away from their long-term employers.
Because of this, suppliers should continue to focus on delivering a quality product and not be tempted to take on work that they are not resourced to deliver. This way they can maintain the stress levels and motivation of their staff and benefit from a steady labour force.
If employers can offer a fair and reasonable wage where employees feel valued, have responsibility and also have the possibility of reaching mastery in their work, they are more likely to turn down higher-paying roles with their element of uncertainty.
Suppliers can be more selective
Construction clients need to recognise that suppliers have more options in a boom period. They will want to tender for work they have a greater chance of winning and work for clients prepared to pay for a quality product.
Suppliers will not want to waste valuable profits continuously tendering for a one in 10 chance of winning work. They will avoid clients with a lowest conforming bid tender selection process.
They will also look for clients that pay on time, are agile in decision making and have contracts that take into consideration market pressures – for example, fair and reasonable insurance levels.
Organisations with slow approval processes and risk-transferring contracts will be left wondering why the bigger-performing companies choose not to tender for their work.
A better approach
Clients need to work at being ‘a client of choice’ during a boom or accept that they will have to pay a premium, as they will be unable to benefit from competitive tension.
They could set up small panels of suppliers to try and secure constructors and reduce the amount of two-stage tendering.
Effort should also be spent upfront to select suppliers based on company attributes for quality control, health and safety systems, sustainability, the experience and technical competence of staff and customer focus.
Margins and overheads for work can also be determined. Clients can then focus on the actual construction work and seek quotes from the panel based on the cost and innovative approach.
There should also be effort to manage the panel through good supplier relationship management and key performance indicators so that all parties are achieving their business goals.
Articles are correct at the time of publication but may have since become outdated.