This news report that Kier proposes charging subcontractors 1.5% of the cost of their contract to be treated as a strategic partners suggests that the whole of the construction industry needs to review its approach. As a small company that has lost significant sums of money twice as a result of businesses that have gone bust after contracting us to do work that in both cases was instructed by the client we are now very wary of working as a subcontractor at all if the job is accountable to the client. Because we are a specialist company that has to work closely with most clients themselves we now often call on the client to pay us directly for the work, or provide a guarantee that if their main contractor goes bust we will not be impacted wherever possible. One of the companies that went bust owing us money even had a Royal Warrant and on paper appeared to be very well resourced, yet their impact on the Electrical Company who they also failed to pay was huge and went well beyond the pain we experienced.
There are some real questions that should arise in the minds of major clients regarding how to get the best result for them and for the society that they are part of. It makes a great deal more sense for large clients who were willing to take on contracts with companies like Carillion, Interserve and Kier to alternatively employ an agency to manage the contract who they pay directly but then for them to commission the various elements of the work such as the architects, builders and electrical companies and any specialist suppliers and simply ask them to do their main work well. Another alternative would be for the financial arrangements to be dealt with directly by the client who can restrict the risk of the various interleaving organisations from adding to the costs and at the same time to understand that if they call on businesses to cope with a six month or even 12 month retention, that the only way for this to be resolved is for the company to charge them more in the first place so it would be more sensible to avoid such approaches.
As the Government claims it wants to support small businesses and local suppliers and pay suppliers within 30 days, the idea of awarding most of its contracts to large companies that do not adopt these policies and then goes on to employ subcontractors that are not local raises questions about the consistency of these policy ideas. It seems that the Government needs to begin to influence the changes needed in the industry!