黑洞社区

You used to know where you stood with cost consultants. A host of historic, mid-sized partnerships were on offer, as familiar and dependable as old boots. But over the past five years the cost consultancy market has polarised dramatically.

First there was a wave of consolidation, with major names like Davis Langdon, EC Harris and Currie & Brown - with a combined 332 years of history - being acquired by overseas giants - US-based Aecom, Dutch-based Arcadis and Middle East-based Dar Group respectively. In the midst of this, huge firms from left-field - property agents such as CBRE and accountants such as Deloitte - have begun muscling in on the market by growing their cost consultancy divisions. And more recently another phenomenon has hit this once-staid profession. A proliferation of start-ups have popped up. 黑洞社区 revealed in May that at least 16 have been founded by former Davis Langdon staff in the past two-and-a-half years alone, while others have spun out from other firms, such as Tower 8, which came from the cost and project management division of Jones Lang LaSalle.

If you widen the scope to include project management start-ups, there are many more, including L+M (founded by former Sweett directors), Hush (founded by former Deloitte directors) and 3PM (a start-up part-owned by QS company RLF).

Start-ups are not new, but what is new is the experience and seniority of the founders and their ambition to compete quickly with the big firms for major projects - with lots of evidence that this is already happening.

Unsurprisingly the start-ups and global conglomerates - not to mention the independents left behind - disagree on which type of firm can offer the best service for clients. 黑洞社区 examines what鈥檚 behind the rise in start-ups and sounds out the various camps. 

The rise in start-ups

The most frequently cited reason for the proliferation of start-ups is frustration of senior staff working at the bigger firms. Toby Turner, managing director of executive recruitment and development consultancy Holtby Turner, says the start-ups are in part a reaction to the wave of consolidation. Turner, who has been involved in a series of UK mergers and acquisitions in an advising capacity, says the transition from being part of a partnership - with the prospect of an equity stake in the business - to being part of a larger firm is jarring for some.

鈥淭hose that are more entrepreneurial and go-getting can find the change suffocating,鈥� he says. 鈥淭he idea of being a small cog doesn鈥檛 appeal at all.鈥�

The role we鈥檙e increasingly playing is bringing knowledge from one market to another

Matt Bennion, Arcadis

Part of the problem, Turner says, is acquiring firms can bring in a raft of additional processes, but he says that isn鈥檛 confined to firms that have undergone mergers and acquisitions. 鈥淲hen the market turns down, a lot of companies bring in more process and tighten their business controls,鈥� he says. 鈥淧rocess kills enthusiasm.鈥�

This is a picture James Clark, co-founder of Core Five and former Davis Langdon partner, recognises. 鈥淎s the organisation gets bigger the management burden gets bigger,鈥� he says. 鈥淎s young partners we felt we were getting further from our clients.鈥�

James Morris, co-founder of Tower 8, argues large businesses are also too inflexible to promote talent. 鈥淚t鈥檚 very difficult to restructure a medium-sized or large business to bring through the dynamic young people.鈥�

But Brian Kenet - a principal at an M&A consultant in New York, EFCG, which specialises in the construction industry and has been involved in deals involving Atkins, Aecom, Arcadis and CH2M Hill - believes there are some more prosaic factors at work. 鈥淥ne of the reasons you see more start-ups after a period of consolidation is lots of people made money in the sales.鈥�

Kenet is sceptical that dissatisfaction with mergers and acquisitions is a major factor behind the raft of recent UK start-ups. 鈥淭here鈥檚 a lot of gossip in the construction industry,鈥� he says. 鈥淪ome start-ups are reflective of a lack of happiness with a takeover but it may not have anything to do with that. In my experience there can be a difference between what鈥檚 said [in the market] and what really happened.鈥� Many major firms have had to make redundancies so it鈥檚 quite possible some start-ups have come about through necessity rather than choice.

Perhaps the most important factor behind the start-up phenomenon is timing. 鈥淭he dust has settled after these acquisitions and the market is coming back,鈥� Turner says. 鈥淧eople are saying 鈥業f we鈥檙e going to do it, we need to do it now.鈥�

Small vs big

One striking aspect of recent start-ups is their ability to punch above their weight. Core Five and Tower 8 - just over one and two years old respectively - both have projects on the books with a capital value of over 拢150m. Relative newcomer Alinea launched in May, also with the express intention of targeting major projects. Its founders were six senior directors from the industry鈥檚 two best-known cost consultants, Davis Langdon and EC Harris, with combined experience of 150 years and major projects such as the Shard and the Leadenhall building on their CVs.

Large firms have certain advantages, such as the heft to invest in innovation and secure banking covenants more easily. But Alinea co-founder Iain Parker says his firm is taking 鈥渆very step鈥� to enable it to compete 鈥渇or the next Leadenhall鈥�. This includes emulating the best aspects of their former firms. 鈥淲e鈥檝e invested a lot of our money in things like IT and covenants; everything a leading organisation like the ones we鈥檝e come from would have.鈥�

Obviously clients are looking for value for money and [start-ups] can keep overheads down

James Morris, Tower 8

The new firms are predominantly focused on the London market, where they claim clients want a more personal service with greater access to senior experienced staff, which they say their larger competitors struggle to offer.

鈥淏oth approaches are right, but for different things,鈥� Core Five鈥檚 Clark argues. 鈥淢y view is that the massive multi-disciplinary team is right for massive game changing projects like the London or Rio Olympics. But then you鈥檝e got the more tenacious London private developer who is keen to assemble the best team of individuals they can; who wants to orchestrate a team like a conductor.鈥�

Parker agrees: 鈥淪ome clients want a consultant that can do a project in the outback in Saudi Arabia as quickly as possible. London is very different.鈥� He adds that London clients want 鈥渙n-the-spot advice鈥�, which experienced bosses in start-ups are able to give. 鈥淐lients do lose patience with the QS that goes away or says 鈥榣et me get back to you tomorrow鈥�.鈥�

The start-ups also argue their lean structures can reduce service costs. 鈥淥bviously clients are looking for value for money and [start-ups] can keep overheads down,鈥� Morris says.
Firms that have been acquired, like Davis Langdon and EC Harris, naturally dispute all this. They say there are benefits to being large that help them deliver great service locally. Peter Flint, head of buildings and places in EMEA for Aecom and a former Davis Langdon partner, says that, although the firm has a presence in 140 countries, it has kept a 鈥渟trong鈥� network of offices in the UK and describes the 鈥渓ocal aspect of our business鈥� as 鈥渇undamental鈥�.

鈥淚 was seeing a local client in Manchester and explained how lessons we鈥檝e learned delivering offices in places like Australia and the US - such as not using raised access flooring or air con in similar climates to here - could help him save money. We can bring that knowledge to bear for a local client.鈥�

Matt Bennion, global director of buildings for Arcadis and a former EC Harris partner, agrees: 鈥淭he role we鈥檙e increasingly playing is bringing knowledge from one market to another. Clients are looking for more value from their consultants and that can come from overseas.鈥�

What鈥檚 on the market

What鈥檚 clear is that clients have never had so much choice when looking for a firm to price a project. 鈥淭here鈥檚 a wide series of different options in the market,鈥� Neill Morrison, Deloitte partner and head of cost consultancy, says. 鈥淚f you roll back five years all the cost consultants were much of a muchness in terms of what they were offering. Everyone in the market needs to know what their differentiator is now.鈥�

At the larger end of the market, many firms have sought to differentiate themselves from their competitors by bundling cost consultancy services up with other disciplines, such as engineering in the case of Davis Langdon, EC Harris and Currie & Brown.

Deloitte is a different kind of cost consultant. The accountant has bolted cost consultancy onto its vast array of financial services. Morrison left Davis Langdon in 2010 to found the firm鈥檚 cost consultancy division and argues cost consultancy and financial services are a natural fit. 鈥淒eloitte offers a bundle of services that help firms set up efficiently and cost consultancy fits nicely into that.鈥� He says Deloitte鈥檚 reputation and access to blue chip clients helps the division pick up major work.

Elsewhere property agents such as CBRE and JLL are growing their construction consultancy businesses, including their cost consultancy offering. Much of that work is won off the back of CBRE managing or advising on property transactions.  鈥淐lients want a single point of contact,鈥� Matt Wilderspin, CBRE鈥檚 head of projects, says. He says the firm offers 鈥渆very single [consultancy] service鈥�, including project management, M&E consulting, CMD, health and safety and environment. Most of the firm鈥檚 work is on corporate fit-outs, particularly in London, where it is managing and fitting out three of the capital鈥檚 five biggest insurance firm moves.

As young partners we felt we were getting further from our clients

James Clark, Core Five and formerly at Davis Langdon

Meanwhile the independent firms say the old ways are not broken and there鈥檚 great merit in large scale, independent consulting. Turner & Townsend and Gardiner & Theobald - both firms that grew in their last financial year - are increasing their international footprints while diversifying, albeit less radically.

Nick Townsend, Turner & Townsend鈥檚 managing director of cost management, says independence is crucial for offering impartial cost advice. 鈥淲e鈥檙e very comfortable with our position in the model of that as independent,鈥� Townsend says. 鈥淐ost advice should be independent.鈥� Adam Glover, senior partner at Gardiner & Theobald, says clients value this approach. 鈥淥ur clients want an independent service, that鈥檚 what they鈥檙e asking for. They value independence, strength in depth and high-value service. We deliberately don鈥檛 set our stall out as all things to all people. You need to know what you are and stick to it.鈥�

The cost consultancy market has never been so shaken up, and with a wide variety of firms jockeying for your attention, it might be time to refresh your contacts book.