黑洞社区

John Cawrey has built up his Leicestershire contracting business on a steady stream of work for local schools and the council. With a turnover averaging 拢3.5m and 28 staff, Cawrey Ltd is a minnow of the construction world, but its director prides himself on providing a quality service to customers on even the smallest jobs.

Despite this, in recent years, his work for public sector clients has dried up.

鈥淲e鈥檝e pretty much been excluded from the pot. We used to do quite a bit of work for schools and local authorities in the area, but in the last five years it鈥檚 dwindled to nothing.鈥�

We feel small contractors should have been given a chance to compete with larger contractors

John Cawrey

Cawrey鈥檚 firm has lost out partly because Leicestershire council has spent most of its budget on rebuilding four schools at a cost of 拢40m, but also because his firm failed to secure a place on its capital works framework agreement, set up last August. The lower tier covers jobs from 拢200,000 to 拢1m, but even this was too big a challenge for Cawrey to take on. 鈥淚t was a minimum of 拢1m work a year,鈥� he says. 鈥淲e couldn鈥檛 cope with that level of commitment.鈥�

Cawrey鈥檚 is a familiar story across the UK. A survey by the National Federation of Builders (NFB), released exclusively to 黑洞社区, has found that, of 460 SME firms questioned, one-third were reporting a drop in work from the public sector. According to the study, smaller companies had been hardest hit.

Most of the firms surveyed attributed their drop in public sector work to councils鈥� adoption of framework agreements, where the minor works that are the bread and butter of small firms are often bundled up into larger long-term contracts. Just over half of respondents said public sector procurement practices had not helped SMEs 鈥� only 12 firms out of 460 said they had.

Small firms complain that frameworks effectively shut them out 鈥� the packages are too big and pre-qualification and tendering place enormous strain on companies without teams of admin staff. About 85% of those who still work for the public sector said it was through traditional contracting arrangements. But they fear these opportunities will not be around for much longer. Overall, 40% of respondents were looking for work in new markets to replace the revenues they鈥檇 lost.

Under threat

Almost 2 million people work in construction in the UK, and 42% of these are in companies classified as SMEs. Firms like Cawrey鈥檚 are the lifeblood of the industry, but they鈥檙e under threat from the government鈥檚 drive for efficiency.

鈥淔or our members, this has been a huge issue,鈥� says Julia Evans, chief executive of the NFB. 鈥淚ncreasing work in the public sector is not coming through to members 鈥� they鈥檙e getting less than they were expecting and they expect it to get worse.鈥�

Frameworks are an extension of collaborative working, recommended in the Latham and Egan reports and numerous government publications since. The idea is to improve relationships and standards; in practice, they are a bureaucratic minefield.

For Cawrey, just filling out the forms would have been a massive strain. He says that when the firm was on the council鈥檚 preferred supplier list, enquiries took about a week for one person to respond to. The framework documents would, he says, have been three or four weeks鈥� work for two people.

Now he is almost totally dependent on private developments. 鈥淚t鈥檚 a riskier area for us. You鈥檙e dependent on the housing market which is a bit of a rollercoaster,鈥� he says. 鈥淲e鈥檙e a fairly forward-looking company. We don鈥檛 want things to stay the same but we feel small contractors should have been given a chance to compete with larger firms.鈥�

鈥淭he call-out stuff was our bread and butter,鈥� says David Lowe, managing director of contractor Philip James. It has a turnover of 拢1.5m-2m and employs 10 people. It used to do 750-850 jobs for Leicester city council a year but that鈥檚 dropped off since April, when the council set up a framework to undertake projects under 拢35,000 and maintain 1,000 buildings, half its estate.

To the contractors that won, Inspace and Sodexho, the deal is worth 拢2.5m over three years. 鈥淭he councils now use big companies with call centres,鈥� says Lowe. 鈥淚 doubt we鈥檇 get on the framework because of the size they want you to be. There are four or five local firms that used to do that sort of work now competing for the same private work.鈥�

It鈥檚 not only the smallest companies that are losing out. Martin Sibthorpe鈥檚 company Sibmar Construction has a turnover of 拢12m and employs 52 people in Essex, but it鈥檚 still not big enough to handle even the minimum workload. 鈥淪ome contracts are 拢100m; some may be only 拢5m. But that still excludes us, as sometimes they say the framework can represent only 10% of your turnover. So you鈥檝e got to have a huge turnover to get on it.鈥� Public sector work has accounted for 90% of Sibmar鈥檚 turnover in the past 27 years, but it鈥檚 moving into commercial development.

The councils now use big companies with call centres. I doubt we鈥檇 get on the framework

David Lowe

The application process for frameworks is not only onerous for small contractors, often the questions are impossible to answer.

Pre-qualification questionnaires may request details of 鈥� systems and procedures鈥� or 鈥渆vidence of benchmarking KPIs鈥�, scoring answers on a points system.

鈥淚t鈥檚 a bit like answering exam questions,鈥� says one contractor who didn鈥檛 want to be named. 鈥淵ou鈥檙e trying to prove how smart you are. We didn鈥檛 provide enough buzzwords so we didn鈥檛 get through. There was a question on how we 鈥榠mplement partnering with our supply chain鈥�.

鈥淲e don鈥檛 have anything like that. We have an informal approach 鈥� we鈥檝e been using one scaffolding company since 1989 so we must have been partnering successfully.

Not only do I know the workforce, I know their families.鈥�

Keeping it local

EU law governing public tenders is a blunt instrument to apply to successful local relationships. Previous relationships cannot be taken into account, so where small companies have many years鈥� experience working for just one council, this cannot be given due weight in their application. The NFB鈥檚 survey also showed that many small contractors are unaware of tendering notices for frameworks 鈥� few are accustomed to trawling the Official Journal for work and several said the first they knew about a framework was when enquiries stopped coming in from regular clients. EU rules don鈥檛 allow councils to invite companies to tender.

鈥淲e worked with Community Housing Association for 20 years on and off and we rang them to find out why we hadn鈥檛 received any enquiries for a while,鈥� says Sibthorpe. 鈥淭hey said 鈥榶ou鈥檙e not part of the framework鈥�. We missed the boat.鈥�

A spokesman for Leicestershire council said it would evaluate its frameworks before deciding whether to extend them. 鈥淓verything is about efficiency now,鈥� he added. 鈥淭he principles of frameworks are a good idea and a lot of authorities are going down that road.鈥�

From his point of view, local firms can鈥檛 match the performance of national contractors, but he doesn鈥檛 believe it鈥檚 all about size. 鈥淚 don鈥檛 feel they鈥檝e kept pace with the larger contractors in areas like health and safety or quality control. Just because they can鈥檛 take on the big boys, it doesn鈥檛 mean they can鈥檛 take processes up to a higher level on a smaller scale. It puts them at a disadvantage when filling out a pre-qualification questionnaire.

鈥淲hy can鈥檛 local contractors band together and hire someone to look at elements of their business, or submit a joint bid for a framework? They could pull themselves up by the boot straps and present themselves as a more efficient establishment.鈥�

A spokesman for Inspace said: 鈥淲e have a network of offices around the UK and we employ direct, locally based labour for this type of work. We believe we鈥檙e flexible and clients can benefit from continuous learning with us.鈥�

If you haven鈥檛 got bread and butter work, you don鈥檛 have the confidence to train youngsters

Andrew Oldershaw

Egan suggested there would be opportunities for small contractors working for larger ones. But just 18% of those surveyed by the NFB were acting as subbies for a framework contractor. The idea also gets short shrift from firms 黑洞社区 spoke to.

鈥淚 would be reluctant,鈥� says Mike Wootton, managing director of Exbury Homes, a 拢1.3m-turnover contractor in Portsmouth. 鈥淚 know if I work for an RSL [registered social landlord] I鈥檒l get paid; that鈥檚 the benefit of working for them.鈥�

鈥淲e have a policy of not working for other contractors,鈥� says Peter Beighton, managing director of Derby鈥檚 Beighton Construction. 鈥淲hy not? We haven鈥檛 got a legal department. It鈥檚 frightening. We had a bad experience once. We got in an adjudicator and it ended up costing more than we were trying to recover.鈥�

Being cut out of public sector work has consequences for standards across the industry. Bill Rabbetts, chair of the Strategic Forum鈥檚 SMEs group (see below), is concerned that small contractors will be cut out of initiatives to drive up standards led by the public sector 鈥� in health and safety, for example. 鈥淭he Health and Safety Executive identified that improvements have to be made in the SME sector, but it鈥檚 desperately hard to interface with these companies. One way to drive standards up is through the public sector setting standards.鈥�

It could also affect the number of new recruits coming into the industry. Andrew Oldershaw runs Oldershaw Brothers, a 拢400,000-turnover firm in Leicestershire. 鈥淚t鈥檚 traditionally firms like ours who take on apprentices and train them. If you haven鈥檛 got the bread-and-butter work, you don鈥檛 have the confidence to train youngsters. Private work is often very competitively priced and it does slow a job down.鈥�

The communities department says its only input into local authority procurement is to offer best practice advice. 鈥淲e have aimed to help reduce as far as possible the admin burden on small firms, to encourage them to participate in public sector opportunities. The latest independent evidence, soon to be published, shows numbers have increased in the past two years.鈥�

Neither is the picture painted by the NFB survey unremittingly bleak. A fifth of firms have downsized, but an equal proportion have hired new staff and trainees as a result of winning more work. Rabbetts cites a framework set up by a group of housing associations that covers an area from Hampshire to Cornwall but includes small firms by allowing them to tender just for smaller jobs and in specific geographical areas. Evans at the NFB praises the efforts of Birmingham council. But these are the exceptions. Unless national and local government wake up to the damage being done to construction鈥檚 grass roots, it could be too late.