The possibility of radical change had been in the air since the contractor was forced to make provisions of 拢26m following its suicide bid for the Cardiff Millennium Stadium, but the scale of the change has taken the industry by surprise. No wonder Laing described the announcement as the most important it has ever made.
The full repercussions of the statement are only now becoming clear. For the staff, there is uncertainty over where the axe will fall, despite assurances from senior management that they will start by seeking voluntary redundancies. But Laing鈥檚 decision to pull its name off the tender lists and cut its turnover by 拢400m will also have an impact on both clients and rivals.
For clients, the big question is whether they will soon run out of contractors to tender. As the table opposite shows, more than half of the top 10 contractors of a decade ago no longer consider traditional volume work to be part of their core business. One leading property developer admitted that 鈥済ood contractors are certainty few and far between these days鈥�.
Meanwhile, Mike Griffiths, development director of Land Securities, hints at the way clients will adapt to the shrinking pool of suppliers. He said: 鈥漈here are still enough contractors around for our tenders. (But) we are increasingly turning to two-stage tenders.鈥� This is where the client agrees elements such as overheads and preliminaries with selected contractors before the bids. Laing will continue to tender for these two-stage projects.
If Laing鈥檚 staff and clients are the potential losers from last Wednesday鈥檚 announcement, who gains? The most obvious beneficiaries are those top national contractors such as Kvaerner, John Mowlem, HBG, Kier, Costain and Sir Robert McAlpine that still do traditional work 鈥� plus dozens of smaller firms that compete with Laing鈥檚 regional operations for the 拢3m-plus jobs that the Hertfordshire-based firm chased.
In theory, there鈥檚 an extra 拢400m of work up for grabs. HBG is one contractor that could benefit. HBG chief executive Adrian Franklin said: 鈥淵es we would pick up some of the work, but not at any cost.鈥� He warned that clients must be careful not to force other contractors to move out of the market. 鈥淐lients should see the signals that someone is voting with their feet. Others may follow if the risk-to-reward ratio is not good enough.鈥� 鈥淚鈥檇 like to think that Laing鈥檚 decision will help us finally push margins towards 3%,鈥� said the chief executive of the top 10 contractor. 鈥淏ut the trouble is that despite all the increasing sophistication of contracting, it remains a horribly low-entry business. Someone else is bound to come along and take Laing鈥檚 place.鈥� Another national contractor based in the North-east said it would be keen to take on any work that Laing did not want. 鈥淚t鈥檚 not impossible to make decent profits from competitively tendered work,鈥� said a representative of the firm. This is not a popular view among the UK鈥檚 top 10 contractors, most of whom have cut back on the number of traditional JCT80 lump-sum and JCT81 design-and-build contracts they do. In fact, there is a joke going around that 鈥渢endering is a niche market鈥�.
The regional rivals, though, are more hopeful. Bristol-based contractor Cowlin Construction is one firm hoping to win from Laing鈥檚 move. A company spokesman said: 鈥淲e will be making sure that [local QSs] Faithful & Gould and Gleeds know our capabilities and include us on their lists, especially in the 拢3m-10m range.鈥� Laing itself is keen to stress that although it will now focus its operations on one HQ, it is not abandoning its regional presence. Jim Armstrong, chairman of Laing鈥檚 construction arm, says the old tripartite structure operated as one brand but three separate businesses. This prevented the company from making the most of the size and diversity of its staff talent pool.
Armstrong said: 鈥淚f we won a job in one area, the relevant division would put its best team on the job, even if we had a more suitable team available in another part of the country. By abandoning the regional divisions, the best team Laing can offer will be on each job.鈥�
