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Dysfunctional supply chains must be addressed

That’s the headline in Construction News today (Wednesday 30 October 2013) and it’s all about the Department for Business, Innovation and Skills having commissioned EC Harris to undertake research into the structure of construction supply chains to inform the government’s industrial strategy. 

But What About The Specialist Contractors Themselves?

The report does highlight some very important issues and failings in the industry, and to quote Simon Rawlinson head of strategic research and insight at EC Harris

“The team found that construction supply chains are highly fragmented, and furthermore, that the level of fragmentation increases in supply chains that are directly involved in the delivery of construction work on site.”

Aside from the fact that just about every Government report into the UK Construction Industry since Adam was a lad has concluded much the same thing, what does the report say about the Specialist Contractors themselves think it should be fixed?

Well sadly – not a great deal.

And in my book that’s an opportunity lost, because as the Government’s earlier report this year identified Specialist Contractors as of “system wide importance”.

So why didn’t this report canvas the views of those Specialist Contractors about what should be done to address the “dysfunctional supply chain”?

And therein lies the problem!

The 3 stated objectives of the report were all about “cost saving” and “competing”.

So here we have a report designed to find out how to save costs, which concludes that the industry is broken!

Forgive for pointing out the bleeding obvious (as Lord Sugar would say), but that’s something we have been saying for the last year. Indeed “Specialist Contracting Is Broken – What Can We Do To Fix It” was the title of our sell out conference for Specialist Contractors this summer!

The Single Most Important Issue Overlooked

What the report doesn’t properly properly address or offer any solutions to, is the way in which the industry is paid!

It does limply say that “Sub-Contractors state that payment performance is worsening and payment periods are being extended…”

But here’s where I take issue with its authors, because it says “payment periods are being extended as a result of current market conditions.”

WHAT? What did you say “current market conditions”. Is that not an insult to all Specialist Contractors who know what’s really going on!

Strangling the flow of money to its supply chain is the only way many unscrupulous Contractors know how to make their slim profits and their massive returns on capital employed.

And what does this report recommend in regard to payment?

“The review of financial arrangements including bidding and payment with a particular emphasis on…” wait for it  “ the role of supply chains in cost lead procurement and maintenance of cash flow at all levels of the supply chain…” and here’s the biggest irony ”…including Tier 1”

OMG here we go again let’s not just fix the payment problem. Oh no. Let’s have another review!

If your car breaks down at the side of the motorway, the AA, the RAC, the Police and the Highway Traffic Officers all sticking their head under the bonnet and concluding “it’s broken” is NOT going to get it fixed.

In fact it will just serve to annoy you even more, and frankly that’s what’s going on at the moment. Specialist Contractors are sick and tired of suggesting that we need yet another review!

They are particularly sick and tired of another recommendation like the one quoted above that says we mustn’t forget the Tier 1 Contractors!

That’s a bit like saying we need to ensure that the top of the range BMW that the Police Officer arrives in to check you have broken down is always immaculately polished!

Please Mr Fallon, Dr Cable, and Mr Cameron, stop looking under the bonnet and fetch a mechanic!


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