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The Impact of the Recession on the UK Construction Industry Supply Chains (2012)

Ref: build0021

The study aimed to determine the extent of the impact of the recession on the construction supply chain, whilst investigating the current tendering practices. It further looked into the difficulties faced by contractors from clients or client advisors and also fellow industry competitors. Structured interviews were conducted with Quantity Surveyors whom were responsible for financial and contractual duties with their respective organisations. It was found from their responses, that clients are currently pressurising the industry supply chain by asking for the low prices. The research also found that traditional and single stage tendering practices relating to lowest fixed prices are very common and popular with clients and their advisors. A further outcome was that savings are being demanded by clients even from their advisors by discarding the production of “Bills of Quantities”. It was found that “Value for Money” was desired by all the clients although they were not willing to pay any extra costs to achieve this. Also, any undue risks arising from the low tender prices were unjustifiably placed on the construction supply chain. Underbidding was thought be on the rise and many felt that it was due to new market entrants and is only possible for a short period of time. Extra pressure was felt by the construction supply chain due to inflation and VAT rises. One discouraging outcome from this study was that impact of the Sir John Egan and Sir Michael Latham publications was fading in the industry due to the financial restraints mentioned. The progress which has been achieved so far is now diminishing due to current tendering practices which are more traditional. Contractor Quantity Surveyors felt that partnering can be useful to overcome the recessionary problems. The reasoning given for this was that extra benefits are available by negotiations through partnering. The client will achieve a high quality building per specifications whereby the contractor will be able to gain profit and experience with fewer risks. It can be a win-win situation for the entire collaborative team. The consultant, however, contradicted this belief by reminding us that contractors are present to make as much money as possible and that clients prefer to pay as little as possible. Although both statements can be accepted it may be necessary to reach a balance. Many examples were given by the participants whereby the frameworks previously agreed were analysed and extra financial benefits were offered to clients through negotiations. The findings showed that the industry is currently facing a struggle against the recession and a solution can only be achieved through collaborative working. One of the positive outcomes of this study regarding the issue of feedback was that it is being offered to all upon their request. This can be of significant help to the organisations in the future.

  • 12,000 words - 100 pages in length
  • Excellent use of literature
  • Good use of cases
  • Good analysis of the subject area
  • Includes interview transcripts


1 - Introduction
Rationale
Aims & Objectives
Structure

2 - Literature Review
Overview of the UK Construction Industry & Recession
Importance of the UK Construction Industry
Recession Impact on the Industry In The Past & Present
The Impact of the Recession On The Public & Private Sector
Contractors & Subcontractors Competition
Private Sector Clients
The Recession Effects on the Construction Tendering Practices
Low Tender Prices
Overheads Costs & Profit Margins
Pressure On & Construction Supply Chains
Practice of Single Stage Tender with Fixed Lump Sum Price
Underbidding
Inflation & VAT Rise
Risks Distribution or Allocations
Small – Medium Enterprises versus Large Organisations
Sir Michael Latham & Sir John Egan Publications
Value for Money (VFM)
Innovation
Partnering
Capital Allowances
Debriefing on Tender Bids
Summary

3 - Methodology
Research Aims & Objectives
Research Objectives
Quantitative & Qualitative Research
Data Collection Approaches
Structured Interviews
Structured Interviews Strengths & Weaknesses
The Unit of Analysis - Defined

4 - Analysis
Participants
Coding
The Perception of Industry Leading Professionals
Low Tender Prices
Rising Materials Costs
Variations
Overheads Costs & Profit Margins
Underbidding
Transferring Of Risks
Single Stage Tendering With Fixed Lump Sum Price
Partnering
Innovation
Use of Bills of Quantities (BOQs)
Feedback
Sir Michael Latham & Sir John Egan Publications
Summary

5 - Discussion
Literature Theory & Research Findings
Summary

6 - Conclusions Limitations & Recommendations
Conclusions
Limitations
Recommendations

References

Appendix



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