Businesses urged to resist pressure to cut costs
By Rob Freeman | 16th June 2020
Pressure from bigger firms is building on businesses in their supply chain to cut prices, according to research in the building industry.
But industry experts have warned those facing tricky cost issues that quality remains the best long-term investment.
Research on the impact of the coronavirus pandemic by Barbour ABI said the pressure has been growing on firms to cut costs.
The firm's latest update said: "We have identified a number of reports of requested or voluntarily discounting across sub-contractors and architects."
A report from architecture recruitment agency Frame Recruitment said practices were offering 20 per discounts to secure contracts.
And the Building Engineering Services Association said 38 per cent of the audience at a webinar had been asked to discount rate or had felt obliged to take that step.
Mike Court, director of Gloucester firm Quattro Design Architects, said they have seen rivals following that path.
He said: "In a few avenues of work we have certainly seen competing architectural practices offer lower fees than they used to.
"Some have offered exceptionally lower fees as well essentially seeking to buy the work.
"What we are also seeing is that clients aren't stupid."
He continued: "A cheap price often comes with it concerns about the liquidity of the practice and some reduction in quality of service now or in the future might potentially arise.
"Therefore clients are not prepared to sacrifice the long term objective for a short term gain."
And he stressed that any cost cutting at this stage could have a major impact in the future for both sides of the deal.
"It is well documented, although perhaps not well known, that the value of the contribution at the initial design stage reaps greater benefits in project value further down the line," he said.
"If one scrimps on the early stages the effects will be felt later on.
"I would like to think the current climate won't be around forever. If we took a scenario where a project might take between one to two years to complete, decisions or short cuts taken now, might extend into better times and have ramifications.
"Quality of service is essential because quality of service adds real value."
Those words were echoed by David Marks, senior quantity surveyor at Cheltenham property and planning consultancy Evans Jones Ltd.
He warned that "whilst contractors need to remain competitive, quality and safety should remain of the upmost importance."
"We are seeing contractors come under increasing pressure to keep their prices down in order to stay competitive and maintain their workload in a difficult market," he said.
"These difficult conditions, along with increased safety measures on sites, is squeezing costs on sub-contractors and others further down the supply chain, as contractors seek to spread the load.
"As market conditions become more difficult over the coming months, this issue is likely to continue and contractors will look to use sub-contractors who provide the best discounts."
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