The industry has recently seen a number of well-known, long-established main contractors file for administration or issue profit warnings.
As a client, you may be wondering what to do if the worst happens and your main contractor is next to face insolvency. After all, you have a project to deliver, a finite budget and, very probably, a project programme that is business critical for you to adhere to.
When it comes to delivering your construction project, main contractor insolvency is the worst possible scenario for you to face. Work will immediately stop and your site(s) will be closed whilst the situation is resolved.
With a partially complete project, the resulting lack of activity means your programme will start to fall behind and your project funders will be looking to you for answers.
If you have any prior experience with having your appointed contractor go into administration, liquidation or default, you will already know that your primary concern is your project recovery and minimising the financial impact.
Appointing an alternative contractor can be challenging. Putting aside the complex legal situation, other main contractors are often unwilling to accept the risk of a partially completed project upon which they’ve had no quality control to date.
In the event you are fortunate enough to find a willing contractor, you can expect that to come at a premium, and with an extensive list of caveats & conditions.
Whilst there is no doubt that the situation is serious, there is an alternative solution that can minimise your losses, mobilise quickly and, in turn, get your project over the finish line with a minimum possible delay.
That solution is Construction Management.
Construction management is a highly flexible solution that allows trade contractors to recommence work on your site at the earliest opportunity.
By appointing an experienced construction management consultant to act on your behalf, work on your project can recommence more quickly than it would under other procurement routes. In fact, you can recommence almost immediately (subject to matters involving administrators/liquidators for valuing any work-in-progress).
Your appointed construction manager directly procures the relevant specialist trade contractors for each of the packages still required to deliver your project.
A significant benefit of construction management is that your construction manager can often enter into discussions and negotiations with the subcontractors previously working for the main contractor. This gives a degree of continuity, whilst also maintaining guarantees and warranties for work that commenced but was incomplete at the point of the construction manager’s involvement.
The construction manager will also procure the remaining trade contractors required to take your project to completion. By making effective use of their established supply chain relationships, they form a collaborative team of trade contractors who take a ‘what’s best for the project’ approach to completing your project.
The appointment of specialist trade contractors will often add greater value to your project and because each is responsible for their own packages of work you aren’t reliant on a single contractor being willing to accept the risk of another contractor’s work.
When a main contractor ceases trading, it’s not just you as the client – that suffers. Often sub-contractors working for the main contractor will have lost out financially and may even have had machinery or tools retained inside closed sites meaning they can’t continue to work on other projects or sites.
Construction management can’t recoup financial losses suffered by the subcontractor if the main contractor ceases trading and owes money to their supply chain. Nor can it guarantee to resolve the bad feeling that inevitably arises in this situation. However, existing project subcontractors are often the first port of call when the construction manager is appointing trade contractors to restart the project. This means that their losses can be minimised as they continue to be paid, directly by the client, for the work delivered under the new contract.
As explained in this article, construction management reduces project overheads as they are limited to the cost of your chosen trade contractors and professional team without, the overheads and profit allowance associated with a main contractor, whilst also eliminating the ‘worst case’ costings that probably formed part of the main contractor’s fee.
As a result of the main contractor’s insolvency, you may need, or choose, to make variations to the project to reduce build time or make savings and get the project back on track. This is made much easier thanks to the flexible nature of construction management.
As with anything in life, there are pros and cons to construction management so it is important you are aware that this option places the project risk firmly with you as the client.
The success of the project is highly sensitive to the capability, and weaknesses of the person in charge. That’s why it is vital to appoint an experienced consultant to act on your behalf.
Evolution5 are experts in construction management offering a pragmatic approach that helps you achieve your ultimate project goals. Our construction managers have a contracting background which means that they have real-life experience in delivering projects on-site. This knowledge and experience mean they provide robust management of your project recovery, giving strong challenge when necessary, balanced with our approach to collaborative working.
Following the high-profile collapse of their main contractor, Evolution5 was appointed by Lumiere Real Estate Capital to provide construction management services for the project recovery of the overhaul of the 30-year-old existing shopping centre.
The refurbishment was long overdue and the objective was to attract top retail names. Work included creating two stunning new shops with high street entrances, a new entrance on the High Street to the shopping centre, refurbished malls and reconfiguration of the overall space (80,000 sqft) to offer large retail units.
Work was also carried out to access routes, corridors, the multi-storey car park and external landscaped areas.
Whilst construction took place, Times Square Shopping Centre and the remaining shops in the centre remained open throughout the project. Whilst providing construction management services to the shell and core for Lumiere Real Estate Capital, we extended our delivery services to assist with the fit-out of TK Maxx and Poundland – two landmark retailers that were new to the centre.
When a well-known regional main contractor ceased trading in 2021, Evolution5 was appointed as Construction Manager by USSP to complete the delivery of a new multi-million-pound research, engineering and innovation centre located within the Science Park.
Our team was able to mobilise within days of being appointed thus minimising programme delays for the Client who now works closely with our team in order to complete the building.
Picking up an incomplete project comes with its own challenges, which our team had to get to grips with from the outset. We have dealt with legacy quality issues, suppliers that haven’t been paid by the previous main contractor, material reconciliations, warranties & guarantees, full scope of remaining works, and creating a cost plan to complete.
Effectively the clock had been reset and the project became subject to new lead-in and mobilisation periods. However, through our collaborative approach we successfully retained many of the original subcontractors as trade contractors, whilst negotiating reduced lead-in and mobilisation periods. In turn, this offers continuity of quality and service for the client.
Drawing on their extensive experience, our team of site and construction managers, along with quantity surveyors, have worked to ensure the client’s uncompromising quality goals for this cutting edge facility are achieved whilst limiting the financial impact caused by the demise of the main contractor.
Even under these challenging circumstances, we have procured all trade packages and provided a fast track programme to completion.
Our recovery construction management service has involved:
If you are concerned about a construction project that has stalled or you are worried you may be at risk of being affected by main contractor insolvency or financial instability, call 023 8040 5073 for a free initial consultation. With experience of dealing with project recovery and commercially sensitive situations you can be assured of our complete discretion.
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