What is early contractor engagement? Why do we push for it and how it can help the industry

In our next series of articles, we’re going to be discussing early contractor engagement – what is it and why it benefits a project, including the bottom line.

With a backdrop which saw an all-time high of an average of a dozen construction companies going into administration a day (Construction Enquirer) we need to take a deeper look at why contractors are treated differently to other consultants and why profit is considered a ‘dirty word’ when much of the time, professionals in other industries wouldn’t get out of bed for a typical contractor margin.

In today’s article we’re introducing the concept of early contractor engagement, what it is, the positives and the challenges it works to resolve.

According to a Government report produce to support HS2 (we’ll say no more about that), early contractor engagement ‘is an approach to contracting that supports improved team working, innovation and planning to deliver value for money.’ [Gov.uk] The idea being that if a contractor, or select number of contractors, are brought into a project at the same point as other consultants and their input is valued in the same way, many of the issues or challenges surrounding budgets, planning and feasibility will be picked up at an earlier stage, addressed, managed, and mitigated.

However, all too often, what we see is a scenario in which potential problems, and opportunities to address them, are only highlighted once a project it sent out to tender, months or even years down the line from its inception – and frequently with only a small number of weeks for the contractor to review with their supply chain, report back and get to site. The result? Increased (and often unsustainable) risk put onto the back of the contractor, reliance on out of date or inaccurate cost plans, and an aggrieved client with a cost far exceeding their intended budget.

The elephant in the room

The predominant theme within the construction industry is that projects tendered without engaging the contractor early will, more often than not, come in above a client’s budget.  What we’re seeing over recent years is the fundamental impact of inflation, where costs have been reviewed months previously and are simply out-of-date by the time a scheme is due to start on site. Post Brexit, covid and an unprecedented volatile market, where we saw prices change weekly and even daily in some instances. So, a project priced two years ago, could have been two years out-of-date! Whilst this has settled now, we’re still able to advise on any changes that might affect construction such as shipments being hijacked in the red sea.

The question is how do you combat this? Contractors have a finger on the current market pulse as they are continuously placing orders for both subcontractors and materials. Subbies are at the forefront and are an imperative part of achieving cost certainty when considering budgets and timescales. This means that information provided by them at an early stage will help the scheme develop in line with current market trends, making it achievable for everyone involved.

Get with the programme

Contractors can also provide programming guidance; we’re seeing funding streams with spend covenants become more prominent (often public sector), which dictate that money has to be spent by a certain date in a ‘use it or lose it’ approach. By engaging a contractor as part of the consultant team, we can bring planning experience and knowledge on the most efficient way in which to approach the construction programme, challenge the design and interrogate the cost proposal all prior to a tendering process. This is called ‘Soft Market Testing’ which we will be looking at in detail in our next article.

For a contractor, early engagement can mean better procurement routes, improved risk allocation and fairer profit – increased collaboration means there are better project outcomes for all. This is why early engagement is a key theme in the construction playbook.

A summary

We know that contractors don’t have the answer to everything, but it’s a missed opportunity to not engage the team actually delivering your project prior to going out to tender. By engaging contractors early, you can make the most of our knowledge and the knowledge of our supply chain – we really can’t see a downside!

There can potentially be a number of challenges presented when a contractor isn’t engaged early on in the process.

From our experience, we have seen projects affected by: 

• Budgets set sometimes years before engagement, leading to out-of-date cost considerations;
• Delays and bureaucracy;
• Public sector spend covenants.

Benefits of early contractor engagement:

• Contractors engaged as part of the consultant team can offer experience and knowledge;
• Contractors can challenge design, propose cost-efficient alternatives, and interrogate cost proposals – all of which can improve outcomes;
• Early engagement allows for improved cross project risk management and better commercial results;

By taking a collaborative approach and engaging a contractor at the same stage as other consultants, clients will have a more accurate understanding of a realistic budget, design and programme in line with live construction trends. It also allows for innovative and alternative solutions to be proposed, increasing the chances of a scheme being delivered on time, to budget, using the best methods of construction all while helping in de-risking a scheme. This is why early engagement is a key theme in the Construction Playbook. For us, collaboration is key, it’s what we place our value on, and we believe that early contractor engagement is for the holistic benefit of the project team.

Want to know more?

Speller Metcalfe was the first contractor in the UK to deliver on the Integrated Project Insurance (IPI) procurement process, where the contractor is brought in on ‘Day Dot’ to support a client in their project delivery. While IPI is at the “pinnacle of collaboration”, we have been engaged early on a number of ‘traditional’ schemes where that knowledge and expertise has delivered greater outcomes for our clients.