Those contractors engaged in the race to the bottom pre-Covid19 will struggle to survive in the new normal

I had written an article in 2017 about how contractors engaged in a race to the bottom were not doing anybody any favours; their singular focus on price driven tendering enabled them to ‘buy’ business against those whose tenders were based on a mixture of quality, service, delivery and yes, of course competitive pricing.

Those contractors won huge contracts, but on such fine, or in some cases even negative margins at tender stage that they would have no fall-back position should something unexpected happen. They were never going to be, perhaps never intended to be financially robust businesses, and it was always going to be the case that their clients and the residents who they provide homes for would be the ones to suffer in the long run.
Well something unexpected has just happened. The Covid-19 outbreak of course was not only unforeseen but has been and continues to be unimaginable in its impact.

It is only now as we return to work that we can start to see that impact. It has already denied most businesses any income for three months, and what it will do in the long term is something we won’t know for a very long time.

It is going to be a long road to business recovery, work levels will not just come back at the same rate as they were before the outbreak, it will take time for clients and their residents to regain their confidence to do things that previously we would all have done without a second thought.

There is already a major and immediate impact in working practices in the post Covid-19 era.

All contractors are going to have to work very differently in the ‘new normal’. Additional costs will have to be absorbed into existing contracts to ensure compliance with government guidelines – actual costs in terms of buying and providing PPE for staff, extra costs in terms of ensuring that operatives travel to site individually rather than jointly, extra costs in terms of providing sanitisers and other cleaning materials, and extra costs because productivity will naturally be reduced through having to complete more tasks on and between jobs to ensure we all play a part in trying to control the virus for the long-term.

These are costs you don’t imagine those businesses who won work on price only will be able to bare easily, and the outcome will be inevitable. They will fall, leaving their clients with no guarantees, no come-back and no after sales support.

I can only hope that going forward all tenders include an element that covers both the process and the cost of ensuring that those who are going to deliver the contracts comply with the most robust post Covid-19 procedures to ensure that everybody remains safe. This is not a time for cutting corners.

Mila Maintenance and Installation is a financially robust business, one that believes in delivering quality in every aspect of its operation.

That quality comes at a cost, but we know in the long term it represents outstanding value for money. Just two weeks into the return to work we are fully Covid-19 compliant in terms of our procedures, our staff training, and having stock in place of all the necessary materials we need to ensure we can work without fear of causing or contracting any sickness, keeping residents safe, warm and secure in their homes.

I have re-posted my original article below for information. It was inevitable that at some point the race to the bottom would back-fire on those engaged in it, of course none of us expected it to be through something like the Coronavirus pandemic and the incredible human cost that has brought.

We must all do our bit to stay alert, control the virus and save lives – and we must all be willing and able to stand the cost of doing it.

Tristan Cooke – Managing Director

Not for the first time recently I was reminded of the famous saying by legendary Astronaut John Glenn who, early into the space programme in the 1960s said,

“As I hurtled through space I felt exactly how you would feel if you knew you were sitting on top of 2 million parts — all built by the lowest bidder on a government contract”.

It says it all really, but the real disappointment as we sit here over 50 years later, is that in many instances it appears that little has changed.
Just last week we scored over 98% for the elements of a social housing contract which we believe underpin the delivery criteria for those who provide homes:

  • Care and consideration for residents
  • Quality of installation
  • A deliverable and achievable project management plan
  • Social Value
  • Environmental consideration and carbon reduction

We came last overall

So, what’s my point, is this just a moan because we have lost out on a very large contract which we believe we could deliver to the highest quality and standards of resident care?

Of course, I am frustrated by the continuing race to the bottom in terms of tendering, where price still seems the most important if not the only criterial which interests some, and it is merely lip service that is paid to what you might call the ‘softer issues’.

But the fact is there is a real disconnect

the ‘softer issues’ are really important; these are the things which bind communities together and deliver a level of care and consideration which residents are entitled to expect. They are not just things to be dismissed, boxes to be ticked.

We all know that we live in economically challenging times, but spending money badly today merely stores up financial problems for later in the life-cycle of the products. As a repairs and maintenance business we have seen this very clearly over the 30 years of our trading life and through the nearly 1.2 million jobs we have now carried out.

There must be a balance – better and more responsible procurement

And I use the words deliberately, must become the way to go. As a society, and as a service sector we cannot continue to buy purely on price. In the example above our quality scores counted for just 30% of the overall bid – it was always going to be won by a large-scale supplier operating at little margin and simply seeking the volume.

It is unlikely that that supplier is truly invested into that community and there is every chance that those products will need to be repaired or maintained well before their true life-cycle is run.

I wonder if you added the cost of repairs and maintenance onto the original tender price what would be the difference between that and a job which was procured responsibly in the first place?

THE race to the bottom must stop

We are merely storing up problems and further financial burden for the future. We are now in 2017, why is John Glenn’s statement from the 1960s still pertinent today?

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Written by : Tristan Cooke

About the author

Having been with the business since 1997, Tristan became Managing Director of Mila Maintenance and Installation in September 2015.

Mila Maintenance
& Installation Services