What to Consider if Your Contractor Goes Bust

As a result of the pandemic, we have seen, and advised on, numerous instances where main contractors have downed tools or closed sites. In some cases, this has been a temporary hiatus to construction works as we and our client employers have persuaded or assisted main contractors to return to site. However, we have unfortunately seen occasions where the contractor has gone bust and never returned to site.

If faced with contractor insolvency, we set out below what you need to consider and those matters with which you may need to deal:

1. If you have a funding agreement, notify your funder of the contractor’s situation. Buy yourself some time with your funder to give you breathing space to work out how any outstanding works are to be completed.  Remember that most funding agreements will contain obligations requiring you to provide information (such as news of insolvency) to the funder in a timely fashion.
2. Immediately secure the site and materials on it. Ascertain what you have paid for in full, what is part paid for and what are contractor or sub-contractor assets on site.
3. Prepare a detailed valuation of the works and, if you have one, request the contract administrator to undertake a formal valuation. Ascertain the works to be completed (including any defects not yet rectified), revise any works programme (including ascertaining what is on the critical path), calculate the costs to finalise the works, whether extra funding will be required to finalise them and any disputes about the works already existing.
4. Check insurance coverage and insure the site, the works and check the insurance position in respect of any third party assets to remain on site. The contractor will likely have carried public liability, employers liability, professional indemnity insurance (if providing design) and contractor’s all risk insurance.  These may come to an end with its insolvency or termination of the building contract (see below).  Decide what insurances you will need in place for the future of the project. Also check any insurances you have in place in respect of the project and whether they require you to inform your insurer of the main contractor’s insolvency.
5. Check the contractual documentation:

• Be it a JCT contract, NEC form of contract or bespoke agreements, they should set out provisions for termination on insolvency of the main contractor. Follow the provisions of your contracts to the letter to formally bring your contract with the main contractor to an end, especially where you want to engage a new contractor to finish any works or oversee their completion yourself.
• Is there a parent company guarantee or performance bond you can claim under? Have the trigger events in such agreement occurred?
• Do you have any collateral warranties from subcontractors? These may assist you and give you step in rights to take over vital supply chain contracts.

6. Make immediate checks to ensure that documentation for which the contractor was responsible can be located and is up to date (eg health and safety records, drawings, test certificates, manufacturers’ warranties etc).
7. Unless commercially imperative, do not make any further payments to any party about the works until you know your full position.
8. Decide how any outstanding works are to be completed after formal termination of the main contractor’s contract. Generally, the options will be a new main contractor or the employer or a construction manager to manage the existing or new sub-contractors. Agree a new contract with a new main contractor (likely to be on a cost plus basis) or with a construction manager.
9. Take advice as to whether you have any claims against the main contractor and whether these are commercially worth pursuing.

The first days after a main contractor has entered into some form of insolvency procedure are critical and it will be an intensive time of information gathering and decision making. It is however hoped that you will have seen some of the warning signs that your main contractor may be in difficulty (eg less activity on site, slow or late deliveries, plant or equipment disappearing from site, requests for accelerated payments, programme issues, persistent rumours about the main contractor’s financial position including sub-contractors and suppliers not being paid, late filing or qualified accounts being filed at Companies House and a new evasiveness in communications) before they go bust and you have been able to undertake some pre-planning before their insolvency occurs.

By Ian Timlin of Conexus Law

If you would like to read more stories like this, then please click here

The post What to Consider if Your Contractor Goes Bust appeared first on UK Construction Online.

Highways England Announces New Framework

Highways England has announced the award of a new four-year archaeology framework which will help it work directly with archaeological contractors.

The framework will offer successful suppliers the opportunity to work with the government company to help protect and enhance the environment, which includes England’s unique cultural heritage and buried archaeology, while improving the country’s motorways and major A roads.

The framework is worth £195M, and has been awarded over three lots to the following companies:

Lot 1 – under £2M

• Connect Archaeology LLP
• Infra
• Archaeology Management Solutions

Lot 2 – £2M to £5M

• Headland
• Oxford-Cotswold Archaeology
• Aecom
• Museum of London Archaeology

Lot 3 – over £5M

• Headland
• Oxford-Cotswold Archaeology
• Aecom
• Museum of London Archaeology

By having this framework in place, archaeology contractors can work directly with Highways England, supporting the initial design stage of road schemes in the road investment strategy. This in turn will support how projects proceed through the planning stages, including what mitigation work is needed. The framework will bring multiple benefits to Highways England across cost efficiency, delivery of improvements and safety on-site. The contract is available to all Highways England schemes, and can also be used by the Regional Delivery Partnership (RDP), Delivery Integration Partners.

Catherine McGrath, Category Manager for Ground Investigation and Archaeology at Highways England, said: “We’re delighted to announce the new framework; it’s the first of its kind in the archaeological sector for Highways England and enables us to develop direct relationships with archaeology contractors, developing greater efficiencies. We look forward to working with the successful suppliers.”

If you would like to read more stories like this, then please click here

The post Highways England Announces New Framework appeared first on UK Construction Online.

Lessons to be Learnt from CMA Investigation

There are useful lessons to be learnt from the Competition and Markets Authority’s (CMA) investigation into three major suppliers of groundworks products to the construction industry after they broke competition law.

In 2020 the CMA fined two businesses, Vp and MGF, more than £15M for illegally sharing confidential information relating to current and future pricing and co-ordinating their commercial activities to reduce strategic uncertainty. A third business, Mabey, was also involved in the cartel for a short period of time. Mabey avoided its fine by cooperating under the CMA’s leniency programme; they were the first to bring the illegal activity to the attention of the CMA.

These businesses supplied groundworks products such as braces, props and steel sheeting, used to protect excavations from collapsing.

What happened

Tough new market conditions prompt illegal collusion

The cartel arrangement took place on and off between 2011 and 2017 and was a response to increased price competition in the market.

Until 2009, there was a lack of competition on price in the market. This changed when Mabey – who would later go on to take part in the illegal activity for a five-month period in 2014 – adopted a more aggressive sales strategy by allowing sales staff greater flexibility on price to win business.

The two main competitors to Mabey in the market, Vp and MGF, responded by illegally co-ordinating their commercial behaviour to reduce price and strategic uncertainty in order to maintain or increase pricing levels in the market. In particular, Vp and MGF monitored the prices each other were quoting customers (these quotes having been provided to them by those customers) and emailed each other examples of what they considered to be low quotes.

This is illustrated by an early email exchange between them in March 2010, which concluded after highlighting some low quotations:

“[w]ith Mabey up to antics at the moment, I am keen not to get into a price war in Yo[r]ks with you.”

This was followed in late 2011 by a series of emails between Vp and MGF highlighting low prices being offered to customers by their respective sales staff. On receiving examples of low MGF quotes sent to it by Vp, MGF employees replied to Vp noting that: “…two quotes were from one salesman’s area, so I am sure we can nip it in the bud rapidly” and “We will get to the bottom of this urgently – my apologies – I’ll get out my big stick”. While over at Vp, after receiving emails from MGF about Vp sales staff offering discounts to customers, an internal email between two Vp employees noted that “it is important that we are maintaining rates as well”.

In 2014, MGF and Vp also communicated by telephone and email in relation to price reviews they were both carrying out. These communications provided comfort to each other that they would both increase their rates at similar times.

Illegal discussion of commercially sensitive information at face-to-face meetings

During 2014, at least two meetings took place between all three businesses in which they challenged each other on prices considered to be too low. They also discussed commercially sensitive, strategic pricing information about the introduction of new or increased charges for certain services.

Complex, cross-supplier market relationships

Several of those involved in the illegal activity knew one another, being on friendly terms and in regular contact. In addition to being competitors in the market, the businesses also had legitimate trading relationships between each other through the hiring and sale of construction products. They were suppliers and customers of one another. Although some contacts between the businesses were for such trading purposes, these legitimate reasons for being in contact could not excuse or explain the anti-competitive conduct that was uncovered by the CMA.

Secret meetings and use of personal emails

Meetings between the rivals took place in locations away from the individuals’ business premises. Various emails relating to the illegal business arrangement were also sent to personal email addresses.

One of those involved told the CMA that his counterpart from one of the other businesses “mentioned how he liked to meet without mobile phones or pads and that what would happen in the meeting would stay in the meeting”.

Staff moving roles between rivals

One individual moved jobs between Vp and MGF, which were bidding on the same tender opportunity. Before moving firms, this individual shared commercially sensitive pricing information regarding the live tender opportunity with their future employer by text message:

“… we’re in at 2015 rates so perhaps we both move back to previous years to keep Mabey away.”

A text in response said: “Yes, I think that’s the most sensible course of action given their current behaviour. Will do that today. Thanks”

When interviewed by the CMA, this individual said they were “caught between the interests of both companies” and, as their future employer was “under the misguided impression that they may be losing” the tender, they “needed to do the right thing” by both the old and new employer by sharing the information.

In fact, far from being the ‘right thing’, this was illegal. The fact that an employee of one firm is about to join a rival cannot justify the disclosure of competitively sensitive confidential information to their future employer.

How this broke the law

Discussing current and future prices as a means of co-ordinating commercial behaviour and sharing competitively sensitive information is illegal under competition law. These practices undermine fair competition.

MGF and Vp did not operate independently of each other; instead they colluded on price and strategic activity. Mabey was also involved in the wrongdoing, but for a shorter period.

Lessons from this case

• the construction sector remains in the CMA’s sights
• tough market conditions are no excuse for breaking the law
• never share internal emails regarding current and future pricing intentions with competitors
• if your competitor is also one of your suppliers or a customer, be on high alert to the risks of engaging in illegal anti-competitive behaviour
• if you believe a customer may be playing you off against your competitor to get a better deal, never be tempted to check this with your competitor
• the CMA has sophisticated means of tracking and capturing evidence and can conduct searches of private premises as well as businesses – you can’t hide illegal conversations offline or use private email addresses to conceal wrongdoing

If you would like to read more stories like this, then please click here

The post Lessons to be Learnt from CMA Investigation appeared first on UK Construction Online.

How Data is Greening UK Infrastructure

Mark Coates, director of strategic industry engagements at Bentley Systems, discusses how the use of data to achieve long-term net-zero carbon targets is helping secure better lending rates, achieve better financial returns, and build successful business partnerships in the long-term.

There are two important topics that major infrastructure projects need to tackle today: delivering sustainability goals and improving project performance.

Neither are easy. Major projects are inherently carbon intensive, and the data required for effective analytics is not easily obtained, as major projects span multiple organisations and each organisation has their own individual objectives and separate data strategies.

Overcoming these barriers will take a transition from a passive adoption of data analytics from general business applications to an active pursuit of data analytics that are specifically for major projects.

To seize the opportunity provided by data analytics and improve the sustainability of project delivery and their outcomes, there needs to be collective leadership.

Sustainability Isn’t a Short-term Target

In July 2020, the former Governor of the Bank of England Mark Carney issued a warning when he said, “Companies that don’t adapt [to zero carbon], including companies in the financial system, will go bankrupt.”

Due to their nature, major projects represent the largest infrastructure projects taking place in the U.K. These projects are the most digitally enabled, but they are also one of the largest consumers of construction material and, therefore, among the largest producers of carbon.

The problem right now is an emphasis on short-term delivery milestones and not long-term outcomes. While these milestones are still very important, business, public-sector organisations, and the wider population are becoming increasingly focused on the need to overcome larger, long-term strategic challenges.

At least nine countries have now set legally binding targets to achieve net-zero greenhouse gas emissions by the year 2050, including the U.K., which also plans to cut carbon emissions by 68% by 2030.

The current situation doesn’t mean that anyone should dismiss short-term wins or individual interests, but rather reallocate resources to meet both business and societal goals. In fact, by understanding the direction of travel and tackling these long-term challenges, businesses can also win more in the short-term too.

ESG Objectives and the Infrastructure Impact

Environmental, social, and corporate governance (ESG) objectives have traditionally been set to reduce the negative impact of an organisation’s activities. To deliver long-term transformational change, the new generation of ESG objectives seek to change the behaviour of an organisation’s entire value chain.

An example of this situation is Network Rail’s announcement in October 2020 to set itself three climate-related targets, including two aimed at reducing its direct and indirect greenhouse gas emissions by 2029.

As a result, Network Rail is now the first railway organisation anywhere in the world to commit to cutting emissions to the extent of limiting global warming to 1.5°C (in line with the 2015 Paris Agreement).

Action on infrastructure will be crucial for meeting the U.K.’s carbon budgets and continuing progress towards the net-zero target. To put into context how polluting infrastructure can be, in its new National Infrastructure Strategy, HM Treasury states the majority (over 80%) of the U.K.’s emissions come from infrastructure sectors.

Cement is the second most-used substance on the planet after water and is responsible for 8% of global carbon emissions. If it was a country, cement would be the third largest emitter of carbon after the U.S. and China, releasing 2.8 billion tonnes of carbon every year.

As one of the world’s largest users of cement, the infrastructure industry should be aware that the green focus of financial institutions will shortly begin focusing more closely on the pollution created by infrastructure and construction.

The U.K. Treasury is creating a new national Infrastructure Bank to be up and running in the spring of 2021, which will co-invest alongside private sector investors to support infrastructure projects, helping meet the government’s objectives on economic growth, levelling up, and transitioning to net zero.

The next generation of British infrastructure will be greener, as the requirements of the net-zero commitment will be embedded in every stage of the project lifecycle and underpin decisions on the technical solutions needed to deliver projects.

Data Doesn’t Belong in Silos

Now widely regarded as one of the most valuable resources on earth, data and technology is the key to meeting this new, green industry.

To meet client-imposed carbon savings of 50%, the team at HS2 worked in a connected data environment to accurately calculate and analyse the project’s carbon scheme. When the design and materials quantities were modified, the tool enabled the carbon footprint to change as well.

As a result, HS2 became the first organisation in the U.K. transport sector to achieve PAS 2080 global accreditation in November 2020, recognising its extensive plans to reduce carbon through the design, construction, and operation of Britain’s new railway.

However, achieving long-term targets to limit emissions will be impossible unless infrastructure businesses have the proper environment, as well as the right tools in place to measure carbon output and provide insight on opportunities to reduce their carbon footprint.

Results from a Bentley-MPA joint survey of more than 100 construction leaders—most of which work in rail/transit, buildings, civil construction, water, and road sectors—show a growing number of infrastructure firms are becoming digitally enabled. 82% of those surveyed said that they are currently deploying digital workflows enabled by engineering software.

Yet data silos are occurring, threatening to stop progress in its tracks. Almost two thirds of respondents (63%) said that they are using four or more pieces of software for project delivery. Just 36% of respondents saying that they had a connected data environment in place to share information across different data platforms.

Using several different software systems typically means data is being siloed among individual project teams and departments rather than shared openly across the business at enterprise level.

The influence of project management teams in driving the adoption of construction software partly helps to explain this situation. If the requirement for data is being driven at a project level rather than at an enterprise level, it also explains why so few businesses have connected data environments in place.

While project teams should be congratulated for recognising the importance of data for project delivery, more efforts are needed to educate senior business leaders that they need enterprise-level solutions in place to prevent data silos.

How Will Carbon Reduction Be Met?

The infrastructure industry desperately needs to be using data to help deliver change in the primary driver of carbon dioxide emissions across the world’s infrastructure.

It is heartening to see that the infrastructure industry is progressing down the digital roadmap. To be successful, carbon reduction cannot just be a project issue or a board issue. Rather, it must become a purpose-led mission that is embedded across the business. If the industry simply digitises what it’s are currently doing, then it has missed an important opportunity.

It is only through an open-date environment that businesses are truly able to model, plan to reduce, and crucially monitor carbon emissions, which cut the amount of greenhouse gases going into the atmosphere.

Therefore, clients and contactors will need to put systems and processes in place that not only empower them with project-level data, but also enterprise-level data and insight, allowing long-term partnerships to flourish at both levels.

If you would like to read more stories like this, then please click here

The post How Data is Greening UK Infrastructure appeared first on UK Construction Online.

SMEs Given Thumbs-Up to Kickstart Home Building

Small builders are set to benefit from a £150M ‘help to build’ fund to make it easier for people to commission a bespoke home.

The UK Government initiative is aimed at creating a level playing field between first-time buyers of newly built homes and those who want to build their own home.

Housing Secretary Robert Jenrick said: “Building your own home shouldn’t be the preserve of a small number of people, but a mainstream, realistic and affordable option for people across the country. That’s why we are making it easier and more affordable – backed by over £150M new funding from the Government.”

This funding is part of an action plan to boost custom and self-build housing, including right-to-build legislation and allocating more funding for the right-to-build taskforce. Prime Minister Boris Johnson has appointed Conservative MP Richard Bacon to lead a review into scaling up the sector.

The PM said: “Self-build and custom housebuilding can play a crucial role in increasing choice for consumers and ensuring people can live in the homes that they want, and that are designed to meet their needs. We know that self and custom builders deliver high-quality, well-designed homes that are energy-efficient, accessible, affordable and welcomed by their communities.”

The Federation of Master Builders (FMB) said the new fund was a positive step, but stressed that the Government must address the lack of sites for development.

FMB Chief Executive Brian Berry commented: “With almost one in two SMEs saying their output is hampered by a ‘lack of available and viable land’, local authorities must allocate more small sites in their local plans for incremental development.”

He added that more funding for time-poor local authority planning departments to help them make quicker planning decisions was also important.

National Custom and Self Build Association (NaCSBA) Chief Executive Andrew Baddeley-Chappell agreed that more parcels of land would be crucial for supporting the sector.

“These could be single plots, small developments and/or larger sites that have been subdivided to include capacity for plots. There are big opportunities for those able to focus their businesses on delivering all aspects of the homes and communities that people want,” he said.

The National Federation of Builders warned that unless local authorities allocated land and granted permission for self and custom builds then the Government’s housing market reforms would fail.

Speaking about the new Government funding, Karen Curtin, managing director at Graven Hill, said: “We are fully supportive of the planned Help to Build scheme which proves that the UK is moving in the right direction when it comes to advocating self and custom build as an alternative to traditional housing. Accessibility has always been at the core of Graven Hill, whether through Plot Passports that simplify the planning process or championing financial support schemes such as Help to Buy. Now, with Help to Build on the horizon, there is even more opportunity for all homeowners to create a home that meets their requirements and lifestyle.

“This scheme will open up self and custom building to more people across all demographics, as a 5% deposit will be needed instead of the usual 20%. We believe it will provide a similar boost as the Help to Buy scheme and look forward to launching new plots and custom homes in our next phases that can benefit from this government funding.

“We hope that the new legislation will encourage developers across the UK to consider self-build plots as a key aspect of their developments. They’ve been hugely popular at Graven Hill, showing there is an appetite for them in the wider market too. This demand must be met to ensure no-one has to settle for a home that isn’t right for them.”

If you would like to read more stories like this, then please click here

The post SMEs Given Thumbs-Up to Kickstart Home Building appeared first on UK Construction Online.

Work Starts at National Portrait Gallery

Gilbert-Ash has announced that it has embarked on a historic project to frame the redevelopment of the National Portrait Gallery for future generations.

Gilbert-Ash has begun work on-site after being appointed as main contactor on the £35.5M project. ‘Inspiring People’, the National Portrait Gallery’s largest development since it opened in 1896 at St Martin’s Place, London, will include an extensive refurbishment of the existing Grade I listed galleries. The project is set for completion in 2023 and is to include a new entrance and forecourt which will transform the original building.

The designs by Jamie Fobert Architects working with Purcell will encompass a complete re-display and re-interpretation of the Gallery’s collection across 40 refurbished galleries, presenting a wider and more diverse selection of portraits. Additionally, these works are to create new retail and catering facilities as well as a new learning centre for visitors of all ages with studios, break-out spaces and high-quality practical facilities.

Gilbert-Ash Managing Director Ray Hutchinson said: “The redevelopment, which is in line with our track record of taking on projects which require innovation to succeed, presents a great opportunity for Gilbert-Ash to further cement our profile in delivering outstanding landmark buildings of international significance.

“We look forward to working closely together, and indeed imaginatively, with the National Portrait Gallery, the architects and the other disciplines and our trusted supply chain to deliver this prestigious project.

“The National Portrait Gallery holds the most extensive collection of portraits in the world. Our team has the knowledge and experience to make a lasting difference to this iconic building for future generations and we are really excited to start work this month.”

In addition, the Gallery’s Inspiring People project also incorporates its most extensive programme of activities nationwide with plans to engage audiences on-site, locally, regionally and online. Activity will include a UK-wide schools programme for teaching history and art through portraiture, new partnerships with museums and organisations throughout the country, and a national skills-sharing collaboration with other museums and galleries.

Ros Lawler, Chief Operating Officer at the National Portrait Gallery, commented: “We are delighted to be working with Gilbert-Ash to help us realise our goal of transforming the National Portrait Gallery through our Inspiring People project. The renewed building will allow us to be more welcoming, engaging and accessible to all, with new and refurbished galleries for exhibitions and the permanent Collection and better-quality learning facilities.”

If you would like to read more stories like this, then please click here

The post Work Starts at National Portrait Gallery appeared first on UK Construction Online.

AMC Takes Delivery of Electric Fleet

National crane hire firm, AMC, has taken delivery of its all-new fleet of electric-operated mini cranes, representing a significant six-figure investment and a commitment by the company to be at the forefront of the electric vehicle revolution.

AMC has welcomed six Maeda MC285CB-3 and five Hoeflon C6e fully battery-powered mini cranes at its two depots in Liverpool and London, demonstrating the very best technology in carbon-neutral lifting.

The new arrivals have helped AMC win a number of new contracts in 2021 worth approximately £20,000, including Moxy Southampton Hotel, Livingstone Academy Bournemouth and Borough Market, near London Bridge. This is in addition to working alongside material manufacturer MICAM at Heathrow Airport Terminal 2 to help replace the ‘Wall of Honour’ glass sculpture dedicated to those who helped build the terminal.

Mark Davenport, owner and managing director of AMC, commented: “Our mission is to continue innovating as a future-thinking company, so we can provide our customers with more choice, quality and reliability in bespoke lifting solutions. Our new electric cranes will help us achieve this tenfold and I am proud to see the company leading the competition in this arena. Electric cranes are the future of our industry – and AMC is right there at the front.

“What the company has achieved in the last 12 months is quite incredible when you consider the challenges we have all faced through the pandemic. We have been brave in our actions by investing in new equipment, creating jobs when other companies made cuts, and bringing our existing fleet bang up to date. Our confidence has paid off and we are now in a position to be excited about how the second half of 2021 progresses – especially now with the new electric fleet in place.

“With our electric cranes having an extensive battery life, our commitment to expanding the business while staying sustainable is one that we will continue to stay true to as we move forward.”

If you would like to read more stories like this, then please click here

The post AMC Takes Delivery of Electric Fleet appeared first on UK Construction Online.