Welsh firms lose out as national contractors move in

As frameworks are increasingly bundled into bigger deals, local firms are losing out. Now Welsh contractors are stepping up a campaign to stop English-based companies walking off with work on their own doorstep. Grant Prior  reports.

Pochin is working on the £24m Welsh Assembly Government building at Llandudno Junction. Start on site was two-and-a-half years after HBG was originally awarded the job in June 2006.

Publicly funded projects are one of the few bright spots in a Welsh construction market decimated by the downturn in the private sector.

But firms from across the border are winning a growing share of work as the Welsh Assembly Government and local authorities bundle smaller contracts into larger framework packages.

The upshot is that smaller local firms are losing out on one of the few sources of work in the current market while English contractors share the spoils.

Now a group of local contractors in North Wales has decided to fight back and is lobbying ministers in a bid to change procurement practices to allow them a fairer crack at winning work.

Representatives of the six - Anwyl Construction, FG Whitley, Read Construction, RL Davies & Son, K & C Group and Wynne Construction - have already met with deputy first minister Ieuan Wyn Jones.

The group is also taking part in a study of the effects of procurement practices being undertaken by Glamorgan University.

Chris Wynne, managing director of Wynne Construction, says: "The problem is that the public bodies are bundling smaller contracts into larger packages and we can't demonstrate a high enough turnover to win the bigger packages.

"They say we can become supply chain partners, but the big boys coming in don't want companies like us to work with them because of our size.

"They want to use labour only subbies or smaller local firms."

Shrinking market

Wynne says a string of recent awards have gone to contractors from outside the region (see "Flashpoints" below) as local firms suffer.

The six companies leading the campaign have already been forced to lay off around 20% of their workforce as the market continues to contract.

Major players such as Bam, Laing O'Rourke, Interserve and Carillion are the main names coming in and mopping up frameworks. Wynne says: "They weren't that active here before the downturn."

But Wynne and his compatriots are not calling for a ban on English-based firms bidding for work - they just want to see a level playing field so the local contractors have a chance of winning.

Local contractors want to see Welsh authorities follow the example of the North West of England where large framework deals have been "un-bundled" to allow small firms to bid.

The lower contract values also mean many deals will be outside EU procurement rules which mean they must be advertised across Europe.

Vale of Clwyd MP Chris Ruane explains: "In the North West of England they have unbundled contracts so local firms can benefit.

"North Wales' authorities need to pull their fingers out on this one. We need to use these contracts as an economic primer and local authorities need to lead on this."

Wynne adds: "I'm not against cross-border competition but we are not getting a fair crack of the whip.

"I'm also not convinced that Government officials understand the procurement methods they are advocating.

"They claim that it is all about efficiencies and economies of scale, however, that's not what's happening on the ground.

"There are still a few smaller frameworks available and we are going for three schools in Wrexham.

"But the awarding authority might be bundling them together in an £18m package which will count us out, as one of the bigger firms will then come in and hoover them all up because our turnover at £15m is not big enough."

A company keen to expand its presence in Wales is Morgan Ashurst, which can take on projects up to £20m and recently won a £6m primary school job in Aberfan.

Managing director for the west region John Rawlinson sees a lot of opportunities in the health and education sectors despite the attempts of local firms to oppose "foreign" contractors.

He says: "We've had a presence in Wales for two years and the focus of our push is education and health jobs where we as a company are traditionally strong.

Around 70% of our work nationally is with the public sector and we see a good opportunity in Wales to further impact those markets."

Solid supply chain

Morgan Ashurst is targeting further and higher education projects in Cardiff and Glamorgan and is looking to build a solid supply chain with local trade contractors.

Rawlinson says: "We want to work with people who want to work with us. We want people that come along with us as we grow in the area.

"We have already held a workshop to try and meet with key suppliers and that provoked a reasonable level of interest. We have not noticed any hostility from local contractors and there are some good local firms in the market."

Rawlinson believes a lack of spending historically on infrastructure in Wales will lead to a host of future opportunities.

He says: "There is a need to spend on the infrastructure in Wales over the long term - particularly in rural areas."

Recruitment specialists are also seeing a rush to the public sector as the balance of work shifts during the downturn.

Stephen Peake, business director at Hays Construction & Property in Cardiff, says: "We are beginning to see jobseekers show increasing willingness to work in the public sector; some are simply looking for a safe haven due to the added job security.

"Experience in the public sector is not vital but certainly helps, more importantly jobseekers looking to make this transition should be able to demonstrate that they are moving for the right reasons."

---

EXPERT VIEW

Wyn Prichard, director, ConstructionSkills Wales

Despite the recession, Wales will have the highest rate of growth of housing repair and maintenance (R&M) output in the UK over the next five years, according to the latest figures from the Construction Skills Network (CSN).

The relative buoyancy of the housing R&M sector means that the Welsh construction industry will have one of the highest rates of employment growth in the UK, so we are really pushing employers to maintain a commitment to training for current staff and new recruits to preserve the industry's workforce.

Our forecasts reveal two distinct phases for the industry: one of recession (through 2009 and into early 2011) and one of gradual recovery (from 2011 to 2013). The year-on-year data indicates that nationally, there will be a contraction in 2009, followed by nil growth in output nationally in 2010, followed by positive growth through 2011-2013.

The Welsh construction industry is in a stronger position than some English regions to survive through the downturn.

Total construction output in Wales is forecast to grow at an annual average rate of 0.6%, which is slightly above the national average, due largely to investment in infrastructure and energy projects.

These include the £84m Port Talbot Peripheral Distributor Road, the £320m PFI scheme to expand the M4 and a new bridge across the Menai Strait in addition to the £400m wood-chip fuelled electricity station at Port Talbot.

If the £15bn Severn Barrage scheme gets the go ahead, output will be shared between Wales and the South West, benefiting both areas considerably.

The success of the R&M sector, which is expected to perform better than new work, is due to increasing activity under the Welsh Housing Quality Standards scheme. The labour intensity of this work helps to ensure that Wales has one of the highest rates of employment growth in the UK.

In total 2,330 new workers will be required in Wales each year between 2009 and 2013, however, this is an average requirement for the five-year forecast cycle and will not be reflected through any period of negative growth.

For more information visit www.cskills.org/csn

---

New work in Wales

Spending on housing is still powering ahead with several local firms winning a place alongside the big boys on a £150m affordable housing framework for the Syniad consortium.

Twenty-two firms have won a place to operate across 20 local authority areas during the next five years.

Wales will also benefit from the nuclear power station new-build programme with Wylfa in the north of the country earmarked as one of 11 potential sites across the UK to host new nuclear reactors.

Galliford Try has won a £13m deal from Network Rail to upgrade Newport station in south Wales in time for the 2010 Ryder Cup golf tournament at Celtic Manor. The contract is part of a £22m regeneration scheme for Newport Station funded by Network Rail and the Welsh Assembly.

Planning permission has been granted for a new £40m rugby stadium in Wales for the Newport Gwent Dragons and club officials are hoping construction can start by the end of the year following the decision by Newport City Council.

Galliford Try also starts work this month on a £47m job to develop and refurbish new and existing facilities at Parc Prison in Bridgend, Wales for Group 4 Securicor.

---

Flashpoints – work awarded to non-Welsh contractors

• Mansell has won an £11m contract from Denbighshire County Council to bring its housing stock up to decent standards by 2012.
• Pochin is working on the £24m Welsh Assembly Government building at Llandudno Junction. Start on site was two-and-a-half years after HBG was originally awarded the job in June 2006.
• Cartrefi Conwy said there were no Welsh Companies suitable to undertake its work following the PQQ process and contracts have been bundled into a package worth £48m.
• Ynys Mon awarded an £18m framework to G Purchase Construction from the West Midlands to bring its housing stock up to decent standards.
• Interserve has built a new £20m car park in Wrexham Maelor under the WHE all Wales Framework (Designed for Life Framework).
• BAM at Ysbyty Glan Clwyd built second additional Linear Accelerator Bunkers valued at £4m as part of a £13m Oncology Strategy for Wales.
• Laing O'Rourke won a £12m job at Abergele Hospital constructing a new centre for the elderly and mentally ill.