The Week That Was - 26 November 2021
Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.
MoD among departments eyeing longer-term contracts
Government departments want to put longer-term contracts in place to get better outcomes and ensure the financial security of contractors to provide greater investment certainty to clients and suppliers.
Deputy director for construction at the Crown Commercial Service, John Welch, said various departments are looking at improving how they award capital works, in particular the Ministry of Defence and Ministry of Justice. Among longer-term procurement options, portfolio-type contracting – where a group of projects are bundled-up and procured for as one – is coming under particular scrutiny, with some clients not comfortable with such an approach. But Welch has highlighted the utilities sector where it has been used widely, with programmes procured for with 5-20 delivery timeframes. Welch considers that, done the right way using a collaborative approach, this can deliver benefits around standardisation and offsite manufacturing, delivering social value across programmes, and supporting financial stability of organisations in the construction sector.
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Materials shortage and rising costs can affect property claims
The materials shortage, brought about by worldwide supply chain issues, has resulted in rising costs for many building supplies, including timber and steel.
Business owners should ensure that they have sufficient insurance cover for rebuilding costs, should their buildings be damaged or destroyed, or run the risk of being underinsured. The rebuilding costs, if agreed some time ago, may be inadequate given the increased cost of building supplies and labour.
Business owners may also look to Business Interruption cover, to cover the loss of income whilst waiting for materials to arrive.
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London crane survey points to recovery for City office market
The future, according to Deloitte's latest cranes survey, is back in the office. Developers are confident that workers will return to the office, as working from home falls out of fashion. More than a third of developers now expect working from home to have no impact on leasing demand, compared to just 12% who shared this opinion 12 months ago.
The volume of new office starts rose by 10% between April and September. The report notes that construction started on 3.4 million sq ft of office space, up from the survey's long-term average of 2.4 million sq ft. Of this total, 46% represents newbuilds (up from 33% from 12 months ago). However, there is still an underlying trend favouring refurbishments, which accounts for 54% of the volume of new starts. Refurbishments will continue to be popular due to concerns over ESG. A quarter of developers surveyed expect their developments to be net zero by 2024 (with 45% expecting to achieve this between 2025 and 2029).
A copy of the report can be accessed here.
Property Developer forgoes liquidated damages
In Mansion Place Ltd v Fox Industrial Services Ltd  EWHC 2972 (TCC) the Court ruled that Mansion Place Ltd ("Mansion") was unable to proceed with a liquidated damages claim as a result of an oral agreement not to pursue its rights to claim against a contractor.
Mansion had engaged the contractor to refurbish student accommodation. However there were delays in performance of the works due to both the COVID-19 pandemic and Mansion's failure to give timely possession of the site and to clear the students off the site.
During a telephone conversation following the delay, the managing director of Mansion agreed that they would forego any entitlement to liquidated damages in return for the contractor foregoing any rights to claim payment for loss and expense resulting from the delay. The court determined that this was a binding agreement between the two parties and that Mansion had abandoned its rights to claim liquidated damages.
A copy of the judgment can be found here.
Bouygues' profit and revenue figures return to pre-pandemic levels
French construction titan Bouygues has stated that its profit and revenue figures over the period of January to September this year have been akin to pre-pandemic figures.
The firm's revenue was up 10% to €27.5bn (£23.25bn), compared with the same period over 2019 when the figure was €27.6bn (£23.33). The firm additionally reported higher operating profits at €1.23bn (£1.04bn) compared to the 2019 figure of €1.16bn (£980m). In the same period last year, Bouygues posted a core profit of just €681m (£576m).
Despite the pandemic, Bouygues managed to win a significant number of contracts last year, and Chief Executive Robert Bradley has said that in terms of future growth he sees a "huge market opportunity" in the building retrofit market.
With luck, the trend of these figures will be repeated across the construction industry.
With thanks to Ryan Colgan, Alastair Stewart, Fiona Engledow, Rory Graham and Charlie Underwood for contributing to this week's edition.