Choosing an experienced and highly qualified professional team of advisers is an absolute must if construction companies are to avoid the risk of making substantial losses on major contracts, accountancy firm PKF claims.
Partner Simon Littlejohns, head of property and construction for PKF in the West Midlands, said problems such as those faced by Wembley Stadium developer Multiplex could be lurking for companies keen to secure high profile contracts, whatever the cost.
The Australian-owned construction company has said it will lose £45 million on the Wembley contract and it stands to lose £3 million a month if it fails to meet the agreed handover date next year.
"Winning major contracts is the aim of all the big players in the industry but this is not just a question of the ability to build, it is a question of whether you can deliver, within budget, on time and to the specification agreed," said Mr Littlejohns.
"Where losses are incurred, too often the damage was done way back before the tender was even submitted. Assumptions are made on timing, material costs, availability of materials, and the ability of sub-contractors to deliver on time and to budget as well."
He stressed it was vital the lead contractor carried out due diligence on the subcontractors it intends to use.
"It is legitimate both to ask and to consider what percentage of a company's turnover will be taken up by the sub-contract you may be about to award it. What experience does this company have in undertaking contracts of this size and nature? Does it have the resources and infrastructure to cope?
"Has it the finance in place, or the resources, to fund its required cashflow for the duration of the contract?"
He stressed that from the notification of the opportunity to tender, it was absolutely vital that the company intending to bid assembled a premiership professional team to advise on every stage of the tender document and bidding process.
"How the company making the bid is structured is vital, as is an understanding of the costs and taxation treatments of the various financial elements," said Mr Littlejohns.
"How price fluctuations of factors such as steel and concrete will impact on the overall cost and final profitability of a scheme must be understood from the outset.
"Other factors such as fuel costs must also be allowed for if the successful contractor is to come out having delivered a quality project and made a healthy profit."
