Your industry news - first Number 1 for Recruitment
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I read an interesting article last week, penned by Andy Monteith, Baker Tilly's head of construction, in which has asked readers to consider how they handle contracts that the clients consider to be problematical.
Although the article is aimed predominantly at the construction sector, it could so easily have been written for contractors providing cleaning and facilities management services. In it, Andy suggests that while people tend to expect the contract manager to overcome any issues that the service (or lack of it) throws up, there are many other causes to consider and too many contractors fail to challenge themselves on the root cause. He argues that often the ability to provide the service expected by the client was always going to be difficult to achieve or that the bid price was based on achieving savings that were unrealistic.
Well we've all heard that one before, haven't we?
The costs of submitting a tender can be high when you consider the work and the time involved, yet in Andy's experience it's an area where processes are often not adequately defined and controls are not robust. However, the implications of choosing the wrong contract price can be significantly more severe.
Andy claims that for many internal audit functions, the amount of effort spent focusing on this area remains surprisingly low. He says that an internal audit function should consider how it can play a more proactive role in mitigating contract risk, right at the beginning of the project lifecycle, rather than once things have started to go wrong, and that firms that do this, will reap the benefits time and time again.
This all makes perfect sense, but how does a contractor mitigate for such circumstances as say, an enormous rise in the statutory minimum hourly pay rates that are coming in? Are you able to go back to the clients and ask for more money, or do they expect you to continue as you are and supply the services agreed at greatly reduced margins or perhaps even at a loss? Or do you end up laying people off and expecting already overworked employees to work even harder; damaging your company's reputation because the work is no longer being done properly - and of course, probably losing the contract as a result?
It's a toughie, isn't it?
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6th August 2015