Construction companies are increasingly looking to the public sector, as private sector work dries up. Two pieces of evidence support this view:
Public sector orders increase while the private sector nosedives
Figures released by the Office for National Statistics on 12 March 2009 show that public non-housing orders (excluding infrastructure) rose by 21% in the 12 months to January 2009 when compared with the previous 12 month period. At the same time, public and private infrastructure orders increased by 32%. In contrast, in the same period private non-housing orders were 30% lower and private industrial orders fell by 32%.
Construction companies sign-up to government register for pre-qualified suppliers
Constructionline, the government-endorsed online register for pre-qualified contractors and consultants, has reported a 13% annual increase in the number suppliers registered with it, which now totals 16,700. In addition, the number of clients using the service has increased by 25%, to 1,900.
Constructionline is not the only online network aimed at easing procurement. For example, the London Development Agency (LDA) has rolled out its own service, CompeteFor, for public procurement work in London (see our previous Legal update and blog post). The LDA estimates that over 75,000 contracts will be procured for the Olympic games using CompeteFor.
Will public sector projects save the industry?
National economies often turn to public projects during times of economic hardship. Although the UK Government has released enormous sums to support the financial sector, it has not made the same financial commitment to any other sector. While the Government could commit to a “new deal” of the type seen in 1930s America, that scale of investment (including spending on “showpiece” construction and engineering projects) woud be a high risk strategy and would draw criticism from some quarters. Despite this risk, President Obama may be about to embark on just such a programme in the USA.
Regardless of the economic niceties, there is increasing evidence that the construction industry is growing more dependent on the public sector for survival. However, the extent to which public sector orders can support the construction industry remains to be seen.