The big question…“Why don’t SMEs bid as Principal Contractors?”

We spoke to David Procter, Director at Procter Street, to ask for his opinion on SMEs bidding as Principal Contractors and, more importantly, how they can break through the barriers…

Q: What are the fundamental reasons that stop SMEs bidding for work directly as a Principal Contractor (PC)?

A: The main concerns for SMEs are often magnified by the thought that the challenges are collectively too much to deal with – namely: regulations; financial risk; limited management skills and resources; accreditations; a market bias towards established, larger PCs; and confidence. When you look at them all together like that, it does appear to be way too much hassle. We’d recommend tackling each aspect separately and working up to a point where you feel ready to bring it all together to manage a PC role, maybe starting with a smaller project initially.

Q: Taking each objection in turn, how would you encourage an SME to go up against the Tier-1 contractors?

A: It’s not really a question of going up against another company, it’s more important to see what is viable and when an SME is the right fit. We see it all the time, and with our experience working client-side, we know when it’s worthwhile to throw your hat in the ring as a smaller business. There will be many occasions when it would be a waste of everyone’s time – we can call that quite confidently early on.

Q: So regulatory factors? How complicated is it?

A: CDM Regs make the contractor legally responsible for planning, management and health and safety site-wide – including subcontractors. You’d need to employ specialists to manage this professionally, safely and confidently. Most SMEs operate within the parameters of H&S regs but might need additional support in demonstrating how they’d roll this out, particularly if it’s a large, complex or sensitive site. We can help – providing the right people to bring in the infrastructure for a confident pitch.

Q: What is the financial risk for a PC when taking on a large contract?

A: Cashflow is the usual concern. To support a larger project you may need to fund parts of it that you’re not used to. And of course, holding enough contingency spending or buffer provision can create an equal measure of stress. You might need to absorb delays, unexpected additional costs and higher insurance premiums. Staging payments sensibly; costing projects carefully and working with an experienced project manager can help.

Q: And what about managing the project – will an SME have the right resources? 

A: It depends – quite often yes, but the management structure might be up to or over capacity if the tender is a significant size. Bringing in additional, experienced resources and working alongside our team as mentors can be reassuring, especially for the first win. We can also support the group’s skillset with specialists or project management if needed. It’s most important that the management team is operating safely and with confidence.

Q: Does the SME need specific accreditations to pitch for a PC role? 

A: It’s usual to be able to demonstrate experience, particularly in the sector they’re bidding for of course. Adding local knowledge and previous, relevant case studies are really helpful. And any need for ISO, CHAS or other accreditations can be found in the briefing documents. It’s ideal to be working towards the key accreditations for your specialism, in readiness for a high-quality tender submission. We can advise on what is most likely to be needed and what will serve your organisation, so you don’t pursue lengthy accreditation processes unnecessarily. They can be arduous and costly so only worth going for if they’re going to be valuable.

Q: How does an SME challenge the client’s perception that a Tier-1 contractor is best? 

A: To be fair they sometimes are the best choice – that’s where our knowledge of the process comes into play. We can assess exactly what the SME can offer and showcase their value in the bid submission. Sometimes it’s a question of being local; having incomparable familiarity with the project; or it could be that the SME is offering a leaner, less expensive option. A realistic assessment of the criteria is vital before spending time pursuing the appointment.

Q: Taking the challenges into consideration it’s no wonder that confidence plays a part in SMEs taking on a PC role 

A: It suits some and not others and that’s fine. Subcontractor roles can be more lucrative and less stressful. An SME has to be ready to take on the PC mantel – that does come down to confidence but really it’s more a question of wanting the PC responsibility and being ready for it.

Starting with smaller PC projects (those under the radar of the larger contractors), being ready to tick more boxes than usual, knowing how to resource the work and having a strong network is a good place to start. Easing into a less risky PC role will provide good grounding for future, more complex contracts. We can work with any SME wishing to take the next step and will advise on every aspect – from preparation to processes, people and work winning.