The preacher and the profit
Politicians seeking a recipe for UK economic recovery could do a lot worse than look at the issues confronting ductwork contractors, according to Ductform Ventilation md Stacey Spence
As both manufacturers and installers, ductwork companies have a broader appreciation than most of the business challenges faced by companies across the UK.
'As manufacturers, we have to be totally self-sufficient, but as contractors we are so dependent on other people - it is a unique perspective and if politicians really want to understand what is going on in the economy they need to talk to people who are in the thick of things.'
So says Stacey Spence, the managing director of Ductform Ventilation, the Fife-based firm that has just celebrated its 35th anniversary.
The company supplies ductwork systems to projects all over the UK, and Stacey believes that market conditions have rarely been more testing, but that companies will emerge from the current recession in better shape.
'However, the Government really must do something about procurement to help firms survive and to improve the quality of projects. This will not just benefit the industry, but will also help improve economic prospects for the whole country by delivering better and more affordable projects.'
Business recovery held back
She believes the way projects are procured is holding back business recovery across the UK, a point she has made directly to David Cameron via email. She is still waiting for a reply (with or without LOL!).
However, she believes the Scottish Parliament is waking up to the need for supply chain reform, hence its decision to create a Sustainable Procurement Bill currently at draft stage.
The traditional project hierarchy is stopping money flowing through the supply chain and is putting firms in real danger, adds Stacey, who is pushing hard for the adoption of Project Bank Accounts (PBAs) on all projects to give contractors security of payment.
'At the moment, I feel like a bank for the client,' she says. 'We have to source materials, pay our labour force, pay over revenue costs, meet the energy bill, and deliver our product to site before we even apply for payment. This makes it impossible to operate without an overdraft.'
Many people see PBAs as primarily for very large projects, but Stacey believes they should be universal.
'Sole traders and SMEs are more at risk than anyone, so a mechanism like this is most valuable to them. Builders will have to go along with it if clients insist and the Scottish government is sold on the idea. We are not far from seeing the first Scottish government project using a PBA.'
She also believes the Scottish administration needs to look at how it supports local business more generally. The economic crisis has driven non-UK suppliers to target projects in Scotland and Stacey is shocked that they are picking up projects at the expense of local suppliers despite having to bring ductwork in from outside the UK. However, Ductform remains resilient. It has already been through the process of cutting its own cloth to suit changing business conditions, particularly, since the boom years of the Scottish semi-conductor industry when it reached a record £9m turnover in 2002.
Stacey, along with brothers Roland and Grant (operations and production director respectively), took over the business in 2005 following a management buyout from their father, Owen, who founded the business in 1974.
The shift in market conditions meant the firm had to become leaner and turnover is now at a more sustainable £4m mark. Ductform still directly employs 70 staff and is also settled into a purpose-built 34,000 sq ft facility in its home town of Glenrothes, Fife.
It provides design, manufacture and installation of ductwork throughout the UK and includes among its clients the Scottish Parliament Building, Edinburgh Castle, Gateshead Music Centre, Manchester's Trafford Centre, Nisa Velodrome in Glasgow alongside numerous, schools hospitals, prisons, distilleries plus oil related off-shore work.
However, Stacey, who started working for her father as soon as she left school, is keen to point out that local tradesmen and small ductwork contractors remain important clients, as evidenced by the recent opening of a trade counter in the Glenrothes factory for 'supply only' customers.
Ductform also makes a lot more of its own products including dampers, silencers and access doors. It is now the largest supplier of pre-insulated Koolduct and Flamebar fire-rated ductwork in Scotland.
Automation speeds production
Increased automation also means the firm has come a long way from the days when Owen would spend four hours making a section of ductwork by hand; this is now built by machine in less than three minutes.
Stacey sees the HVCA's decision to change its name to the Building & Engineering Services Association (B&ES) as another necessary step in the process of 'moving with the times'. Owen decided to join the association in 1982 because he felt sub-contractors needed more support.
'Things have improved hugely since then thanks, in many ways, to the work of the association on the Construction Act,' says his daughter. 'We have a lot more payment protection than we used to, but contractors are often reluctant to use their powers to force payment in case they upset clients, especially now when there is less work around,' she says.
The Act also needs improving because clients can still withhold payments without justification, according to Stacey. 'As it stands, we merely have to be informed of what is being held, and why' she says. 'The Certification of Applications can be severely reduced based on very little supporting evidence. This leaves the trade open to falsified deductions and undervaluations. This is a real worry for a contractor who is, after all, already funding the project.
'There should be new rules that stipulate the level of information that must be provided on the back of a contra charge or deduction.'
She believes that PBAs could help here because no party would gain from holding back monies that were properly due. 'It's a complete no-brainer that contractors receiving fair payment on time would improve our overall economy,' she adds.
The pressure on ductwork firms is increasing as buildings become more complex and, with contract conditions being so fierce, the struggle for profitability is tough.
'Ductwork is the largest service that goes above the ceiling and so the accuracy of design drawings and project planning is crucial,' she says. 'Project times are being compressed and clients are trying to fit more and more services into smaller spaces.'
BIM adoption is a crucial step
As a result, she sees the adoption of Building Information Modelling (BIM) as another crucial step for the industry.
'If the ductwork has to be re-routed that is a major change, but obtaining payment for these changes is an on-going challenge because projects are being priced up so tightly.'
So, firms must find ever more sophisticated ways of avoiding costly changes. BIM allows designers to clearly visualise an installation before work starts on site and this helps to avoid clashes and expensive changes.
The tightening of fire regulations has also added a further element to Ductform's work, with growing demand for fire-rated ductwork and a requirement for ductwork designers to understand a building's overall fire strategy. A fatal fire earlier this year has concentrated minds in Scotland on this aspect, particularly as it was revealed that CDM regulations were ignored leading to fire dampers and barriers being omitted from the design.
'We always remember we are in the life safety business too,' says Stacey. 'Not all fire-rated ductwork is the same and so consulting engineers need to be very specific in their instructions to project teams about exact requirements to keep building occupants safe.'
However, she is concerned that common sense is no longer applied to health and safety issues in some projects. We are all for protecting our workforce and that of other contractors. However, we are now at a point where health and safety restrictions (particularly on projects with little turnaround time and major changes) impose unworkable and impractical requirements. This all adds time and cost, which have not been allowed for at tender stage.
'I'm sure more reasonable steps could be taken to achieve the same safe working environment and practices without imposing such heavy financial and administrative burdens on firms.'
Ductwork contractors continue to face an unprecedented range of challenges, but their unique role as both manufacturer and contractor means how they emerge from the current economic crisis could have a strong bearing on how the rest of the building engineering sector fares in the future.
That's why our political leaders could learn a lot from a conversation with Stacey Spence - or even by replying to her emails!
16 July 2012