The Spanish construction industry is traditional in nature; competitive tenders are typical, involving contractors providing fixed price tender returns based on detailed drawings, specifications, contract terms and bills of quantities. However, with external pressures impacting the current market, perhaps it is time to re-evaluate our stance on this time served route of procurement, and the effects this could have on our industry.

We are all aware of the current crisis in Ukraine, but perhaps lesser known is the significant ripple effect occurring as a result in the Spanish construction industry. We have seen a sharp increase in the price of materials, with some increasing by as much as 20% in recent weeks. Additionally, energy costs are soaring, causing many Spanish manufacturers to halt or slow production in the hopes of avoiding holding stock manufactured at high productivity costs that might not be sold for a profit.

Alongside cost implications, we can also see effects in the supply chain caused by manufacturing disruptions. Ukraine is a major centre for the production of milled steel which is exported to EU countries for further manufacturing, and crude oil from Russia has stopped flowing into the EU affecting the manufacturing of construction materials such as insulation or roofing felts.  These disruptions have resulted in shortages and delays across the EU, leaving contractors unable to guarantee programme delivery dates and therefore struggling to deliver on their contract obligations. The domino-effect continues, with clients now concerned for new contracts in the tender process, as contractors are unable to agree fixed price contracts with guaranteed delivery dates.  With off-site manufacturing promising reduced construction times and improved quality control, it is worth considering how this can benefit contractors, clients and all in the construction industry.  Balancing upfront payment to engage manufacturers with a change of mindset from main contractors to work with third party contractors may be a challenge worth taking on if it increases efficiency for all involved and helps all to meet their obligations.

With the current market in mind, they do say that out of crisis comes opportunity, and I believe the Spanish construction industry is facing a fantastic opportunity ahead. We need to be less adversarial and more collaborative than in the past, opening the door to open-book forms of contract and creating the opportunity to onboard contractors earlier in the design process. The traditional method of procurement may have been effective in years gone past, but it is imperative to adapt to the state of market we are in and improve our processes to ensure increased efficiency for all in the industry. Whilst this change of position will of course require a significant change of mindset from contractors, and from those financing works, bringing contractors into the project team will enable them to contribute their construction know-how instead of distancing them on the other side of the pitch. It is fair to say that there are both challenges and opportunities involved in adapting the Spanish construction sector into a more efficient industry, but I believe progress can be made if all parties involved in the development and construction process pull together in these challenging times.

John Watson

Director

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