Receptor: Hi Paul. How are you doing? I’m good, thanks, how are you? Yeah, very well, mate, very well,
Paul Heming: Thank you.
Receptor: Podcast episode number one. Here we go. This is probably going to sound a little bit wooden
Paul Heming: As you get used to the camera. Especially with me on the other end.
Receptor: Well, that’s true. I’m pretty used to it. I think I was talking more for myself. I’m
Paul Heming: Usually quite fluid, but maybe not so much. We’ll see. Yeah, not so much on camera probably.
Receptor: But today, episode number one, and I wanted to speak to you about, I thought, a good topic
Paul Heming: To start with would be the structure of construction management and how that looks like for a small
Receptor: Developer.
Paul Heming: A gripping first topic to get everyone off their seats.
Receptor: Well, I’m struggling to keep seated, so I think you’re right. But let’s get into this.
Paul Heming: Because I think that the concept of construction management we’re going to get into it feels
Receptor: For me as someone who isn’t an expert. It sounds on the surface pretty simple and it
Paul Heming: Makes sense as we’re getting to that it might be favourable for a small developer. But what
Receptor: You rarely get is someone actually laying out exactly what it looks like with detail.
Paul Heming: So that’s what we’re going to get into. But before we do, tell me a bit about what, without
Receptor: Going into too much detail, what is construction procurement? What do we mean by construction
Paul Heming: Procurement?
Receptor: I told you this was a fascinating subject, but sadly I know a fair bit about it from experience
Paul Heming: And from studies at university. Procurement in construction, and a lot of people, in my
Receptor: Opinion, probably don’t really think about this at the outset of their project. Procurement
Paul Heming: In construction, it’s all about risk. Nothing else. It’s all about risk and different projects
Receptor: Have different risk profiles, which is why you have different procurement routes. So
Paul Heming: You have the traditional main contractor procurement route, that could then be subdivided into
Receptor: Design build as a procurement route, management contracting, construction management, which
Paul Heming: We’re talking about in this instance. But the reality is that, or the principle is that
Receptor: At the start of any project, what is meant to happen is the client or the property developer
Paul Heming: Should assess their projects uniquely, think about the risks, challenges, what they’re
Receptor: Trying to achieve, and match all of those risks and challenges with the most appropriate
Paul Heming: Procurement route. The problem being is that the traditional procurement route is the procurement
Receptor: Route that the entire industry was founded on. So the traditional procurement route is
Paul Heming: Property developer, employees architect, architect does design. Once that design is complete,
Receptor: Architect, together with property developer, goes out to the market to make contractors,
Paul Heming: Principle contractor prices, and whoever wins the competitive tender succeeds, and that
Receptor: Principle contractor then manages the construction works while the architect manages the design,
Paul Heming: And the principle contractor employs various subcontractors. Now, the point of this discussion
Receptor: Is not to discount the validity of that as a procurement route. It is a good procurement
Paul Heming: Route. It works. It has its place. The question being, does it have its place in the smaller
Receptor: SME residential market? Is it the best situation, the best solution for SME property developers
Paul Heming: And SME property developer being anyone doing, I guess, developments that are size 0 to 100
Receptor: In unit size, perhaps anything where the construction cost is sub 10 million, maybe sub 5 million
Paul Heming: Even. So before you get into that, so when SME procurement routes are in terms of you’ve
Receptor: Got traditional, and well, in the context of this conversation, you’ve got traditional,
Paul Heming: Which you go and buy a main developer, goes via a main contractor, and then you’ve got
Receptor: Construction management, where you skip the main contractor and go to the subcontractor.
Paul Heming: Yeah. Well, so traditional procurement, the stack of all the organization chart, if you
Receptor: Like, for a project would be property developer at the top, employing directly an architect
Paul Heming: And principal contractor, main contractor, who are both directly employed by the property
Receptor: Developer, and both have equal standing, one in charge of design, one in charge of build.
Paul Heming: And from there, the main contractor would then employ all of the subcontractors direct
Receptor: To the contractor in main contractor and subcontractor. With construction management, it is not a
Paul Heming: New procurement method. It’s been around for quite some time. And the primary difference
Receptor: Is that rather than employing a main contractor, the developer has historically employed a
Paul Heming: Construction manager. And that construction manager traditionally is an organization,
Receptor: A separate entity. So for example, people listening will probably know who Mesa, Mesa,
Paul Heming: Absolutely gigantic global organization, UK based principal contractor, who started as
Receptor: A construction manager, their business was originally to offer construction management
Paul Heming: Services. So they would then employ, they would then advise and employ the subcontractors
Receptor: As trade contractors on behalf of the developer. So the difference is traditional contractor
Paul Heming: Is traditional procurement, sorry, the route is property developer, employers architect
Receptor: And main contractor, main contractor, employees for the subcontractors. With construction
Paul Heming: Management, it’s different because the property developer employs the architect direct, employs
Receptor: The construction manager direct, and then on the advice of the construction manager,
Paul Heming: Then employs all of the subcontractors direct as well. So that’s the difference. Construction
Receptor: Management, as we know it, and as we have experienced it in contemporary construction,
Paul Heming: If you want to call it that, we’ve started to see that rather than employing a construction
Receptor: Manager as an entity, i.e. employing a Mace kind of company, a lot of SME developers are
Paul Heming: Now actually starting to consider employing a construction manager in inverted commas
Receptor: As like a construction professional, a really good project manager or side manager, who
Paul Heming: Can act as that conduit between the developer and construction expertise, if you’d like.
Receptor: Okay. Why should a small developer or medium sized developer consider construction management?
Paul Heming: It’s a good question. I think everything has to be considered, again, in the context
Receptor: Of what is right for the project, what is right for the risk, in the same way that I
Paul Heming: Would argue that at the start of a project, everything should not be traditional procurement.
Receptor: Every project is not suited for traditional procurement. Likewise, every project is not
Paul Heming: Suited for construction management. But everything seems to be, or a lot of what seems to happen
Receptor: In the SME market seems to be based around the power struggle between different professionals
Paul Heming: And the institutions that they represent, their own commercial interests. And because
Receptor: Traditional procurement, going back to what I was saying at the start of the conversation,
Paul Heming: Is basically what the entire industry was founded on. It made that loads of architects
Receptor: In the sector, it made loads of quantity surveying practices, it made a lot of structural engineers
Paul Heming: Because that’s how it works. You now have all these organisations and you have all of
Receptor: These institutions.
Paul Heming: Which they have made them, you mean, these businesses were formed on the back of the
Receptor: Sector requirements in this model. Exactly. So 100 years ago, traditional procurement
Paul Heming: Started, we’ve now got 100 years of architectural practices, quantity surveying practices, structural
Receptor: Engineering practices, off the back of that. And even more than that, you then have all
Paul Heming: Of the institutions that back them. So you’ve got REBA, who protect, if you like, the architects,
Receptor: You know, RSS, who protect the QS’s and other surveys. So if you’re considering the outset
Paul Heming: Of a project, a lot of property developers will employ an architect or QS to give them
Receptor: Advice on a project and say, what is the best procurement strategy for me on this project?
Paul Heming: The majority of them are going to provide advice with even in the best case, just a small bit
Receptor: Of bias that is appropriate and suitable to their own commercial interests. And that’s
Paul Heming: Why sometimes you look at the traditional and think it’s just a status quo, it’s more
Receptor: Of the same, basically. So for example, if I’m a QS, and I actually am a QS, but if
Paul Heming: I was a QS, I don’t know all that against you, mate. Most people do, a lot of people
Receptor: Do. But if I as a QS, who is running a PQS firm and asked by a property developer, what’s
Paul Heming: The best procurement route for this project, there is a chance that I’m more likely to
Receptor: Advocate for the traditional procurement route, because that is going to give me maybe larger
Paul Heming: Volumes of administration documentation for a PQS firm. So it may be of more interest
Receptor: For me to do that, rather than suggesting others. And I’m not saying just construction
Paul Heming: Management, any of the others. And same for the architect. The architect with the traditional
Receptor: Route has many benefits, number one being that they get probably bigger fees, because
Paul Heming: They are going to be doing more of the work and more control of the design work. But more
Receptor: Importantly, perhaps, or maybe not more importantly, but importantly to architects is with the
Paul Heming: Traditional route, they keep absolute control of the vision and the architectural intent,
Receptor: The design intent, which they would lose the design and build and with other procurement
Paul Heming: Routes. So it’s really advantageous for the architect to say the traditional route is
Receptor: Best suited for this project and work on that basis. So going back to your question about
Paul Heming: Why why would you endorse construction management for SME developers, the reason being that
Receptor: The status quo is not retained. And that isn’t the only reason why it’s positive. But there
Paul Heming: Are lots of situations, particularly for smaller developments where really detailed architectural
Receptor: Intent is important and useful, obviously, and quality surveying support is useful. However,
Paul Heming: The majority of cases will be less, let’s go out and procure a main contractor to manage
Receptor: All of the construction. That will be the advice from a lot of architectural practices
Paul Heming: And QS firms because they’re not necessarily set up to manage the construction management
Receptor: Approach. And in employing simply a main contractor, the question that an SME developer has to
Paul Heming: Ask themselves is, is a main contractor the best solution for the project? Because it
Receptor: Doesn’t matter if it’s, we’re talking about traditional procurement and construction management,
Paul Heming: Really the difference is the principal contractor and having that principal contractor in place.
Receptor: And as developers start working with more difficult and tighter margins, I think construction
Paul Heming: Costs are going up by 20%. Over the next few years, according to RSES and house prices
Receptor: Aren’t doing the same, they’re stagnating or growing smaller. Developers are now having
Paul Heming: To look at projects with a little bit more detail, pay a bit more attention to construction.
Receptor: And in doing that, looking at who their construction team is, their construction team in the traditional
Paul Heming: Approach for the majority of developers is, I’m going to get a main contractor, the main
Receptor: Contractor is going to manage it for me. And in doing that, they are paying the main
Paul Heming: Contractor’s profit and overheads, they’re paying for the main contractor’s management
Receptor: And preliminaries. And often not always getting the service that they wanted being heavily
Paul Heming: Involved in the micro management of those projects anyway. And in doing so, they are
Receptor: A lot of SME developers feel like they are taking on a lot of the management, but also
Paul Heming: Paying for it twice effectively. So an argument for SME developers to move to construction
Receptor: Management, I realise I’m banging on here, might just be simply a commercial issue,
Paul Heming: But it should always come back to the procurement risks and which strategy is appropriate for
Receptor: Your project. I was banging on, wasn’t I?
Paul Heming: Yeah. But we’re in this together. And if you’ve got this far, listening to us, then I’m
Receptor: Presuming you are interested in procurement. If you’re not, you’re interested in use your
Paul Heming: I don’t know, it’s just an old form of self-harm or I guess. So the, as I understand it, then
Receptor: The, the main benefit for a small developer to construction management is the obvious
Paul Heming: Commercial, the economic benefit whereby you’re cutting out a cost, a substantial cost, right,
Receptor: Of the construction. And I’m guessing there are other smaller areas where there’s a benefit
Paul Heming: And other areas where you’re, you’re, you’re, it’s given sake, you’re missing out on have
Receptor: Just as with anything where, you know, if you’re working with a consultant, that person
Paul Heming: Is a specialist in that area. And there is a comfort in working with that person. And
Receptor: Certainly there is a requirement in some circumstances, but clearly, if you, if you can engineer a
Paul Heming: Position where you don’t need that consultant, consultants aren’t cheap, especially if they’re
Receptor: Good. And you’re going to, you’re going to claw back a big chunk of margin. So understood.
Paul Heming: Moving on from that, talking about funding, what does it look like? What does, does it
Receptor: Look any different for at the funding stage putting forward? And we don’t need to go
Paul Heming: Into the heavy detail here, but putting forward a case for construction management, as opposed
Receptor: To traditional procurement, does that look different?
Paul Heming: I think it does. With, with funding, they look at things in the way that the SME developers
Receptor: Should look at things, right? It’s going back to what is the framework for what are the
Paul Heming: Risks? What are the framework? How am I going to, how am I going to manage the project?
Receptor: So from a funding perspective, the funder is looking at, do the numbers stack up? Is
Paul Heming: This project going to be profitable? Can they deliver it in the time that they said that
Receptor: They’re going to deliver it? And who’s doing the construction? And is the person or entity
Paul Heming: Doing the construction capable of delivering the construction? And a lot of the times,
Receptor: A lot of the time, the easy answer to that is, well, we’ll get our main contractors
Paul Heming: To do it, look at their portfolio. And the, and the funder will look at it and go, okay,
Receptor: These are the three main contractors, all of them have got the right expertise for delivering
Paul Heming: Similar projects. Happy days. Yes, we can approve the funding because we think that
Receptor: The overall risk profile of the entire project from a terms of me giving you the money, it’s
Paul Heming: Likely you’re going to deliver it. And it’s likely that you’re therefore going to pay
Receptor: Me back the money, I’m going to make some money, I’m going to make some profit on that.
Paul Heming: So that’s the process that a funder goes through. Obviously, it’s far more nuanced than that.
Receptor: I’m simplified here, but there’s no reason why from a construction management perspective,
Paul Heming: You can’t give a funder the same comfort that you give them by saying, look, this is the
Receptor: Main contractor I’m going to use, this is their portfolio. Why, why can you not say
Paul Heming: To a funder, we spoke to plenty of funders who would be very open to this, say to the
Receptor: Funder, this is my project manager, these are the projects that he or she has delivered.
Paul Heming: They are very competent. This is the portfolio that proves it. And this is how we’re going
Receptor: To manage the construction because the reality is that the main contractor is only capable
Paul Heming: Of delivering those projects in their portfolio because they have project management, good
Receptor: Project management, that’s, again, maybe simplify it, they’ll be outcry. But main contractors
Paul Heming: Are service businesses that are entirely based on the quality of their people together with
Receptor: Perhaps a little bit of supply chain. But if you can get the people from the main contractor
Paul Heming: Into your business as a developer, I think there’s massive gains to be made for your
Receptor: Business. Generally, thinking about future projects, about construction expertise, generally
Paul Heming: Your business, it’s a big gain.
Receptor: Yeah. So, I mean, like you say, funding is a subject in its own right. And it’s no doubt
Paul Heming: Something will go into in future episodes in more detail. But from a top level perspective,
Receptor: What we’re saying is that the funder looks at things, is looking at risk. And so they
Paul Heming: Can, if you’re coming with traditional, it’s an easier job for them potentially, because
Receptor: They’re just looking at these three main contractors that you’re looking at or one, who have delivered
Paul Heming: This type of job before. And you are doing the same thing with construction management,
Receptor: But instead, you’re putting the case forward for your team or however that looks to deliver
Paul Heming: The project. It’s no different in that sense.
Receptor: Either way, the funder, the funder doesn’t really care about who is on the construction
Paul Heming: Team. They want to know, I’m going to give you X 100,000 or X million. And you’re telling
Receptor: Me you’re going to turn it into double that. And I’m going to get as interested in everything
Paul Heming: Else that comes with it. Can you execute the job? Do the numbers make sense? Yes, they
Receptor: Do. The house prices all make sense, blah, blah, blah, blah, blah. Can you manage the
Paul Heming: Construction? Have you got any experience in it? Most people, most developers, simple
Receptor: Answer is no, I haven’t got any expertise, but I’m going to this guy who’s going to
Paul Heming: Manage it for me. And their main contractors, what we’re suggesting with the construction
Receptor: Management route is that whether the project manager is a main contractor or a human being
Paul Heming: Embedded into your business, that is the person that is going to deliver the construction.
Receptor: So that’s the difference. And there’s plenty of SME developers that I personally know that
Paul Heming: Have either transitioned to it, have always done it. And they’re getting funding from
Receptor: High Street Banks and really well-known fund agencies. This isn’t like niche. All it is
Paul Heming: Is about how you present and the risk profile of the project and can you deliver it?
Receptor: I wanted to take a quick break from the show to share a message from our sponsor, Scenic.
Paul Heming: Scenic is software designed to streamline the process of subcontract procurement. It’s
Receptor: A platform that helps SME developers and main contractors stay agile whilst replicating
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Receptor: Against budget construction costs on your next project, head to www.get.c-link.com.
Paul Heming: If you’re driving or working out right now and didn’t catch that URL, don’t sweat it.
Receptor: We’ve included the link in the description box for this episode. Now, let’s get back
Paul Heming: To the show.
Receptor: Let’s talk about what it looks like as a legal entity. Again, from the developer, small
Paul Heming: Developer’s perspective, wanting to go into construction management, does it change the
Receptor: Way they need to structure their business as a legal entity?
Paul Heming: Yes. Regardless of the procurement route that a developer chooses, they have to have a project
Receptor: Comply with CDM, construction design management regulations from 2007. The developer has to
Paul Heming: Comply with it. As I said, there’s a number of ways they can do that. Every project has
Receptor: To have a principal designer. Every project has to have a principal contractor. Typically,
Paul Heming: Principal designer is the architect. Typically, principal contractor is the main contractor
Receptor: That a developer employs. With construction management, the principal designer is the
Paul Heming: Architect, still the architect, and the principal contractor is whoever is the principal contractor
Receptor: On the project. That principal contractor, the fundamental difference, is no longer Joe
Paul Heming: Blog’s construction limited. They are the developer’s name, construction limited. Say
Receptor: The project is on Bridge Street, you might name the developer with an SPV called One
Paul Heming: Bridge Street Limited, and then if your developer is called, I don’t know, riffing it, Joe Blog’s
Receptor: Developer Limited, you might have the SPV as One Bridge Street, and then have Joe Blog’s
Paul Heming: Construction limited as the principal contractor. You need to have two entities. It’s not overly
Receptor: Complicated. I’m sure people listening to this know how simple it is to set up different
Paul Heming: Businesses. This is also not something that is news to the people who are listening, I
Receptor: Imagine, because SPVs are common practice, special purpose vehicles, limited companies,
Paul Heming: Common practice in property development in real estate. Yeah, you do need to, for the
Receptor: Sake of CDM, you do need to have two entities, and that’s the way the majority of people
Paul Heming: Manage it. Yeah, that sounds clear to me. I think one of the biggest concerns ever were
Receptor: Me as a developer who is not interested in construction, has no experience in construction.
Paul Heming: What’s wrong with construction people? I’m a construction person. We’re all right. Exactly.
Receptor: Is that, it’s like anything that you outsource to consultant, either it seems too big and
Paul Heming: Dangerous to mess up, so I want to get someone specialist to manage it, or it’s just a lot
Receptor: Of hassle that I really don’t want, and I just feel much more comfortable putting it
Paul Heming: Out. Also, it’s the time, right, because I’m not a developer, I’m a spoken to developers,
Receptor: And I understand particularly new developers, or developers that are early on, there’s a
Paul Heming: Lot more work than they thought there would be. Time is critical, and how much time is
Receptor: This going to take for me to take this in? How much am I going to need to give to this?
Paul Heming: Yeah, it’s fair enough, and construction isn’t sexy, it’s probably not the nice bit
Receptor: Of being an SME developer, but everything, or being probably the before-stop, but everything
Paul Heming: Has to be in the context of, this is business, you’re in it to make money, how can you best
Receptor: Make money? Whether it’s a one-off project, or whether you’re planning on being a developer
Paul Heming: For the next five years, 10 years, 20 years, however long it is, you are going to spend
Receptor: Millions of pounds on construction, so you might not want to focus on it, but if you’re
Paul Heming: Going to be successful, and going back to the tightening margins and increased construction
Receptor: Costs, it’s not something that you can just say, I don’t like construction, it’s complicated,
Paul Heming: It’s not very sexy, I’m not going to do it, I’m going to pay lip service to it, my opinion
Receptor: Would be, whichever procurement route you choose, you’re not going to be as successful
Paul Heming: As the developer around the corner, who is more competitive with construction, knows
Receptor: How to manage it, is delivering projects more quickly, more profitably, because guess what,
Paul Heming: If your costs in construction are 33% of the total of GDP, which is the anecdotal conversation,
Receptor: If the developer around the corner from you is doing it at 30% or 25%, and is more competitive
Paul Heming: You with construction costs, they’re going to be outbidding you when they’re looking
Receptor: At all of their appraisals, so it isn’t sexy, but I can’t see how a successful developer
Paul Heming: Who is going to run a really successful business can afford to not take it seriously.
Receptor: You can take it seriously and use traditional, so what I mean by that is, at the moment,
Paul Heming: What we’re saying is construction is a part of development, of course it’s a part of development,
Receptor: Whether it’s the bit that you like or you don’t like, and at present you might use a
Paul Heming: Consultant or a main contractor or whatever you want to call them, to manage that area,
Receptor: To manage the construction, because that’s their expertise, not my expertise.
Paul Heming: So if I’m going to bring it in-house, one of the things that I would be weighing up
Receptor: Would be how much time is this going to need from me, in comparison to working with a traditional
Paul Heming: Contractor, now you can’t stick a number on that clearly, you can’t say two more days
Receptor: A week of your time.
Paul Heming: It’s going to take more time, there’s no way of saying, it’s going to take two days
Receptor: A week or whatever, but it’s going to take more time, particularly on project one, probably
Paul Heming: On project two, less so on project three, four, five, but if you’re going to be a serial
Receptor: Property developer, get the construction right, because you’ll only gather momentum from it.
Paul Heming: It’s definitely on project one, construction management is probably going to cost you
Receptor: More time than traditional.
Paul Heming: I would be lying if I didn’t say that, you’re going to be involved in trying to recruit
Receptor: The right project manager, you’re going to be involved probably a little bit more in
Paul Heming: Strategy for building out the site with that project manager, but you’re going to understand
Receptor: The process a lot more, your business is going to be a lot closer to it, and you’re going
Paul Heming: To potentially take a lot of benefit from that, which otherwise goes to the main contractor,
Receptor: So the main contractor can find efficiencies in the builds, they have a small margin, but
Paul Heming: They try and increase that margin by taking money from the supply chain, I don’t mean
Receptor: That crudely as in just procuring well, but you could as a property developer, you will
Paul Heming: Spend more time doing construction management, and you will probably have to get your hands
Receptor: Dirty to start with, but the business that you’ll build off the back of it, and I say
Paul Heming: This because I see businesses doing it, I know them, will be far better for it, you’ll
Receptor: Be much leaner, you’ll have much more understanding of construction, and that’s good for tendering
Paul Heming: And so on, or looking at future projects, and you’ll have a much closer relationship
Receptor: With the specialist, the important thing to understand is a main contractor is obviously
Paul Heming: Skilled and specialist in their role, usually by the project manager, but by the project
Receptor: Management, commercial management teams that they have, but the experts on the job are
Paul Heming: The subcontractors, so by removing the main contractor, you’re actually taking the relationship
Receptor: With the experts and benefiting from it, so it’s another opportunity to get close to that
Paul Heming: And understand a little bit more about how everything works.
Receptor: Yeah, you might be in a good case for it, okay, so you mentioned subcontractors there,
Paul Heming: So let’s take the main contractor out, and so we’ve taken that middle arrow, we’ve got
Receptor: Subcontractors on site, so now that I know that I have the main contractor to manage
Paul Heming: Them, what does it look like, what do I need to account for with regards to resources,
Receptor: What do I need to be thinking about and preparing for?
Paul Heming: Everything project dependent, again, without continually saying the same thing, every project
Receptor: Is unique, the majority of SME developments are, everything is unique, but you can characterize
Paul Heming: Them by saying that it has a certain number of units, like a similar-ish specification
Receptor: Fit out and M&E requirement, so you can characterize them, but every single one is unique, what
Paul Heming: Is important in terms of grasping and understanding, and I know we’ll talk about this perhaps in
Receptor: Future episodes about what you’re paying for and the structure of management within the
Paul Heming: Traditional route, is that you as the developer, you have management, whether that’s just you
Receptor: As the director or whether that’s some kind of resource, will manage the main contractor
Paul Heming: To some extent, so there’s one level of management there, you then have the main contractor’s
Receptor: Management, so they will include costs and resource for preliminaries, so for all kinds
Paul Heming: Of management, and then every subcontractor will also have some kind of either non-working
Receptor: Or working management, whether that’s the director on the tools or whether that’s the
Paul Heming: Director not working, or if it’s just they have a contract manager or a project manager,
Receptor: But so you have three levels, you’ve got developers’ management team, main contractor’s management
Paul Heming: Team, and you have subcontractors management team, the way it looks, and it might seem
Receptor: Hard to fathom, is exactly the same in construction management in the way some SME developers
Paul Heming: Are doing it, so you will have the developer’s management, whether that being you, the director
Receptor: Of the developer, or someone else, you’ll then have the construction manager, which
Paul Heming: Is your project manager, the one that I’m advocating that you’re in, Dorser, who replaces
Receptor: The main contractor, and depending on size, you might have a site manager as well, you
Paul Heming: Might have a QS, I don’t know, it depends on the size, but for the smaller projects,
Receptor: A project manager can probably lead the site and commercial aspects, and then you still
Paul Heming: Have the subcontractors and all of their management, so this is the point of understanding what
Receptor: You’re paying for, and understanding the traditional procurement risk, there’s so many levels of
Paul Heming: Management in there, but just by removing a main contractor doesn’t mean that you all
Receptor: Of a sudden have no expertise, they are reliant on the expertise of the subcontractors, I’m
Paul Heming: Going to call them subcontractors, that’s what we call them, so if you’re cutting out
Receptor: The main contractor, the main contractor when it comes to something really complicated,
Paul Heming: Let’s say the M&E package, the main contractor’s project management team will not be M&E experts,
Receptor: Groundwork experts, dry line experts, experts of all the trades, they rely on the management
Paul Heming: From the subcontractors, so all you would do as a developer is just remove them, replace
Receptor: Them with your project manager who will be an expert in certain trades, but will rely
Paul Heming: On the subcontractors for their expertise, so it’s similar, it’s hard to picture I guess
Receptor: Because it does feel like from conversations I’ve had with developers who are insistent
Paul Heming: On the traditional route, it does feel to me a little like they consider the main contractor
Receptor: To be this warm, comfortable blanket that’s wrapped around them and removes any kind of
Paul Heming: Risk that they have on this project because they are experts in construction, it’s all
Receptor: Their problem, now you are taking on more risk by being the principal contractor, I’m
Paul Heming: Not denying that, but your main contractor probably has an excellent project manager
Receptor: Embedded in their team, I’m just suggesting you take her and you make her your project
Paul Heming: Manager and you take all the benefits off that.
Receptor: And are there any headline top level responsibilities that I would need to take on board now that
Paul Heming: I don’t have a main contractor anymore?
Receptor: There are a few, health and safety being the obvious one, so under CDM the regulation we
Paul Heming: Spoke about before, the main contractor is the principal contractor, the main contractor
Receptor: Is responsible for the construction phase plan, lots of other boring things, but important
Paul Heming: Things don’t get me wrong, things that they have to do to comply with those regulations
Receptor: To make sure the site is run safely, is designed safely, etc.
Paul Heming: You can do that by being the principal contractor yourself, you can do that by employing a health
Receptor: And safety expert consultancy to set up the site files, set up the project files to regularly
Paul Heming: Visit site and check that you’re continuing to comply with that and you’re going to do
Receptor: That much more financially beneficial, in a much more financially beneficial way to yourself
Paul Heming: And your business then saying to the main contractor, you manage that, you put your overhead and
Receptor: Profit on that process and you deal with that risk.
Paul Heming: And again, it’s not sexy stuff, this isn’t sexy stuff, but tight margins, tight margins
Receptor: Expected in the future, why not do it, why not at least think about it this way because
Paul Heming: Lots of other people are.
Receptor: Yes, sold.
Paul Heming: To be honest with you, Liam, I’ve come from a contracting background and I never thought
Receptor: I would be looking at construction this way, it’s not the traditional, I’ve come through
Paul Heming: The traditional way, I never thought I’d be looking at this way, but the last few years
Receptor: It has really opened my eyes to a lower level, where the construction costs are less.
Paul Heming: At a lower level, you mean a smaller level as opposed to that huge project?
Receptor: Yes, so my background being really, really big jobs or tier two size jobs where you’re
Paul Heming: Talking like a total build in the hundreds of millions.
Receptor: So I could never imagine at that level, there being no making trouble, there’s so many reasons
Paul Heming: Why you need one there.
Receptor: But when you’re talking about two, three, one, two, three, four, five, 10 million pound
Paul Heming: Builds, I’ve started to look at things a little bit differently to what I was taught, what
Receptor: I understood because I see people doing it and I’m a believer now.
Paul Heming: I think on that note, you’ve done a great job there, Paul, and I think it’s clear on
Receptor: The top level what the structure looks like for a developer, and I’m a believer too.
Paul Heming: Well there you go, we managed to do it.
Receptor: That wasn’t my intention to start with, but if I’ve solved you, I’ve solved it.
Paul Heming: Thanks Paul.
Receptor: Awesome.
Paul Heming: Cheers.
Receptor: Catch you later.
Paul Heming: Bye now.