The consultants’ view: Battling the ‘race to the bottom’

You’d be forgiven for thinking the role of the consultant is under threat.

As main contractors frequently move into construction management relationships with clients, the value consultants bring is under greater scrutiny. However, as Construction News discovers, there remains plenty of work for consultants out there. Even if they are having to look further afield for it.

Construction News spoke to senior figures from several firms, including Eckersley O’Callaghan, Mott MacDonald and WSP about the state of the industry.

How are they addressing the UK’s imminent departure from the EU? Is there a way out of construction’s ‘race to the bottom’ model? And how will their relationships with contractors evolve?

Shifting relationships

Consultant-contractor relationships can often be fraught, particularly when one party is perceived to interfere with or encroach on the work of the other.

WSP UK managing director of property and buildings Kamran Moazami believes a separation between the role of consultants and contractors is for the best. He cites the case of Aecom, which signalled its intent to move into contracting with the 2015 acquisition of US-based Tishman Construction. Its UK venture did not prove successful domestically; the consultant pulled out of the UK contractor market in 2019.

Mr Moazami says: “It doesn’t work; you should have the consultant and you should have the contractor. Let them work together to come up with the best solution. It’s the same thing where our competitors all over the world are trying to become part of construction companies. In fact, we acquired Mouchel and Parsons Brinckerhoff, after they were part of big construction companies.”

A deep relationship with Apple

Few consultant-client relationships run deeper than Eckersley O’Callaghan’s 15-year partnership with Silicon Valley’s Apple, in which quality is a chief concern.

Brian Eckersley and James O’Callaghan met Apple co-founder Steve Jobs at an early stage in their careers, and the maverick visionary deemed the fledgeling consultancy worthy to deliver “amazing palaces of great design” – the now iconic glass Apple stores (Milan, pictured).

This was despite the consultancy being a two-man band, working out of a converted toilet attached to Brian Eckersley’s Islington house.

They’ve been an established partner of the tech giant ever since, alongside architects Foster & Partners, working on 50 projects for it around the world in 2018/19 alone.

“You can do incredibly successful things if you have a supportive client who allows you to have that space to develop an idea. Conversely, it’s very difficult to innovate on one project, with one client who’s never going to lead to any repeat business,” Mr O’Callaghan says.

There has been a shift in WSP’s role on projects, according to its UK head of building services Nick Offer: “We’re becoming much more of a consultancy-based service and a management consultancy service, rather than just the labouring on the accounts and individual sizing that we used to do. The relationships are good, but consultants and contractors remain two separate sets of organisations.”

Aecom UK CEO David Barwell says the rise of BIM and the wider digital transformation of the sector means the way projects are being delivered is evolving, leading to more collaboration and partnering between contractors and consultants.

“With everyone engaging much earlier in the process, project design and delivery are becoming more interactive,” he says. “This enables key decisions about construction from the very beginning, bringing greater efficiencies for clients as a result.

“While this may lead to some overlap of services between consultancies and contractors, strategic advisory services will always require the commercial and objective input of a consultant. With new approaches such as modern methods of construction, we’re likely to see procurement routes further evolve to accommodate the changing role of both consultants and contractors.”

The race to the bottom

A common complaint is that ‘lowest bidder wins’ procurement is rife in construction, for contractors and consultants.

Mott MacDonald UK and Europe managing director Cathy Travers describes a two-fold solution to how Mott MacDonald seeks to stem these falling domestic rates. First, the company’s global presence affords it the flexibility to pursue major opportunities in markets from Australia to the USA. “It’s not about just pursuing growth for growth’s sake, it’s about pursuing […] the right sort of work for us that we can grow our bottom line on,” Ms Travers says.

“With everyone engaging much earlier, project design and delivery are becoming more interactive”

David Barwell, Aecom

Second is an emphasis on quality over quantity.

“We are pursuing our group strategy quite vigorously, which is about focusing on our platinum clients. Fewer clients, but really following those [clients]. And if they’re global then so be it, [it’s about] really cultivating these deep relationships.”

She name-checks Balfour Beatty, Network Rail, HS2 and Heathrow as examples the firm is prioritising.

WSP’s Mr Offer says he is beginning to see many customers requesting a multi-disciplinary team.

“Some of our overseas clients are coming to us and they want to buy one product. Sometimes we’re bringing 14 to 16 disciplines on one, and we seem to be charging our normal rates on each. At certain times for projects, yes, there is a lot of competition, but I think people are still buying quality.”

However, he does highlight some of the ways a large, complex business such as WSP can use the sheer scale of its enterprise and workforce to achieve a lower cost for its services.

WSP, which is involved in the 1 Undershaft build, says it continues to see demand for high-rise buildings, despite Brexit uncertainty

“Through the young talent that is arriving in our industry and in our business we’ve been able to write many more programmes than we used to that automate large parts of our design process. As things get more complicated and timescales are quicker, we plan to react by adjusting and starting to automate processes to work in a slightly different way. That’s really helped us,” Mr Offer says.

Mr Moazami adds: “We have this global strength that instead of Manchester or Birmingham or Newcastle, we’ll have a group of people in India and in China, who supplement our work. When we need to reduce our rates due to competition, we are able to still provide the same level of product using a lower cost.”

Structural engineering specialist Eckersley O’Callaghan co-founder Brian Eckersley notes that a “cut-throat fee world” has developed in the world of engineering consultancy.

He says: “It applies much more in this country in terms of the bread and butter work we do of building structures. It’s less the case in our specialist work where we stand out a lot more. We don’t have as many competitors, and clients come from around the world to seek us out.”

“[Contractor-consultant models] don’t work; you should have the consultant and you should have the contractor. Let them work together to come up with the best solution”

Kamran Moazami, WSP

Company co-founder James O’Callaghan believes that driving down fees has changed the makeup of the market: “Increasingly the challenge with regular consulting and regular projects is where do you as an engineer or consultant identify your value?

“It’s led to this increasingly disparate world in terms of your specialisms, and it leads to a specialism-focused industry because that’s how you demonstrate value and therefore a greater ability to get the fee. It basically disintegrates the industry into pockets.”

He says he hopes the UK manages to resist the freefall in fees that some have begun to observe, as he’s witnessed the negative impact on quality that lower fees for structural engineering have had in the USA.

“There has been for at least 20 years a significant difference in what you get from a structural engineer in the US versus what you get from a structural engineer in the UK.

“[There is] less quality, less information, less input; you have very little collaboration. There’s no creativeness. It’s just executing the rulebook; filling in and cut and pasting drawings. Maybe that works to get your building, but then you’ve got to look at the relative innovation of building stock in the US versus what we’re able to achieve in Europe.”

Brexit instabilities

As any resolution to the Brexit issue remains a distant prospect, businesses must nonetheless face up to the continuing uncertainty in their own distinct ways.

The impact of Brexit is different for consultants and contractors, according to Ms Travers: “They are affected by different things. For example, as a consultant we don’t deal in materials, we deal in people. And we’ve got a very skilled labour force.

“You would hope our ability to continue to attract those skilled people into the UK would still be highly feasible for a consultancy [post-Brexit], whereas I think there’s the impact of having to buy and import materials and a different skill level within the workforce for a contractor.”

Ms Travers says that while Mott has a strong UK order book, now isn’t the time for complacency. “It’s that tension between the fact that we feel pretty confident at the moment, but with the knowledge that we’ve got Brexit coming, and the likelihood is the UK could go into recession.

“But the way out of recession is for the UK to sell UK plc. And the way you do this is by investing in skills, knowledge and experience, through major projects like HS2, Crossrail, Heathrow and the nuclear sector.”

Mr Moazami strikes an optimistic tone about the effect of leaving the EU.

“The way out of recession is for the UK to sell UK plc. And the way you do this is by investing in skills, knowledge and experience”

Cathy Travers, Mott MacDonald

“WSP is a global company. We follow global clients, we work globally, so we are not just bound by the UK. In fact we believe Brexit and the lowering of the pound have created major opportunities for the UK.”

He gives the example that WSP has international clients looking to invest in a 60-storey tower planned for North Acton, for which the company is to provide engineering services. “If they believe that is not going to pay back, they’re not going to invest their money and put in all of the low-income accommodation that is required by law. Obviously they believe there is a potential for making money in the UK.”

Mr Eckersley says Brexit is “looming large”.

He says: “It’s not a particularly supportive environment for an international business like ours that has clients around the world hungry for our services and expertise, a business that relies on international staff to work here. Probably half of our staff in our London office are continental Europeans.”

Although the firm has expanded rapidly in its 15-year history with offices now in New York, San Francisco, Paris, Hong Kong and Shanghai, it is still a London-based business.

Mr Eckersley describes a slowdown in 2017-18 growth that he puts down to Brexit uncertainty. “It put a bit of a pause on [us] in that period. As it has across our industry – it caused many practices to shrink. So [while we] didn’t shrink, growth dropped a little.”

Indeed, the impact has only been a temporary blip. After profit decreased from £3.3m to £2.3m between 2016/17 and 2017/18, the company bounced back in the following 12 months to £3m against a turnover of £11.9m; a healthy margin of 25 per cent.

The revenues of these consultancies may range from £12m to £15bn but speaking to them highlights some basic takeaways from the industry at large. Maintaining long-term consultant-client relationships is crucial to breaking the chokehold of plummeting rates.

Contractors and consultants belong around the same table, but they still have different roles. And, more immediately, the outlook on the post-Brexit landscape doesn’t need to be anywhere near as bleak as one might assume, at least for the companies with the luxury and flexibility that global reach affords.

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