Fixed price proposal

Summary

Established in the 1990s, the client is a well-established building services contractor operating UK wide. They have an annual turnover of approx. £40 million and operate with approximately 12-14 live projects at any time. Based in the North, their projects span the whole of the country with locations from Glasgow to Brighton. They utilise temporary labour as part of their installation works and at peak can have up to 250 operatives running at any one time.

We have been servicing the client for several years, initially as part of a structured PSL of four agencies. They operated with multiple agencies, hiring the labour on a standard hourly rate basis working on-site under the Project Manager and Supervision teams.

Challenges

Following various meetings with the client, it became apparent that there was a real desire to reduce the spend on labour.

It was reported that they were spending in the region of £7.5 – £8.5 million per annum on labour alone.

It was also admitted that there was a degree of waste in this spend due to the nature of hiring temp labour at times. Despite the management team working as hard as possible to have the best return on investment for the labour, it is always very difficult to completely eradicate wastage, so the focus was on minimising it as much as possible.

Our Proposal

We offered a proposal to the client which focused on reducing the spend without jeopardising service and quality. We made the proposal of offering the labour on a fixed price basis and therefore guaranteeing the spend and eradicating any nasty labour cost surprises following post project completion reports.

To utilise this, we proposed operating either on a single supply basis nationally or per project to ensure all workers received the same and there was complete transparency on site.

As part of this proposal, we had to restructure the whole reporting method from the traditional timesheet method of reporting hours to weekly work reports. MEP Resourcing produced all the required documentation to do this and offered on-site support to Project Managers. Offering weekly pay on the price work ensured we were able to attract the best candidates as this is unique in the industry.

Results

sites

238

operatives at peak

12%

cost saving

year frame agreement signed

The client initially engaged us with our proposal on 1 site to trial the concept. The success of this in terms of sourcing the correct quality of labour soon gave the confidence to roll this out on other sites.

For the majority of 2019, we have now acted as a single supplier to the client and have peaked with 238 operatives across the whole UK and have utilised the price model across all sites. There have been some learning points doing this which will allow for even more improvement, but the projects have been delivered at the required level of quality and safety expected. For the first three projects, they have analysed the results and the consensus is that the model has represented a saving of 8-12% in comparison to previous years.

Based on the annual spend of labour, this is proposing a saving of between £650K – £950K per annum and we both agreed that we can make further improvements to the concept to allow even further savings. It has been agreed that this saving (as it is budgeted spend) will sit on the bottom line for the client so is making a real saving and improved profitability to the business.

Following the success of this concept, we have now signed a 3 year frame agreement to supply all labour for all projects on a single supply basis.