In this current economic climate, the identification and management of risk is of prime importance.
Competition is healthy in any market but fierce competition the likes of which has been present in the SEQ market from contractors “buying work” is a leading indicator of risk that we need to be aware of in the market today. Competitive tender prices were gratefully accepted but they came with a heightened level of risk for all parties, and that risk not become evident until the project was well underway.
Contractors that tendered in the past, and are now having to let trade packages, may be finding that they have to pay more than they have allowed.
This leads to cash flow strain and can greatly limit their ability to deal with problems that arise on their projects. As a result the likelihood of projects in this situation becoming distressed is real, and we are already seeing a number of contractors and subcontractors going under.
While it is difficult to identify in advance every risk that may affect a project, staying transparent and exposing, and addressing, uncertainties early could make the difference between a project running smoothly and project becoming distressed.
Darryl Bird, a partner of Mitchell Brandtman 5D Quantity Surveyors, discusses the warning signs for distressed projects:
Mitchell Brandtman 5D Quantity Surveyors Partner Darryl BirdThe Signs
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