Why Large Contractors Fail – A Fresh Perspective
It’s been nearly 200 years since French educator and writer Jean-Baptiste Alphonse Karr uttered the epigram, “the more things change, the more they stay the same”; but those words still hold true today. The question is, is history repeating itself, albeit on a larger scale.
The challenges of increasing project sizes and complexities are creating negative impacts across the Built Environment and threaten the balance sheets of many construction firms.
Large contractors fail for the same reasons that they did back when FMI first conducted its groundbreaking research into the subject in 2008. The question is, what have we learned from the past and how have we strategically positioned ourselves to protect firms from the risk of default.
In 2014 we experienced the significant failure of Truland Electric. Five years later McDermott filed for Chapter 11. Bondfield’s massive surety default in the hundreds of millions of dollars in 2018 represented the largest loss in Canadian history, partially due to unsustainable growth in a short time period. That same year, Carillion, the U.K.’s second largest contractor, became the largest failure in British history.
Of course, failure is never far from the doorstep of one of the riskiest business environments. Contractor failures may be a reality of the industry, with the same root causes of past failures impacting today’s performance. Megaprojects, for example, don’t meet all stakeholders’ goals, with one industry study stating that just 1 in 1,000 megaprojects is successful.1
Large failures of contractors and megaprojects continue to remind us that no one is too big or small to fail—and that contractors do not die of starvation but of gluttony. Hopefully, we do not see history repeating itself with contractors making the same strategic errors of recent failures, but instead learning from the past.
1 “Changing the game. How Australia can achieve success in the new world of Mega-projects.” Australian Constructors Association. 2015.
This article was originally published June, 2016.
