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鈥淐ompetition is really, really important.鈥� Gareth Lewis, the chief executive of Mace鈥檚 拢1.5bn turnover construction arm, is standing on top of Battersea power station on a hot, sunny morning pointing out all the jobs that the firm is working on as the capital stretches out in all directions.

It is a remarkable view and, for those few with lots of money at their disposal 鈥� prices start at 拢865,000 and run into tens of millions of pounds 鈥� it will be theirs when the final residents of the 250 or so flats move into their new homes in a few weeks鈥� time.

Lewis admits that he wants to win every job he bids for but knows the law of averages says that he can鈥檛. Instead, he lavishes praise on those he frequently comes up against. 鈥淪ir Robert McAlpine, Laing O鈥橰ourke, Lendlease 鈥� all absolute quality competition. I鈥檓 pleased to compete with all of them.鈥�

Mace鈥檚 work on the second phase of Battersea 鈥� basically, what the layman would know as the power station itself 鈥� is coming to an end after five years. The firm came in on a construction management contract after original contractor Skanska could not agree a fixed price.

鈥淚t turned into a CM [contruction management] opportunity,鈥� Lewis says. 鈥淲e both bid it and we won.鈥� 

The job is one that he will miss. 鈥淚鈥檝e loved it,鈥� he admits. 鈥淲e鈥檝e had a fantastic team at Battersea, the architect [Wilkinson Eyre] has been great. The client has been brilliant.鈥�

I鈥檝e been through three recessions but there has been nothing like this. Steel prices have been horrendous. It has gone from 拢800 to 拢1,600 a tonne

Lewis says Mace will look at further phases of the development which saw Carillion build the first phase, a slew of flats running away from the river, while McAlpine is completing work on flats designed by Foster & Partners and Frank Gehry.

As well as 253 apartments, with the first residents moving in last May, Mace鈥檚 work has involved building a new headquarters for tech giant Apple and over 100 retail units.

But, for Mace, this part of the job has the feel of one coming to an end 鈥� at one stage 2,800 people were working on it 鈥� and Lewis is looking at more opportunities elsewhere. There seem to be plenty.

鈥淥ur pipeline that we鈥檙e tracking is 拢5.7bn, more than we have ever tracked before. We are waiting on 拢2.4bn-worth of decisions. That鈥檚 double anything we have been waiting on before.鈥�

He reels off a list of schemes that he is looking at. Asked if he would cast an eye over any rebuild of Manchester United鈥檚 Old Trafford stadium, he says: 鈥淲e would if it was CM. We would prefer it if it was in the south, we are quite London-centric. It would probably suit Laing O鈥橰ourke and SRM more than us, but we would look.鈥�

Inflation

Despite everything, there is still a glut of work about. And by everything, that means what the industry has been hit with in the past six years. Brexit, a global pandemic and now rampant inflation.

鈥淯nprecedented,鈥� says Lewis of the latter. He has been in the industry since the mid 1980s,  when he graduated from Bristol University with a degree in construction technology.

鈥淚鈥檝e been through three recessions but there has been nothing like this. Steel prices have been horrendous. It has gone from 拢800 to 拢1,600 a tonne.鈥� He thinks the market might calm down in the coming weeks as alternatives to mills in Ukraine and Russia are found but is less optimistic about when overall inflation will start to flatline.

鈥淭here is more to come between now and the autumn, it鈥檚 going to be with us for the next six to 12 months,鈥� he adds. 鈥淚n the short term, it will get worse and we will see [inflation at] 10%.鈥�

He says that the scale of price hikes on jobs has caused mid-sized schemes to be delayed by three months and the larger ones by six months or more as clients review budgets, value engineer projects or sit on their hands and hope that the headwinds pass. But developers still want to develop and builders still want to build. 

鈥淚t鈥檚 not fair to go to our clients and say, 鈥榃e鈥檙e passing it all on to you, you鈥檙e the consumer鈥�. We have a duty of care to support construction. It鈥檚 in our interest for projects to go ahead. It鈥檚 not in our interest to kill a project off. Consultants don鈥檛 want projects to die, either. We have a duty of care to do things right.鈥�

He says that Mace has told clients the firm is not looking to profiteer from inflation, reckoning it can fix around 80% of the cost leaving the remaining 20% 鈥� which covers materials 鈥� to be a variable cost. 鈥淲e鈥檙e then managing that risk together.鈥�

Clients fall into three categories right now when it comes to negotiating a revision of costs on deals already agreed before the steep materials rises really kicked in. 鈥淪ome clients will say no, some will say, 鈥楳aybe, put a case forward鈥� and others will say, 鈥楬ow can we help?鈥� It is not in clients鈥� interests for us to do badly, it is not in our interest for the supply chain to do badly. This is a team game and, if we can all work together, take a bit of pain on the way, then we will get through it.鈥�

What to do, though, about those clients who flatly refuse to help, point to the contract,     shrug and say tough? 鈥淵ou have to take it on the chin.鈥� 

But Lewis has a long memory. 鈥淲e are being a lot more selective about the work we go after and they will drop further down the list.鈥�

Cashflow

As ever, cashflow is key 鈥� more so right now. Mace, which takes an average of 29 days to settle its bills, is paying some of its smaller subcontractors 鈥� such as bricklayers, dry liners, painters and decorators 鈥� fortnightly.

鈥淐ash is so important for smaller suppliers, we鈥檝e got to keep them moving. They pay their labour weekly and they need the cash regularly. We鈥檙e only as good as the quality of our supply chain and how they deliver for us. You have to look after them or they will go somewhere else.鈥�

There is another reason, of course. According to the Insolvency Service, April this year saw 384 firms in the industry go under, compared with 419 the previous month. Both are 12-month records and there are worries that the number will get worse before it gets better.

I think we will see more firms go bust and cashflow is always the biggest cause

鈥淚 think we will see more firms go bust and cashflow is always the biggest cause,鈥� Lewis says. Big firms like Mace are also not immune from being saddled with jobs agreed at one price only for costs to head rapidly north.

鈥淚f we are in the finishing stage of a project, I鈥檒l worry less because we鈥檒l just close it out. If we are at the start [of a job] we鈥檙e working with our clients to manage that [risk] very carefully without being seen as not being honourable. We don鈥檛 want a lose-lose situation where a supplier goes bust and we have to pick up the contract at a 10% premium, we go to the client and he gives us no sympathy.鈥�

He does see some hope for the coming months, though. 鈥淐lients are much more sophisticated nowadays. They understand having a distressed project is not in their interests either.鈥�

All this has meant a resurgence in CM contracts, which Lewis says plays to Mace鈥檚 strengths but which has also shone a spotlight on what risk contractors are prepared to take on. Schemes get into trouble, he says, because contractors are married to the wrong job. 

鈥淚t鈥檚 usually complex projects taken on by too small contractors.鈥� In an ideal world, margins should be between 5% and 6%. Instead, they remain stuck at half that. 鈥淚t鈥檚 too competitive and margins are too low.鈥�

He joined Mace in 1994 as a project manager, attracted by the idea of working on CM schemes. He had spent the previous decade at Bristol firm JT Design Build, later bought by Higgs & Hill. 鈥淚 trained in D&B but saw this fresh new approach called CM and I wanted to move to London.鈥�

His first job at Mace was a VIP lounge at Gatwick airport and he is now one of four senior shareholders of the company 鈥� along with chief executive Mark Reynolds, former chairman Steve Pycroft and deputy chairman Mark Holmes 鈥� who between them own around 70% of the firm.

Such was his love of CM, he actually left Mace to go and work for Schal, the then Tarmac-owned construction management specialist, on the makeover of the Royal Opera House in Covent Garden, central London, for four years. 鈥淥n my Mace CV, it says I took a sabbatical.鈥�

He came back to work for Pycroft, which eventually meant working on the Shard, the company-transforming deal that Mace won more than 15 years ago. Asked to name a favourite project, he plumps for that job. 鈥淪teve won the project and I built it,鈥� he smiles.

He was the managing director of major projects at the time, then spent a dozen years as COO of construction before becoming chief executive of the business, the firm鈥檚 largest division, three years ago. A year later he was facing a crisis. 

The pandemic meant turnover on Battersea went from an average 拢30m a month to zero in the space of a few days. The job was shut for six weeks and thousands of workers were told to go home. 鈥溌�60m or 拢70m was not happening,鈥� he winces.

Industry changes

He turned 60 in April and so is in a position to marvel at how much the industry has changed in his three-plus decades in it. 鈥淭he projects are more technically challenging, it鈥檚 a lot faster paced.鈥�

His very first job for JT Design Build was a 拢1m headquarters for US conglomerate Honeywell in Bracknell. 鈥淵ou wouldn鈥檛 get much for that figure now.鈥� 

Technology is changing at such a pace. We have got to find ways where it鈥檚 a proper enabler to what we do. I don鈥檛 think we鈥檝e found those ways yet

There are more opportunities today for young people than when he was starting, he says. Of construction, he adds: 鈥淲e actually create things, we make things happen. That鈥檚 quite exciting.

鈥淢MC is here now and it has taken far too long to get on the map. We should be driving offsite much harder than we are. Technology is changing at such a pace. We have got to find ways where it鈥檚 a proper enabler to what we do. I don鈥檛 think we鈥檝e found those ways yet.鈥�

The carbon agenda is driving change too and the need to replenish those people leaving the industry with new talent. 鈥淲e have a wonderful opportunity to be a modern, inclusive industry and I want Mace to be modern and inclusive.鈥�

He wants to do more life sciences, process engineering work, data centres and building the plants springing up to make electric car batteries. Aviation, decimated by the pandemic and which saw the firm go from 220 staff at Heathrow to 69 in the space of four weeks, is also coming back.

The firm missed out on the chance to carry out the fit-out of Apple鈥檚 office at Battersea, the job instead going to ISG, but Lewis sees the chance to break the monopoly of the big two 鈥� ISG and Overbury. Turnover here is around 拢150m but Lewis wants it to be between 拢200m and 拢250m.

The work-life balance in construction is very challenging. I like to work hard, I like to network and I like to get home when I can

He is coy about how long he reckons he has got left at Mace. He is up at 5am and out of the door of his Berkshire home half an hour later. He will stay in town for much of the week, with Tuesday and Thursday evenings reserved for meeting clients. Trim, thanks to regular mountain bike rides with one of his five children, it is clear that he enjoys it too much to think about packing it in.

But he admits: 鈥淭he work-life balance in construction is very challenging. I like to work hard, I like to network and I like to get home when I can.鈥�

For Mace, work on the next five-year plan 鈥� the current one ends in 2026 鈥� will start up again within a couple of years. 鈥淲hen you鈥檙e younger you don鈥檛 think in five-year chunks,鈥� he reflects. 鈥淵ou just want to get to the next stage of your career as quickly as you can.鈥�