By Richard Gelder, Client Engagement Lead for Construction & Property

Currently, most contractors, house builders and consultancies who need people with construction industry skills and experience, choose to fill temporary roles through a Preferred Supplier List (PSL) of agencies built up over many years.

These PSLs have worked well in the past, but there is now a growing risk that this approach is outdated and not fit for purpose for the labour market of today.

In the past few months, output across the construction sector is surpassing pre-pandemic levels. Significant further growth is forecast over the next three years. The challenge facing every business is the  major shortage of the temporary and freelance skills needed to scale up workforces.

This is being driven by:

• a drop in the availability of EU-born labour
• new foreign worker rules
• compliance issues that are putting barriers in the way of efficient recruitment

Here’s my view on why existing PSLs will not be up to the task of meeting these challenges – and why a new approach is now needed.

Getting temporary agency workers at the right cost

With a limited supply chain, the main problem with the PSL approach in today’s market is that you only have finite access to temporary skills needed to cover growing workloads and new demands. It’s also potentially costly. Hiring managers usually fill gaps their PSLs can’t fulfil by going off-contract whether they have approval or not, using non-PSL suppliers on ad hoc and more expensive terms. This can result in significant volumes of agency and contingency worker spend going off-contract.

PSL agencies don’t typically use dedicated technology, relying on an 'analogue' combination of using phone calls, emails and spreadsheets. This means there is no  visibility across the whole supply chai.n  It also creates an extra administrative burden and a risk of of non-compliance.

Inefficient processes around ordering, timesheets and invoicing

Construction businesses already spend too much time managing different timesheets, invoicing processes (including PO numbers) and sales calls from every supplier within their PSL  as well as from recruiters aiming to supply off contract too. Processes and systems differ from agency to agency, so you also have to manage the administration that arises from each relationship differently. This has a big impact on time that could be spent on core tasks.

Managing IR35 and other compliance needs

New IR35 rules are additional barrier to the effective resourcing of temporary workers and efficient workforce management. IR35 determinations need to be updated regularly. Agencies within PSLs may agree to complete this for you, but it’s not easy to check they are doing the determinations as required. Construction businesses also usually depend on their agencies to complete checks on compliance areas like modern slavery, foreign worker rules, fraudulent applications, AWR, CIS status checks and Right to Work. If any of these checks fail, or haven't been completed correctly, then liability could fall back to you as the employer.

Controlling and reducing costs 

With a PSL, it is time-consuming to gather reports across multiple agencies, and almost impossible to receive data in a consistent format to get visibility on what you’re spending on who, where and why. This lack of data prevents accurate forecasting and is a barrier to insight that could help you understand your staffing usage and make sure you’re not retaining workers that aren’t needed.

It’s not just the ability to procure skills that enables construction businesses to be competitive – it’s doing it for the right cost while managing your workforce more effectively.

Neutral Vendor recruitment: Less admin, better access to the people you need

The best option for solving the challenges with PSLs is to work with a Neutral Vendor Managed Service Provider.

This provides construction businesses with access to a wider pool of agencies and temporary skills without having to go off-contract. It also solves compliance headaches, because Neutral Vendors provide proactive and transparent checks that most agencies in PSLs don’t provide.

The Neutral Vendor approach is also a far better alternative to Managed Vendors that have their own recruitment agencies and have a vested interest in placing their own candidates.

Choosing a Neutral Vendor gives you:

• increased choice and quality of candidates
• more options for filling temporary roles
• proactive compliance checks
• and more agility to scale up and down.

A Neutral Vendor should also give you the insight you need to manage the resourcing of agency workers more effectively. At Matrix SCM, for example, we have a pre-approved supply chain of 2,500 UK recruitment agencies that gives us a complete overview of the market. We also provide technology and experienced account managers that deliver the management information you need for predicting trends and resourcing needs. Ultimately, you get much greater visibility over spend and usage of temporary agency workers.

Working alongside your Preferred Supplier List

There is one final important point to make: construction businesses don’t need to replace their existing PSL, discarding relationships and knowledge built over the years to make this approach work.

A Neutral Vendor can work with your existing agencies to expand your options and improve the way your PSL works. At Matrix SCM, we happily work with existing PSLs and can easily add to existing supply chains to cover your resourcing needs. The result is smarter working, better planning and ultimately a reduction in spend.

If you would like to find out more about our approach, we’ve recently produced a buyer’s guide for the construction sector that will help you explore your options.