Guidance

Activity type factsheet 2021/22: Construction

Updated 15 March 2022

Under the Defence Reform Act 2014, the SSRO must provide the Secretary of State with its assessment of the appropriate rates used to determine the contract profit rate for pricing qualifying defence contracts and qualifying sub-contracts. Part of the methodology is the categorisation of comparator companies in to four activity types.

• Develop and Make
• Provide and Maintain
• Ancillary Services
• Construction

The results of these groups are separately analysed and this fact sheet describes the Construction group. The baseline profit rate combines results from “Develop and Make” and “Provide and Maintain”, as set out in the Recommendation Factsheet. For further information on the methodology used to calculate these rates please see the Single Source baseline profit rate, capital servicing rates and funding adjustment methodology.

Construction

Companies undertaking comparable activities considered as ‘construction’ are expected to deliver services in relation to the construction of buildings or other structures at fixed locations. Companies could provide such services either on a contract basis with designs and specifications received or using their own designs. Comparable companies may be responsible for the management of the construction project, and are likely to bear contract risk, procurement risk, staff risk and some quality control risk in respect of these activities. They are not expected to bear any significant property price risk in respect of these activities.

Profit on cost of production

	2017/18	2018/19	2019/20	2020/21	2021/22
Underlying rate (unadjusted for capital servicing)	4.00%	3.92%	4.02%	3.34%	3.18%
Capital servicing adjustment	-0.39%	-0.43%	-0.52%	-0.27%	-0.17%
Underlying rate	3.61%	3.49%	3.50%	3.07%	3.01%
Three-year rolling average	5.88%	3.75%	3.53%	3.35%	3.19%

Note: The capital servicing adjustment accounts, at an aggregate level, for different levels of capital employed across the companies in the index and so sets a baseline upon which step 6 of the contract profit rate applies.

The pre-2017/18 underlying rates used for the three-year average were: 2016/17: 4.15%; 2015/16 (calculated using the Review Board’s methodology): 9.88%.

Data sources

For further information on the data selection approach please see section 7 of the Single Source baseline profit rate, capital servicing rates and funding adjustment methodology. A company update search of the Orbis database was carried out on 5 November 2020 on data update number 202001 using software version 202. The financial data for the calculation was extracted from Orbis at the same time.

Median capital servicing adjusted return on cost of production

Proportion of Companies by country

Proportion of companies with defence keyword

Supplementary statistics

Number of companies	88
of which profit making	79
Aggregate turnover	£118
Total capital employed (CE)	£2.37
Average company CP:CE ratio	46.71

Source: Orbis (Cash figures shown in GBP Billions)

Names of companies in the index

3B Construction LTD	Glasgiven Contracts Limited	Modebest Group Holdings Limited
Aasen & Oevrelid AS	Goldfoster Limited	Morgan Sindall Group PLC
ADF Group INC *	Groep VAN Roey	Oliver Connell and SON Limited
Aecom	Grupo Empresarial SAN Jose S.A.	Peab AB
Aecon Group INC	H. G. Construction (Holdings) Limited	Putkiwuorio Oy
AF Gruppen ASA	Haandverkskompaniet AS	Severfield PLC
Andrew Scott Ltd.	Haley Securities Limited	Skanska AB
Ashe Group Holdings Limited	Hallmaker Group AS *	Skorve Gruppen AS
B & R - Bouw en Renovatie	Hardwicke Investments Limited	Societe Groupe 1000
Barnwood Group Limited	Highgrove Group PLC	Spritestore Limited
Bird Construction Inc.	Hollingsworth Bros. (UK) Limited	STEINER BAU Gesellschaft m.b.H. *
Blenheim House Construction Limited	Implenia AG	Steve Hoskin Construction Limited
Bowmer and Kirkland Limited	J P Dunn Construction Limited	Stuart Olson Inc. *
Bravida Holding AB	J. & P. Avax S.A.	Tclarke PLC
Brims Building Group Limited	J.Wareing & SON (Wrea Green) Limited	Tolent PLC *
Buckingham Group Contracting Limited	Jarvis Group Limited	Tonroe Group Limited
Byggpartner I Dalarna Holding AB	Jerram Group Limited	Tutor Perini Corporation *
Cara Holdings Limited	Kier Group PLC * (J)	Vanoncini S.P.A.
Champion Groundworks Limited	Koninklijke BAM Groep NV	Veidekke ASA
Clegg Holdings Limited	Kvia Entreprenoer AS *	Vinci
CMF Structures	Lapin Teollisuusrakennus Oy	Vopi 4 SA
Conlon Holdings Limited	LES Macons Parisiens	Wates Group Limited
Coulson Group Limited	Lindum Group Limited	William Hare Group Limited
Darke & Taylor (Holdings) Limited	Lonsdale Holdings Limited	Williams Industrial Services Group INC (J)
Drange Maskin AS	Lowe Holdings Limited	Winvic Group Limited
Elektro AS	M.P.B. Structures LTD	WYN Construction Limited
Emcor Group INC	Magnus M Thunestvedt AS
Evadx Limited	Martifer Sgps S.A.
Feltham Group Limited	Masterson Holdings Limited
Fira Group Oy	Mitchellson Formwork & Civil Engineering Limited
Fluor Corp *
Gaiger Brothers Limited

‘*’ Indicates that the company is a loss-maker in the year. The data for loss-makers are not included in the 2021/22 assessment, but the companies will be taken forward for consideration next year.

(J) Indicates a company which was not in the activity group last year, but has been added this year.