One of Scotland's oldest and best-respected construction industry firms Charles Henshaw has said big institutions are commissioning sub-standard buildings with expensive and potentially dangerous defects.

Tom Lamb, managing director since 1982 at Henshaw, Scotland's leading creator of glazed structures for major buildings, has said a "culture change" is needed to stop "suicidal pricing" of contracts, and revealed that recent high-profile refurbishments in Scotland have already developed major defects.

Henshaw, a 104-year-old Edinburgh firm which is still locally-owned and has Sir Angus Grossart as a shareholder, is completing the £4m new roof at Waverley Station and its projects include the glass facade for the Scottish Enterprise HQ on the Broomielaw.

Mr Lamb said Henshaw had guarded its reputation for quality and was narrowly in profit, but the downturn had wrought dramatic changes on the industry.

He said: "We have lost facade packages worth £2m to companies who have absolutely no experience of taking on jobs of that size. You check them out financially and find they have got balance sheets of £150,000 and are basically men of straw, but because they are offering main contractors a suicidal price, and probably a non-compliant bid, the contractor goes for it so he can satisfy the client's demand for a cheap price.

"We have already been called back to buildings with huge defects and leaks - jobs that we lost three or four years ago to companies who had gone in on suicidal prices. The industry is littered with the wreckage of these companies who have gone bust but have left big problems behind them."

He cited the recent refurbishment of a Glasgow office landmark, carried out by a now-defunct contractor and said: "There are huge latent defects in the building and the repair and rectification costs are going to be something in the region of £8m."

Mr Lamb said the same phenomenon was rife in other areas of sub-contracting, such as mechanical and electrical, where potential corner-cutting could cause even more damage.

"If I go back six years, when we were appointed by a client, we would be asked to attend an interview where the client's representative would want to know the work you had carried out, would make visits, would want to know who your project manager was, would want to do real due diligence on your accounts and make sure you were financially stable. All of that has now gone out of the window. The only interest, the only driver from the clients, who are advised by their consultants, is just to press for the lowest price. I think it is pretty appalling.

"Speculative property developers have always wanted to build as cheap as possible ... the dispiriting thing is some of the buildings going up for institutions such as banks, who were in the past interested in building quality ... are being advised by lawyers and quantity surveyors to continue driving to get it cheaper."

Clients were now satisfying themselves merely by asking contractors to sign onerous contract conditions including 12-year collateral warranties, Mr Lamb said. "The problem with that is the main contractor passes the responsibility down to the sub-contractor, so all the risk and all the warranties are left at the door of the subcontractors who are going bust at a rate of knots.

"Once they go bust, the whole thing bounces back like a bad smell up to the main contractor, and if he has gone bust it falls back on the client."

He adds: "The clients have to look at what they are building and do proper due diligence on sub-contractors in terms of quality and financial stability."

But he said some big Scottish contractors were honourable exceptions and added: "These guys pay much more attention to quality and try to ensure the subcontractor is offering a compliant bid."

Mr Lamb said: "Cultural change has to start with the major main contractors deciding not to chase turnover but start bidding jobs at sensible prices." Fair contract conditions too had to be restored, he said. "There are so many lawyer amendments that it makes the main contractor responsible for everything, these are passed down, and in every job you go into you are virtually signing your soul away. For the poor old subbie, there is not a lot we can do about it - we are at the bottom of the food chain."

Mr Lamb said the depression in the industry had prompted contractors from Ireland and London to enter the Scottish market offering "cut-price deals", particularly to cash-strapped public sector clients. "You get what you pay for," Mr Lamb said, adding that temporary entrants into the relatively small Scottish market did not feel the same accountability as established players who "tend to want to have continuity".