“It took 12 years to put together and 12 weeks to dismantle.” That was one of the more wry comments on BAA’s decision to turn its back on framework agreements for a good chunk of its work.
The decision was taken by Steven Morgan, the man brought in by the airport operator to wring the greatest possible value from its capital spending. As our interview in this week's magazine makes clear, his preferred method for doing so is gladiatorial combat between would-be suppliers.
That BAA has taken this line is not entirely unexpected. Ferrovial’s highly leveraged takeover in 2006 left it with massive debts (€24.1bn at the time of writing) and it clearly needed to look hard at its subsidiary’s capital spending. Further bank finance is no doubt conditional on slashing costs to the bone.
All of which brings up the familiar wrangle between competition and partnering.
Morgan’s position on this one couldn’t be clearer: “Competition,” he says, “is one of the best ways of achieving value for money,” a conclusion supported by his success in cutting costs at Sellafield by £250m. Ironically, the main man on the other side of the argument is a former BAA boss: Sir John Egan. He introduced frameworks during his time as chief executive on the grounds that the traditional inefficiencies of construction could be overcome with long-term partnerships that nourish trust and expertise.
So, BAA’s change of tack could hardly be more symbolic. What it says, in effect, is that partnering is only applicable during periods of sunny economic weather. Well, BAA’s frameworks could have been more financially rigorous perhaps, but does the idea of continuous improvement really have no value after all? The gamble BAA is taking is that it gains more than it loses – and the outcome will be watched intently by other clients, including the government.
Another of BAA’s changes is to get out of the construction management business. Its projects division has been dismantled on the grounds that it “is not a construction company”. That may be the case, but one consequence is that its suppliers have to be extremely knowledgeable about airside working – and BAA itself must know exactly what it wants at the outset. Otherwise, it may find that the spirit of competition extends all the way to the High Court.
So, does partnering have a future? Probably only if contractors can demonstrate that guaranteed work does cut costs and doesn’t breed complacency. What seems clear is that even the clients that bought into the Egan agenda are as worried that their suppliers are trying to fleece them now as they were in 1998 when Egan published Rethinking Construction. It’s sad but true that trust in construction remains an elusive virtue.
The optimal solution
Wanted. Employment for an Olympic stadium, hardly used, in up-and-coming London location, one previous owner. Well, the latest plan for the 2012 stadium is to keep it at, or near, its full 80,000-seat capacity, fill it with tourist attractions and use it as a sports venue.
It’s a bold decision to drop the idea of collapsing it to a 25,000-seat ground, not least because it was designed to be demountable. But the plan to turn the stadium into a sports academy seems an expensive way of providing a school – a bit like cutting up an Oscars gown to make overalls.
What’s being mooted now needs a good deal more thought, and some serious sums need to be done. But Margaret Ford, who’s now in charge of the 2012 legacy, is right to disregard critical headlines in favour of delivering a lasting structure that provides some reason to go to the Olympic park – besides attending a football coaching session.