Schal’s Stalingrad

In case you missed the magazine two weeks ago, Building made an exploratory trawl for public yet private documents under the Freedom of Information Act. We chose the BBC’s £400m redevelopment of its Broadcasting House headquarters because it was large, prestigious, and because the decision to appoint Bovis Lend Lease as construction manager was unusually controversial. It was controversial for two reason: it took almost a year to appoint a winner, and there was a perception in the industry that Bovis and the BBC had something of a special relationship: it was already working on the corporation’s White City project and it had a strategic relationship with Land Securities Trillium, the BBC’s development partner at Broadcasting House.

We were surprised by how many documents we obtained from the BBC, and by what they revealed. The project had been the scene of an acrimonious, confrontational and personal war of attrition between Bovis and Schal, which was then the autonomous CM arm of Carillion. Allegations of bid rigging were thrown around, BBC officials were harangued for 30 minutes at a time, and, after the decision was made, it took a month before the BBC’s project manager could bring himself to break the news to Schal.

I won’t retell the whole story here, but I will make two points. The first is that there was clearly a lot more riding on the decision for Schal than for Bovis. The latter’s pride would have no doubt been dented, but it would have been back for the next big job. For Schal, though, the difference between winning and losing was pretty much the difference between life and death. No wonder the BBC was impressed by the “particularly strong commitment” of Terry Chapman, the managing director of Schal.

The second point is that the BBC documents offer us an insight into the current state of the CM market. What happened after Bovis was selected as construction manager? The client went to a fixed-price deal. These days, when clients talk about going down the CM route, they are talking about the early part of the project, or they are hiding a fixed-price, risk transfer element beneath the CM badge. There may be honourable exceptions, such as the headquarters of the Swiss drug firm Roche at Welwyn Garden City (11 February, pages 70-75), but after the Scottish parliament, it seems that CM is about as popular as a drunk at a children’s birthday party.

In many ways, the story of Schal mirrors that of the industry in the past 25 years. In the 1980s it was brimming with fresh ideas, it surfed the tidal wave of that decade’s property boom, it worked on key jobs such as Broadgate and Stockley Park, and it recovered from the crash with complex, problematic, lottery-funded jobs such as the Royal Opera House and the Tate Modern.

The noughties have not offered such a clear direction. Commercial work has been patchy, arts projects have dried up and the only real work stream is coming from the public sector. There was a brief fetish for construction management in the housing sector, notably by Berkeley Group, but it never really caught on.

In the immediate aftermath of the BBC bid, I’m told Schal was given more of a free rein as a reward for almost winning the job. However, it was also split into five divisions, to make it less of a hostage to the construction management market. The idea was to target health, defence and regeneration, under the energetic leadership of Chapman. This had the ironic result of making the firm more attractive to its parent, with the result that it is now being “sucked back into Carillion”, as one onlooker put it. In the spring, Schal’s staff, which have declined from more than 400 in the late 1990s to fewer than 50, are set

to move from their Waterloo office to Carillion Building’s Brentford home. Carillion will in future use the Schal brand when it is appropriate. And as Stanhope director Peter Rogers warned back in 2001, a construction management team struggles to thrive within a dedicated contracting division.

For Schal, the difference between winning and losing was pretty much the difference between life and death

The story of Schal is the story of our uncertain times. The so-called ABC of listed contractors – Amec, Balfour Beatty and Carillion, all of which pitched for the BBC job – moved in different directions in recent times after it. Amec

hot-footed it over to support services on the stock exchange and last week bought Fast, a French IT firm. Balfour is still very much a contractor but its Schal, Heery International, does not appear to be the force it once was in the UK.

Such changes are explained by the need to control risk and thereby attract investment.

Tricky, high-profile, one-off jobs are for gamblers. Just ask Laing a few years ago, or Mowlem now. Facilities management and PFI may be a little more plodding, but don’t include the heart-stopping thrills of the Royal Opera House or the Tate Modern.

Maybe so, but doesn’t that course of action have its own dangers? If you throw out or subsume your risk takers, surely you lose much of the creativity and spark within your business?

Phil Clark is deputy editor of Building