Client profile: Manchester Airport

Manchester Airport PLC holds a special place in the construction industry's hall of fame – the reputation of being one of the UK's toughest clients. It has never been afraid to use its economic muscle to strike a hard bargain, and its projects were frequently accompanied by yelps of pain from contractors. However, it wasn't until 1998 when local blockwork specialist Niwel went into liquidation that the airport really made the headlines. Niwel, which was working on the £100m British Airways Terminal 1 project, said its cash flow was blocked and pointed the finger at construction manager Bovis (now Bovis Lend Lease), responsible for certifying payments; Bovis in turn saw relations with the client sour over disputes about the final cost.

Three years on, the airport is looking to appoint contractors for the string of projects that will form part of its proposed £1bn construction spend through to 2015 (see box). It is also keen to convince its suppliers that it is, in fact, a good client – albeit a demanding one.

The programme is intended to accommodate a geometric growth in passengers using the airport – Manchester anticipates that they will double to 40 million over the next 15 years. This is not so remarkable, given the Civil Aviation Authority's prediction that the number of flights to and from the UK will rise 5% a year for the foreseeable future. But Manchester – aided by the recent completion of its second runway – is aiming to overtake Gatwick and become the UK's second largest airport. The expansion will make it the biggest construction client in the North.

As Andy Campbell, head of development at the airport, prepares for the big spend, he is carrying out a review of procurement policies. This has already resulted in new versions of the framework agreements for consultants that were set up three years ago, but it seems that contractors are not to be similarly favoured. Campbell says he is unconvinced that BAA-style partnering agreements will secure the best project management teams. "I just don't see how on a £100m project that runs over the course of 10 years, a contractor can guarantee its resources and provide us with its best people," he says.

Rather than frameworks, contractors are to be offered the kind of design-and-build deal that was used for the £58m Ground Transport Interchange that is being built by Skanska. This involves three stages: in the first, the contractor reviews the contract details. It then produces a tender package for its subcontractors to establish a target cost, and, finally, executes the work.

Campbell adds that frameworks are complicated by the airport's status as a public sector company – the shareholders are Manchester council and nine district councils. This, says Campbell, makes it subject to European competition regulations that do not affect a private sector company such as BAA. This means that the airport's present contractors, such as Skanska and Kier, will have to go through the European Union's Official Journal to win new projects.

According to Campbell, firms love working with Manchester Airport. However, none of the airport's suppliers who spoke to Building would comment about their client. "There would be too much risk involved," said one spokesman. One supplier who did express an opinion said he would not take another job with the airport. "They're difficult to work for; very intractable, very dogmatic. They're just trying to convince the media they've reinvented themselves," he said.

What is your reaction to your reputation?
I don't believe we are tough clients. We have always looked for certainty of cost and certainty in the development of our programmes, and some people haven't performed. We won't tolerate this. But overall, we have worked well with about 98% of our contractors. We got a lot of bad press about the Bovis situation.

We are one of the biggest clients in the North-west and people are clamoring to work with us all the time. The team we are working with love working with us. But when people fabricate claims or don't perform then we shall not tolerate them. We haven't fallen out with anyone from our consultant framework contracts.

What is your procurement policy?
We use project management for all different kinds of work, both large and small; sometimes we use traditional contracts. But for the last three years we have been using framework contracts with our QSs, architects and engineers. These are now being renewed.

How different from the previous contracts are these framework deals?
The contracts will use newly created – and improved - agreements that will be easier to work to because they will be managed in a more streamlined way. These contracts should be in place in early 2002, and will be in operation for three years with an opportunity to extend them to five years. The contracts cover a range of projects, from £100m to smaller ones.

Over the past three years, we have done a lot of benchmarking and are using the results of this to develop our contracts. We have examined continuity arrangements, so are now increasingly moving towards a multiple-stage procurement strategy based on design-and-build contracts. This should get us certainty of price, because we are working in collaboration with our consultants from an early stage.

Why don't you follow BAA's example and set up framework agreements with contractors?
The way I see it, if you tender through an OJ advert, then apply the government's best value criteria, the best contenders will come out on top. This system ensures you are not prejudiced against unknown firms. There are more than just several companies in the construction industry and we don't want to rule out working with companies just because we don't know them yet. New companies deserve a chance; we don't want to deprive the construction industry of opportunities. It is also important to recognise that we cannot breach the OJ rules that govern large projects.

Would you consider framework agreements in the future?
We are not trialling partnering deals with contractors, but this may become a possibility in the future. We have happily worked with contractors Skanska and Shepherd. They are all repeat contractors. But we definitely want to rule adversity out of contracts.

Can contractors expect repeat work?
If we do find that we get on with a company then we talk to them about future projects. If they are that good and like working with us then they will reapply for work and will measure up well against the best value criteria.

What do you expect from your suppliers?
An ability to manage whole projects from the provision of robust designs down to delivering projects on time while giving a maximum price. They must also be transparent in their dealings and experts in their field.

Who are your key decision-makers?
John Spooner, managing director of Manchester Airport, Rowena Burns, group strategy director, and myself. David Teale, who until recently worked in this department, has left to become managing director of Manchester Airport Aviation Services.