Airports operator to use competitive tenders for all schemes over £25m as it tries to bring down costs

Airports operator BAA is to stop using its £6.6bn construction framework on major projects as part of an overhaul of its procurement strategy.

The firm, responsible for the construction of Terminal 5 and developments around Heathrow, Gatwick and Stansted airports, will now put all projects worth more than £25m out to competitive tender.

The move follows a review by Steve Morgan, the firm’s capital director since January. Sources close to the process said the decision was motivated by a desire to cut £200m from the firm’s £6.6bn five-year construction plan.

Under the shake-up, only jobs of less than £10m in value will be allocated under the framework. For jobs worth £10-25m, the framework members will have to go through a mini bidding process. Any jobs over £25m, such as the forthcoming £100m contract for Terminal 2b, will be procured through open tender.

According to a source close to the situation, the change could also affect some projects already in procurement that do not have a tight timescale for completion.

We’ve got as much chance of benefitting as losing out

Framework contractor

Morgan is also believed to be seeking to make procurement less informal by ensuring no work is begun or prices agreed until full contractual terms and conditions are agreed and signed.

The five-year framework, signed last year, includes Balfour Beatty, Carillion, Costain, Ferrovial Agromán, Laing O’Rourke, Mace, Morgan Ashurst, Skanska and Taylor Woodrow.

Contractors on the framework said the move was a shock, but could offer as many opportunities as threats. One said: “We’ve got as much chance of benefitting as losing out. We’ve had some confusing signals from BAA in the past six months, so hopefully this should clear things up.”

A BAA spokesperson confirmed that the organisation had reviewed its procurement strategy, but declined to confirm details or the £200m figure. She said: “Given the scale of our capital investment, it’s important that we’re increasingly efficient and fair. Like most companies, BAA is always looking to reduce costs where it can, and we’ll work with suppliers to do that.”

The news comes as BAA this week confirmed it was contesting Competition Commission plans to force it to sell a number of airports.