The sources said the moves were designed to reduce overlap between Amey divisions and to lower costs. Building understands that Amey’s business development and programme management divisions may be merged or even scrapped. Sources suggested business development director Robert Osborne may leave the group.
The changes would take the group back to its original structure. This was changed two years ago by chief executive Brian Staples to turn the group into one of the UK’s largest companies.
Amey told shareholders last week that it was reviewing its business. An official this week said there had been “fine-tuning” taking place but refused to comment further.
A City source said: “They have tried to be too clever but it hasn’t worked. They are now left with highly paid people having nothing to do.”
The revelations have come in the same week that Amey was forced to reassure the City and bid partners of its commitment to PFI after The Times reported the company was abandoning PFI and public-private partnership deals because of the high up-front costs of new bids.
Amey said it planned to scale back its PFI involvement by becoming more selective about which projects it bids for. The firm’s cash flow has been seriously affected by the high cost of winning PFI contracts, coupled with the long delays in the contracts coming to financial close (see “Preferred bidder blues”, left).
“We are not pulling out of PFI but we might be more selective. We have a strong position in PFI, so we can afford to be,” said an Amey spokesperson. “We want to find the balance between long-term growth and short-term cash generation.”
Bovis Lend Lease, which is pitching with Amey for the £3bn Allenby and Connaught barracks PFI and has sought reassurances from Amey, said its partner was still committed.
However, Amey is part of the Bechtel team that dropped out of the race for the £500m Leeds Supertram scheme after a row over bid costs. The Leeds Tramlink consortium quit after failing to get assurances that its bid costs would be reimbursed if it failed to win.
Amey’s continuing problems have hit its share price, which plummeted 35% last week to 94.5p.
City and industry sources said the firm’s selective approach was being adopted by other PFI contractors. One PFI rival said: “It’s the case with everybody. We are all looking at bids carefully because of costs, which are not going down. It’s a cautious market out there.”
The issue has also led for calls for the government to speed up the PFI process, which can drag on for months. “The government will have to do something to address this,” said a City analyst. “Some deals, like the Tube, just take too long – it will eventually put contractors off.”
Preferred bidder blues: How PFI eats up cashThe bigger the PFI or PPP deal, the more expensive it is to bid for. The most cash-hungry phase of a bid comes when a firm is named preferred bidder, accounting for about 80% of the total bid costs. Delays and high up-front costs are putting extreme pressure on Amey’s cash flow. It is currently preferred bidder for three deals:
- Amey is part of the Tubelines consortium, which will upgrade and maintain the Jubilee, Northern and Piccadilly lines for London Underground. The deal was due to be finalised last September but has dragged on, and is costing Amey about £1m a month. Amey will receive more than £20m when it reaches financial close.
- The group has been named preferred bidder for the £375m deal to provide core services to Redcar and Cleveland Borough Council. The 10-year contract will involve Amey providing the council with various services, including council tax collection and housing benefits.
- Amey is finalising a £130m deal to build and maintain law court facilities in the South-west over the next 25 years.