Suppliers must pass client’s yearly tests to keep their place on new 10-year contracts.
Airports client BAA is to introduce an annual “MOT” test for suppliers that win places on its second-generation framework agreements, which will go out to tender over the next two years.

BAA is also expected to cut the number of suppliers it uses.

The new frameworks will last 10 years, twice the length of the previous arrangements. However, contractors and consultants will face an MOT test every year.

The new system is the brainchild of BAA group supply-chain director Tony Douglas, 37, who oversees BAA’s £1.2m annual spend.

The tests, similar to MOT tests for cars, will check service delivery, value for money, quality, environmental performance and health and safety.

Under Douglas’ scheme, suppliers that fail the test will be given “yellow cards”. This will oblige them to carry out a “corrective action plan” agreed with BAA.

They will then have to retake the test, although the time allowed for them to improve their performance will vary. Douglas said: “In a simple case where overheads are 1% higher than the market, it could take just 24 hours to reduce it. Rather like fixing a broken exhaust.

“However, if the marketplace has moved on and your technology is behind, it will take longer. It’s as if your oil is leaking all over the drive and your gearbox is shafted.”

If you’ve lost your motivation in a long-term agreement, you will be exited

Tony Douglas, Group Supply-Chain Director, BAA

Douglas said BAA’s supply-chain development team would be there to help suppliers trying to pass the annual tests.

If a supplier fails a retest, it will be given a “red card”. “If you’ve lost your motivation in a long-term agreement, you will be exited,” said Douglas.

The news is likely to be greeted warily by BAA’s construction suppliers. Some consultants are concerned by the news that their fees will be frozen while corrective action plans are carried out after a firm receives a yellow card.

One source said Douglas, who joined BAA 18 months ago from Kenwood, where he was a director, was stamping his authority on suppliers. “He is a hard, commercial procurement director and is emerging as a new force,” said the source.

BAA, which has £440m of construction projects under way and is expecting to issue orders for £240m more this year, is one of the strongest proponents of the Egan agenda. Sir John Egan, author of Rethinking Construction, is a former chairman of BAA.

The client dropped key suppliers, including Bovis and architect Percy Thomas Partnership, from its preferred list last February.

How the MOT and card system works

The contractor is awarded a second-generation framework contract for about 10 years. One year on, the contractor has an “MOT” – a series of tests ranging from value for money to environmental performance. If it passes, it continues and is tested again the following year. If it fails, it is given a “yellow card” and a “repair plan” to carry out. At the end of the repair plan, the contractor must take another MOT test. If it passes, it continues on the framework. If it fails, it is given a “red card” and loses its framework agreement.