BAA procurement changes save £300m in a year

Steven Morgan, capital director of BAA, has revealed that controversial changes to procurement have saved the airport operator £300m in his first year in charge.

When Morgan took over at BAA in January 2009, it was £300m over its £4.1bn spending limit, but he says the 2008-2013 five-year programme is now back on budget, thanks to measures

that included tendering work outside the framework, cash rewards for good performance and slashing red tape.

He said: “We’ve made a saving of around £260m. There were also a few projects we decided not to do, which brings it up to £300m, and inflation hasn’t been as high as we had expected. But the biggest saving has been from competition.”

The nine primary framework contractors – Balfour Beatty, Carillion, Costain, Ferrovial Agroman, Laing O’Rourke, Mace, Morgan Ashurst, Skanska and Taylor Woodrow – had previously been allocated

projects by BAA under the framework but now have to compete for work up to £20m, while larger projects are being offered to the market.

Morgan, a former US Navy rear admiral who served in Vietnam, said: “Initially there were big gulps, but they seem happy now, at least to my face. Everyone can compete for everything, rather than being handed a corner of the work, and they’re rather attracted to the award fees.”

The award fees – up to 2.5% of the contract – are given to contractors at BAA’s discretion for good performance.

One major contractor on the framework welcomed the changes. “We’re very positive about the new regime – if you offer keen prices, and if you do a good job, then that’s the way to get work.”

Meanwhile, Morgan said the Laing O’Rourke and Ferrovial Agroman joint venture on the £812m Terminal 2A deal was being forced to make 80% of

the subcontracting work competitive rather than provide work in-house. “There’s been a little whingeing about that,” he said.