BAA sets out £9.5bn spend including new Heathrow T2

BAA is the construction industry’s largest private client: last year it procured £1.3bn of work and is responsible for Heathrow Terminal 5, one of the UK’s largest live projects.

It is showing no signs of letting up. When T5 is completed in 2008, upgrade work will begin throughout the airport, while just last week it announced a redevelopment of Terminal 2 in time for the 2012 Olympic Games.

Plans for this project are at an early stage, and BAA is to discuss the viability of the idea with airlines, but if T2, or “Heathrow East” as it is called, goes ahead, it could start on site in 2009 and cost up to £1.5bn. All this is is on top of the £3bn to be invested over the next decade as part of the Heathrow masterplan.

With plans at such an early stage, Roger Bayliss, BAA’s construction director, says it is too early to talk about how Heathrow’s next megaproject will be delivered. He says he remains committed to the framework approach used at T5 but adds that it will be reviewed to ensure the range of suppliers matches the profile of the work.

“We’re not doing away with frameworks, but we are looking at how we want to structure them in future,” says Bayliss. “We’re examining whether the framework meets all the needs coming up over the next few years. We’re not throwing out what we’ve got – we’re building on a foundation and filling in gaps.”

Bayliss will also be considering a variety of procurement models. “The framework does not legislate for, or against, any possible contract vehicle. We need a range of options to get best value, from fixed-price lump-sum to cost-plus and the whole variety in between.”

The opening of T5 in 2008 will lead to a series of moves by airline operators. When British Airways moves into T5 in 2008, this will leave Terminal 1 vacant for £700m of upgrade work before it becomes a hub for Star Alliance, a group of international airlines.

Bayliss likens it to a game of Tetris, with a number of moving elements that have to be fitted together. These projects present a formidable planning operation because the team must work around a fully functioning airport while causing minimal disruption to the 90 airlines, or the 67 million passengers that pass through Heathrow each year.

For example, at Terminal 3 a £50m multistorey car park has to be constructed by next spring. This must done without disrupting the Heathrow Express station, which is situated below it, or pedestrian and car access. More than 800 services on the site including airfield ground lighting, high-voltage electricity and IT cables had to be rerouted. “It’s logistically challenging – we’ve got to keep T3 live all the time. It’s a busy area,” says Bayliss. ”

We’re not doing away with the framework, but we are looking at it

Roger Bayliss, BAA

BAA’s property division employs 300 people in the seven airports in the UK. There are 120 construction staff, the rest are split between design and commercial. Earlier this month Michael Clasper, BAA chief executive, announced a 9.6% rise in operating profit to £412m and a cost-cutting programme that aims to save £45m a year. BAA intends to axe 700 of its 12,000 total staff by 2007, including one in five of the management and supervisory staff.

But Bayliss notes: "I don't anticipate there being significant job losses in our capital projects area as we have a busy pipeline of work."

Big projects aside, BAA will also spend £50m a year on an asset maintenance programme at UK airports. He said: “The profile of our work is changing. We’re moving from a number of large bespoke landmark projects to a lot of asset management work.

“Some of the facilities have come to the end of their lives, so we’re going through a programme of quite exhaustive asset replacement – lifts, escalators, some of the flooring.”

The aviation bill now going through parliament is likely to bring more opportunities for airport expansion. Bayliss’ construction department functions as an internal supplier for BAA: that is, it delivers the programme that the corporate team agrees on. So, on the plans for the second-generation upgrade at Stansted, Bayliss complements the business development staff. He says: “We’ve been working with the Stansted team to help it understand logistics. It is focusing on how it will stand up from a business perspective.”

Decision-making on expansion plans is not part of his job description and when quizzed on high-profile cases, he says: “Don’t ask me about Luton, I can only give a personal view,” although he shies away from doing so.

It’s now been a year since Bayliss returned from Hong Kong to take up his role at BAA. He had worked for the Mass Transit Railway Company since 1992, and was pleasantly surprised by how UK construction had changed while he was away.

“I was pleased to leave because the industry was really tough, but now it’s different,” he says. “I see an industry much more in tune with the needs of society and with much more collaboration between client and supplier. It’s a much more pleasant industry to work in.”