Land Securities, aka the builder's developer, is spending £700m a year. But you won't win any of it if you're what development director Steve McGuckin delicately terms a bullshitter. Katie Puckett found out about his plans to take even tighter control.
You can't bullshit Steve McGuckin. Land Securities' development director has a first in architecture, he's RICS-qualified, he has an MBA and he studied real estate at MIT in America and finance at the London Business School.
"I understand design, I understand construction, I understand money and finance and business. If I'm in a meeting and someone's bullshitting, no matter where they come from, be they a QS, an architect, an engineer or a commissioning consultant, I've been there and I know. If I find out they've lied, I can't trust them."
Blotting your copybook with McGuckin is a major tactical error, given that Land Securities is one of the industry's biggest clients. It will have £2bn under contract by the end of this year on 15 projects across its London, retail, urban regeneration and Trillium outsourcing divisions. Another 20 major projects are in the pipeline. The developer is among the bluest of the blue-chips - its latest results in May showed an 80% rise in pre-tax profit to £2.4bn for the year to the end of March 2006. Its long-term rental income allows it to develop rain or shine, it takes a chance on the market and on its architects - currently in the pipeline are daring City offices by Jean Nouvel and Rafael Viñoly.
Developers are always demanding clients and Land Securities, described by one contractor as a "builder's developer", is known for taking a more hands-on role than rivals such as British Land or Hammerson. McGuckin himself spent 20 years working for construction companies including Mace before he switched team, and his team includes 60 project managers all with at least 10 years' experience of the industry. They are already involved in every project from start to finish, and they're about to get even closer into the detail.
Next target: The supply chain
McGuckin is determined to make the supply chain more efficient. He commissioned cost consultant EC Harris to conduct a three-month review of exactly what it spends and with who. The study revealed that 73% of its spend was on building structures, cladding, M&E and fees for contractors and architects. Over the next three years, this adds up to £450m on M&E and £300m on cladding.
Land Securities already works closely with its contractors, but McGuckin says it will formalise relationships with specialists as well. "At the moment, if there's a problem,
I will pick up the phone to the MD of a trade contractor, but it still has a back-door feel. We want to make that relationship more open, explicit, tangible and valid.
"It's about getting knowledge from the people who do the work - the designers, the manufacturer in their unit in Wales, the guys and girls on site fixing things together - so projects are delivered as efficiently as possible."
A call for greater efficiency is often a genteel way of announcing cost cuts, but don't panic - McGuckin is adamant that it's not about squeezing margins. "I don't mean doing it cheaper, I mean reliability and adding value," he says. "I've placed about £2bn of work for Land Securities and I've never gone for the lowest price. I always go for the team.
"First place will go to the right people at the right price. We've got enough knowledge in the team to know what we should be paying and we look for bids within 1% or 2% of that."
Land Securities' own performance on each project is measured by a dizzyingly complex matrix of key performance indicators; each time, team members must better their performance to win bonuses. McGuckin says this might be extended down the supply chain. "At its simplest, we might give bonuses for achieving key milestones. I have a philosophy of not overcomplicating - there's enough complication without adding meaningless measures."
Leaning in the right direction
In three years, says McGuckin, all Land Securities projects will have "much more integration in the design process, a more open procurement process, closer relationships at the different levels in the team and incentivised performance". He will trial the new model on exemplar projects in the retail and office sectors.
He sees Land Securities as "less lean than Stanhope and less theoretical than BAA".
It wants more control of the end product because, unlike Stanhope, it will hang on to buildings and maintain them. "Being lean isn't necessarily good for us."
Of the airports operator BAA, he adds: "They're doing a great job but we'd like to be leaner in terms of the processes. If you take T5, there are four or five project management experts in there but I haven't got a clue who's really calling the shots."
I don’t mean doing it cheaper, I mean reliability and adding value. I’ve placed about £2bn of work and I’ve never gone for the lowest price. I always go for the team
Over the next five years, Land Securities' development pipeline will grow to about £800m a year and McGuckin says it is focused on up-and-coming areas rather than just buildings. It is redeveloping swaths of the Thames Gateway in Kent and is on Network Rail's shortlist to redevelop Victoria station and the surrounding patch of central London. McGuckin also has high hopes for Southwark - today he chose to be interviewed and photographed at Allies and Morrison's £200m Bankside office development behind Tate Modern.
Land Securities is also big on corporate social responsibility - visitors to its website are invited to while away a few minutes playing games entitled Save the Newt, Stakeholder Drop Zone and The Mean Lean Green Machine. More seriously, last week it published a 28-step report covering biodiversity, supplier management, energy performance and workplace equality.
"CSR is part of shareholder value," says McGuckin. "We're about the creation of shareholder value through responsible management of risk. We're not in it for the short term. We're investing in Victoria and here in Southwark because we see the potential to regenerate or reposition those areas, not just for commercial gain but gain for the whole area. If the whole area is considered safe and well designed, that itself supports and increases property values."
McGuckin isn't worrying about the Olympic effect just yet - he believes it will depend on the size of the schools, healthcare and defence programmes in 2010-11. But with both public and private sectors building at a furious rate, he is concerned about capacity.
"People like Bovis, McAlpine, Skanska, Laing O'Rourke only have so many A-teams. The danger is that the top players will all fight for the same 80 firms. Clients also have to help some of the middle-sized firms become larger players."
For example, he has hired East Anglian main contractor SDC on a £15m retail scheme:
"We went for them because other clients told us they were great and they do what it says on their tin. They came with a very open-book approach, they were very honest. They're comfortable on projects around £30m, but they're the type of company who could grow if they wanted to."
Small but perfectly formed
Smaller firms wanting to graduate to the big league should also look at their own supply chains, advises McGuckin. "It's not just about them becoming bigger. It's about their supply chains growing or them developing relationships with the suppliers who currently sit under the big boys."
What about the industry's perception that Land Securities actually relies on a shortlist made up of Bovis and Robert McAlpine? McGuckin says it's a myth. "We're working with Miller on an £80m scheme in Scotland and HBG has been appointed on a retail development in Corby worth £30m. I'll only allow people to tender if they've got a chance, I'm not into making up the numbers, it's a waste of resources and it's not honest. If people are serious about tendering, we're serious about using them."
It is almost de rigeur for developers looking for kudos for their speculative City schemes to draft in a big-name architect, hence the hiring of Nouvel and Viñoly. But McGuckin says it will also consider using younger, smaller practices on different parts of schemes.
"It's easier now to use one architect to do the concept and others to deliver a project - it used to be frowned upon. I constantly see small practices as well as larger ones. You don't assume just because they're small, they can't deliver - but we won't pretend they can do it if they can't." He's always looking for the next generation of stars and tips Flynn Architects, FAT Architects and Panter Hudspith for greatness. He is also keeping an eye on his former colleagues at Grimshaw.
Architecture was McGuckin's first love and he reckons that of all the letters after his name - MA, MBA, MSc, RIBA, and, deep breath, RICS - his RIBA qualification was the most difficult.
As for his personal wonder and blunder - job-seeking architects take note - McGuckin scans the London skyline for inspiration but decides he needs a bit of time to think it over. A few days later, he emails with choices of a distinctly coastal theme.
McGuckin went to university in Brighton in the early 1980s and he has bad memories of the Ramada hotel on the seafront by Michael Lyell Associates. "To my eye, it failed in every respect of urban and architectural design. The area thrives despite it."
His wonder is David Chipperfield's house in Galicia, northern Spain, and is another nod to that "philosophy of not overcomplicating". McGuckin's verdict: "It sits in comfort, in a rambling elevation that forms a terrace in an old fishing village on the waters edge of the Atlantic coast. It uses, rather than fights, the geometrical constraints of the site and exploits the views. Simple. Magic."
Land Securities at a glance
Programme Will hand out contracts worth £700m a year for the next five years
- New Street Square, London EC4: £312m
- Cardinal Place, Victoria, London: £256m
- Bankside, London SE1: £200m
- 50 Queen Anne’s Gate, London SW1: £995m
- Jean Nouvel’s One New Change in London EC4 is in for planning, with a proposed completion date of 2010
Major retail developments outside London include Princesshay in Exeter,worth £149m, and the £200m Merchant’s Quarter in Bristol. Regeneration schemes include 7250 homes on 300 ha at Eastern Quarry in the Kent Thamesside area.
Land Securities will convert to a real estate investment trust next January to save paying tax on its assets, but it’s too early to say how this will affect the development programme.
Who does it work with? Architects: “Last time I counted, there were 90 firms who we had worked with and would work with again.
I believe in loyalty to people we’ve worked with before but I don’t want to be seen as married to any particular architect.”
Land Securities has preferred suppliers in every field right down to land surveyors. McGuckin aims for four or five but if there are only two firms he rates in a specialism, he doesn’t add more just to make up numbers.
Procurement It is moving from single-stage lump sum to two-stage design-and-build tendering. “You’ve got to look at how certain you are about the project, how long you can delay while you find a lump sum and, on a large project, how realistic it is to ask three main contractors to spend half a million pounds bidding when the industry’s busy.
“If you’re an expert client, isn’t it better to fix things like overhead, profit, preliminaries and inflation, and ask people to take the risk where it’s reasonable and pay a reasonable premium? We’re not switching to construction management because, ultimately, we want the contractor on the hook for time and cost.”
Who’s who Francis Salway is group chief executive. The Trillium outsourcing division is headed by Ian Ellis, the London division by Mike Hussey, retail by Richard Akers and urban regeneration by Mark Collins. McGuckin’s team works for all four.
Working with McGuckin
People describe you as a “tough cookie”. Is that true?
I like to think I’m firm, fair and clear about what we want. We’re demanding – that’s
the sign of a good client. “Positive
intolerance” is the term I use. You don’t tolerate underperformance, but you’re reasonable in what you ask. I say, if there’s a problem and it’s not a big deal, don’t make a big deal out of it. If something is a big deal, flag it up early. I’ll forgive a mistake, but not a mistake that’s been hidden.
What are you looking for in a construction firm?
Passion and technical capability. What turns me off is falsehood or, to put it another way, bullshit. Everyone should be very careful what they say in interview. If you claim to have done something, I’ll check it.
What’s the biggest problem with the construction industry?
Lack of belief. We undersell ourselves. What we do is amazing and it’s a great time to be doing it. When I finished my studies, I saw three recessions in seven years.
You can find a thousand reasons why something’s impossible but if you believe and keep going, it’s amazing what can happen. At Waterloo [International Terminal, where he worked for architect Grimshaw] we were all in our 20s, but we had to have faith in the team and get on with it.
Try saving the newt on Land Securities' website www.landsecurities.com/crgame/