Many consultants and designers have never forgiven the £470m-a-year airports client for the months of staff hours they lost first time around filling in baffling questionnaires only to be told that they did not make the cut. Some that made it are still disappointed that the “guaranteed” stream of work in the original five-year deals did not materialise as they had hoped. And a few high-profile construction managers and designers are smarting from losing frameworks last year.
But ask the bosses of any of them if they will bid for the second-generation frameworks, and without hesitation the reply is: “Oh yes, of course.” The industry’s hunger for its super-client is stronger than ever, it seems, and it has been sharpened by the ever-dangling carrot of the new Terminal 5 at Heathrow Airport.
Among the contracts up for rebid are cost-management frameworks, to be awarded at the end of this year, and construction management deals, up for grabs in mid-2000.
But firms that venture back this time will find a very different BAA to the one of 1996, when the first frameworks were let. Gone are chairman Sir John Egan, technical services supremo Simon Murray and group supply-chain director Martin Sykes. In have come group technical director and board member Mike Roberts and construction director Andrew Wolstenholme. Hovering in the background, too, is young blood group supply-chain director Tony Douglas. And on the fast-moving, high-turnover escalators of BAA senior management, success this time could mean – for some – a ticket to the first-class lounge seats of the boardroom.
So what do they expect of their construction suppliers this time around?
Ex-Army man Wolstenholme is understandably reticent about the assessment process for the frameworks, giving the impression that much of the detail still has to be firmed up. But he can assure those suspicious of cosy relationships established with the current frameworkers that there will be opportunities for new entrants.
Suppliers lucky enough to get a deal this time will be offered about 10 years of work, twice the average length of the previous frameworks. They will, however, have to pass an annual “MOT”. Those that fail will be given a yellow card and a “repair plan”. If they fail again, they will get a red card and lose their framework agreement.
We expect prices to come down rather than go up over the next few years
Andrew Wolstenholme
Although most in the industry are happy with the set-up, a minority think the “MOT” smacks of lack of trust. However, Roberts insists that proof of the scheme’s success will be a high retention rate among suppliers. “If you wait until the end of the year for a school report and it’s a big shock to the parents and the child, then obviously something’s gone wrong,” he says.
The MOT will include five main tests: service delivery, value for money, quality, environmental performance, and health and safety. These will vary from supplier to supplier – construction managers will get a different type of quality test from consultants, for example.
People expecting to both win and stay on second-generation frameworks will have to meet exacting professional and cultural standards. Roberts says the BAA team is looking at how it can measure the willingness of suppliers to break out of their traditional secrecy culture and share learning with competitors. “There are very few areas where not sharing learning gives a competitive edge,” he insists. By way of warning, Wolstenholme says that at principals meetings, which he chairs and where the bosses of BAA’s suppliers meet every other month, it is clear who is receptive to openness and who views it as a threat. “Some see it as quite an ordeal, and they are generally the ones who are falling behind in the industry,” he says.
Wolstenholme has requirements on price. “We expect prices to come down rather than go up over the next few years,” he says. This news is likely to rankle with the handful of consultants that have already reacted angrily in private to news that their fee rates will be frozen while they carry out “MOT repair plans” – periods of time that could be more than six months.
And it gets tougher still. “Take a consultant that has offices in west London and north London,” says Roberts, “we are paying for that overhead. We want your bright people at the airport.”
By way of example, BAA is compacting its multi-floor offices in London’s Victoria into a one-floor, high-density, open-plan space.
In a bow to the car and retail industries – unsurprising, considering the Egan report’s reliance on them – sourcing components from abroad will also be considered, to take advantage of the high pound. “If a supplier has got a component from a manufacturer down the road, we could say: ‘We can source it better and cheaper from eastern Europe, so why should we help your mate out down the road?’” says Roberts. “A lot of detailed design work should be happening on another continent. We must challenge our suppliers’ supply chains.”
My life is spent rehearsing for the big match. It will be a real test of us as a client
Andrew Roberts on Terminal 5
The pay-off for those that can rise to these challenges, says Roberts, is that most sought after prize, the win-win situation. “Our suppliers can get better margins by reducing their overheads and improving their sourcing,” he says. All they will need is the promised stream of work – which is where Terminal 5 comes in. “Most of my life is spent rehearsing for the big match,” says Roberts, referring to the delayed project. He admits: “It will be a real test of us as a client.”
But Roberts has news for those who think that the Terminal 5 spoils will be split between the framework suppliers. “Looking back, it was pie in the sky to think that we could translate straight from the frameworks to T5 because of the massive increase in effort,” he says.
Wolstenholme differs slightly on this. “I don’t think that’s a change of thinking,” he says. But he agrees that BAA will need considerable supplementary resources. “For example, when we build 14 km of tunnels for T5, it will be a one-off, so we won’t need the framework arrangement.”
This, of course, is great news for most of the industry, as only the select few will make it on to frameworks. However, until the Heathrow project is given the go-ahead, the industry will be looking for some stability, of company line as well as flow of work, in what is a constantly changing culture at BAA.
There is no doubt that BAA is at the leading edge of construction procurement in the UK. It is even prepared to admit that it sometimes makes mistakes – a deviation from Egan’s “the client can do no wrong” line.
“As clients, we have encouraged a ‘silo’ management philosophy,” admits Roberts. “The potty training of our suppliers has been that the client will not take risks, so they have loaded the risk into their supply chain, which has built up liability insurance and the silo culture.”
There is no denying the desire by the top people to improve BAA’s record as a client. The company has an exemplary payment record. Wolstenholme says it has come down from 47 days last September (impressive by construction standards) to 40 days now.
But the industry will be keen that the three main BAA protagonists will not simply engender change for change’s sake. Douglas, 37, who sits in on principals meetings chaired by Wolstenholme, oversees BAA’s £1.2bn-a-year spend, two-thirds of which is non-construction. Impressive in physical stature, Douglas has an ebullient demeanour that contrasts with Wolstenholme’s bright military clippedness and Roberts’ quietly persuasive authority.
