BT: not one to blow its own trumpet

For a big-time client, British Telecom has had a remarkably low profile. Boasting a œ100 million-a-year construction spend, it is not far behind trendsetters such as BAA, yet it scores barely a mention in the industry press.

Until recently, this was not surprising. BT had problems. Most of its jobs went astray on both cost and time for one of three basic reasons - either BT, the client, had failed to say what it wanted, or the consumer had not been clear with his designs, or the contractor had focused on making a financial gain rather than in providing a quality service.

But not any longer. BT's head of construction, Bob Davidson, hasn't waited for the Latham Review to stimulate his imagination over cost savings. He has already introduced fundamental changes in its project management policies that have yielded savings of more than 20%.

Out went the old system whereby the country was divided on a district basis, each with a general manager, and each following an independent building and maintenance policy.

The drastic restructuring led to a single, centralised unit known as the Construction and Maintenance Management (CMM) division.

BT's CMM staff manage contractors and consultants positively - their phrase is 'in a robust and careful fashion'. The core philosophy is to establish single-point communication with every contractor: in other words, someone out there has to stand up and be counted.

'We had a problem,' concedes Davidson. 'It was very common to encounter difficulties. It wasn't that they went wrong on either cost or time, it was always both. The reason was that someone hadn't done their job properly - hadn't focused on giving a high quality service.'

Problem projects, once accounting for the majority of jobs, have tumbled dramatically and now number no more than 1% of total workload.

At the heart of the improvement is the work done by BT's Supplier Assessment Group (SAG), a key part of its CMM division. Not content with logging basic information on the 3,000 firms to be found on BT's qualified construction suppliers' list, SAG staff continually feed in additional data. They believe the most important information stored in this way is the quality of service the contractor provided when it worked for BT before.

Another key change that helped BT earn that valuable 20% saving in construction costs was the formation of an in-house project management team. Some 75 strong, it is the biggest outside Government.

As a sophisticated purchaser of construction services, BT made this move because it recognised that construction expertise within the company was vital if it was to use the construction industry in the most effective manner.

The success of this philosophy is plain to see - BT construction projects now come in to cost.

And where do the 20% savings come from? The four main areas are managing design better, procurement, value management and project appraisal techniques.

Not surprisingly, Bob Davidson, head of CMM for the past four years, is delighted with this turnabout in fortunes and having now put his house in order, he's keen to bring its low profile to an end.

'We want the reputation of being a commercial, demanding client,' he explains, 'but one that is fair to its suppliers.

'We purchase all professional services from external suppliers. For example, we have no designers here, our philosophy being to specialise in our core business of telecommunications. That explains why our unit notches up more than 3,000 appointments a year with contractors, consultants and suppliers.

'Because the most important people in delivering projects to cost are the contractors and consultants, we believe we must manage them in a robust and careful fashion. The aim is to be objective rather than subjective in the choice of who we work with.

'Our specifications are precise. We define what we want very carefully and if we get that right then, hopefully, the criteria for differentiating between contractors is simply on price.

'The normal policy is to accept the lowest tender from a limited number of bidders. All carefully selected from a pool - we do not believe it is ethical to invite someone to go to the expense of tendering if they may subsequently be rejected.'

The pool - or basic list - that Davidson refers to contains 3,000 names, all of them qualified suppliers, and is managed on a company-wide basis.

A new contractor, for instance, wanting to join the list would be invited to respond to a questionnaire and supply company information. 'We would then talk to the people at the company,' explains Davidson. 'We'd look to gather detailed information on previous experience, their company approach to business, the people they employ and these people's various skills.

'If the new firm was wanting to work on an M&E contract for a new computing centre, for instance, previous experience would be absolutely necessary. On other occasions we can be less demanding, it depends on the situation.'

Once a contractor has worked for BT, the CMM team make further judgements. This is the Vendor Rating System at work and what is logged goes into an additional database list.

CMM stemmed from an internal reorganisation of BT called Project Sovereign which saw BT's 30 estate offices, dotted up and down the country, swept away. The company's new property regime has three divisions: Group Property (dealing with property strategy), Building Services (the facilities management sector) and Construction and Maintenance Management.

CMM has three main duties:

n project management of all BT construction work on a worldwide basis;

n maintenance of BT's UK estate;

n placing the contracts for BT's facilities management division.

BT's current construction workload runs to more than 1,000 projects a year, worth more than œ100 million in total.

A growing portion of this is overseas, BT having made a policy decision that it wishes to reinforce its position as a global telecommunications player - it sees vast opportunities as national barriers are dropped, monopoly scenarios giving way to free market competition.

Right now, BT has a planned list of building projects in 40 countries, with work actually under way in 25 of these.

The advent of CMM resulted in a big staffing upheaval. Not only was the old BT estates team halved to 135, but Davidson brought in a number of top professionals from outside.

By collecting data from past projects, the CMM team has firmly established that some contractors are better than others - Davidson won't name names. He does point out, however, that contractors who look to be heading towards the door marked 'out' don't always find themselves pushed through it.

'This is our philosophy of good communications at work,' he explains. 'We try to be open and honest, so if we are unhappy we don't sit there and keep quiet, we talk to the contractor in question. Often, we find an answer to the problem and avoid its repetition - remember that the cause could have been on either side.

'What makes a good contractor? I'd say it was one who cares about us as a client and wants to retain us in the future. In other words they focus on us.

'Don't think that all is perfect: there are still negative factors. There are still contractors who try to take advantage of us. We tackle that scenario in a firm manner and record the experience for future reference.

'What is a bad contractor? One who doesn't work with us to achieve a quality product on time - one who looks for recompense for changes at a level way above what is reasonable, who is trying to make an unjustified additional margin.

'Things have got better since we've had the professionalism to deal and communicate in an expert fashion.'

BT's greater professionalism in dealing with the construction industry lies in the hands of the 75 in-house project managers in the new CMM unit. While the majority had previously worked as project managers in BT's former divisional structure, the top 10%-15% were brought in as external recruits with contracting experience.

'They gave a better focus and generated a new culture,' says Davidson. 'They used their additional expertise to generate a different type of management.'

Davidson's insistence on having a clear communications policy with contractors means that industry standard forms of contract are used as much as possible. Inevitably there are minor amendments now and then, but the preference, whenever possible, is for standard forms that contractors understand.

Since many contractors and suppliers strive to establish a continuing relationship with BT, Davidson has grounds for feeling that he must be doing something right.

But however close relationships get, contractors still have to win work in competition. 'I don't really understand partnering,' says Davidson.

'It is a buzz-word that too many people are putting too much faith in. If BT was to enter into one-to-one partnering arrangements, the risk to BT would be enormous. We are so big it wouldn't work.'

So why do clients such as BAA speak so favourably of partnering? 'They probably have very different requirements,' says Davidson, 'and they encounter different levels of risk. When you develop prestigious projects it could be that you feel just one architect, or one contractor, has the special skills you look for.'

So if partnering is out, what is Davidson's team looking for when meeting new contractors?

'The thing we like most, as a client, is having a supplier who provides a single point of contact, perhaps a partner or director,' reports Davidson.

'The beauty of the system - us with an in-house project manager, suppliers with a single point of contact - is that we pick up on problems early on and jointly work to solve them.

'Where we enjoy a pleasurable experience with a supplier we would want to work with them again. Hopefully a long-term position is established whereby they make acceptable returns on a relatively high volume of work.'

When it comes to procurement strategy, the policy of Davidson's CMM division is to use each and every method, even inventing an approach if that seems the most appropriate. However the most common methods are:

n traditional, tenders submitted to a precisely defined design and specification;

n Design & Build; and

n D & B with a novation of the designer to the D+B contractor.

The designer, in the latter situation, would have been chosen in competition. The benefit of this method is that it leaves one person working on both the original design and the detailed design stage that follows.

Today, as a result of flexible procurement methods, an eagerness to stick to standard contracts and a search for suppliers who offer a single point of contact, it is no surprise to find projects that fall into the categories of cost failures, time failures or quality failures, are quite rare.

BT's tally of completed annual projects runs to four figures yet the number that arrive on Davidson's desk as problems to be solved number less than ten - a statistic that speaks for itself.