A framework for success?

TERMINAL 5 Heathrow: (œ1.6 billion)

Public enquiry started in 1995 with announcement expected summer 1998. If given the go-ahead, T5 expected to open in 2004. Turner Steiner International SA, Parsons Brinckerhoff International and Boyken were appointed executive constructor in 1995 If you are going to revolutionise the contracting process it makes sense that you are also seeking to turn the fundamental philosophy and working practice of the construction industry on its head.

For Simon Murray, managing director of group technical services at BAA - the world's leading airport operator - one will hopefully follow on from the other.

Murray, an engineer by profession, joined BAA three years ago and has been in his current post for the past two. He is also the man in charge of the company's innovative if controversial framework process.

Process

BAA introduced the process 18 months ago and it already supplies more than 70 per cent of the company's needs. Under the process, contractors tender to become framework partners and the successful bidders are then allocated work on BAA's construction projects for the contract's five year span.

Daring and imaginative as it is, the process - which requires applicants to fill in detailed questionnaires - has been attacked by the industry for being long-winded and costly to contractors.

Murray admits: "There are many areas where we can improve in our framework agreements. But we had to do it the way we did because we wanted to implement the new system as quickly as possible, plus it was an ambitious programme about which you learn as you go.

"But after its launch we spent a lot of time finding out how the agreements were received by contractors and as a result our later agreements have been handled much more efficiently than our earlier ones."

Faults

But Murray adds that the faults did not lie entirely on one side: "A lot of it came down to contractors simply not having what we asked for. For example, one of our questions quoted as having the industry scratching its head for hours was: 'How do you plan your work and estimate the resources you need to complete it?' If that has the industry scratching its head for hours then frankly, I've a problem with the industry.

"And in fact, the successful contractors answered the questionnaire very quickly and with little effort."

Murray also points out that BAA introduced the entirely new method of contracting in the first place in response to the industry's long-standing complaints that contracts should not be allocated on price alone.

Under the framework agreements, contractors are selected to become partners on various criteria, including price, quality of the company and its staff and products, attitude - and the ability to work with BAA.

dedicated

The contractors are hived off into 13 dedicated teams each of which are allocated to either a particular product - for example, pavements (aeroplane taxi ways) - or to a geographical part of an airport.

"But it's progressive. So when we come to allocate our next batch of work, we will give preference to those teams who have performed best so that no-one is stuck in one area or on a particular type of work," explains Murray.

"The idea behind it is to give contractors continuity of work and the advantages of working in a team with targets to reach.

"We believe passionately that the way to improve performance in construction is to work collaboratively with your suppliers, forming longer-term and more open relationships with them."

Murray says that even though it is still early days, the process is already yielding results.

reduction

In the tax year of 1997/98 (April-March), BAA has projected a reduction in its annual œ500 million construction budget by 10 per cent, following savings last year.

In 1995/96, as the new process was getting under way, 70 per cent of projects were completed within budget. The figure for 1996/97 rose to 84 per cent.

Delivery times are also down: one project finished three months ahead of schedule.

The teams are also encouraged to examine ways to increase efficiency and productivity, including reducing transport costs, using more cost-effective materials and working more hours within specified time periods.

In a bid to persuade contractors to continually improve their performance, BAA has introduced a "Strive for Five" programme, under which teams have to meet improvement targets. Each team has five ladders to climb in key areas: cost, time, safety, quality and environmental impact.

performance

As their performance in each area improves so they ascend the ladder until they reach the top rating of five, a zone of near perfection where, for example, such hiccups as accidents and maintenance costs are relics of the pre-framework days.

Murray has faith in the new practices. "We're aiming for a reduction in our total costs of 30 per cent by the end of the decade," he says, though he cannot confirm whether the money saved would be ploughed back into construction projects.

But just as important as the radical overhaul in BAA's methods of working, is the impact Murray is confident the framework approach will make on the construction industry itself.

"The most important thing in running a business is to work out what your customer needs and to provide it. Industries that are effective in dealing with customers have people professionally trained to work out with customers what they really need.

"The construction industry works completely differently with a total focus on the deal. Winning the contract is what it's all about. Consequently the industry tries to configure itself to respond to the needs presented in a specific contract. So we've ended up with an industry without any core beliefs and you can't identify contractors with a brand like you can with manufacturers for example in the car industry.

"If Volvo tried to satisfy the needs of everybody, from boy racers to retired couples living in Eastbourne, they would lose their brand identity and go out of business.

NICHE

"The construction industry has to change because the present situation where they chase every deal is unsustainable. If each contractor found its niche it would help clients understand the industry much better. And if each contractor was not forever changing to suit the latest client, they could become much more consistent and reliable in delivering their product.

"I think that our framework process with its emphasis on goals and long-term relationships, will help contractors start to think in that way." n l In the tax year ending March 1996, BAA made a pre-tax profit of œ418 million on a turnover of œ1.2 billion.

l It has invested more than œ4 billion since it was privatised in 1987 and plans to spend œ2.2 billion on Britain's airports over the next five years.

l It owns Gatwick, Heathrow, Stansted, Glasgow, Aberdeen, Edinburgh and Southampton airports as well as interests in airports abroad. A BAA spokeswoman said: "We don't think that the windfall tax should apply to BAA because we have not enjoyed excess profits and we're not a utility."

The spokeswoman said that BAA will not consider legal action until it knows whether it will be a target for the tax. If a tax is imposed on BAA, she says, "We would have to look at our construction programme again."