'Disaster' policy reversed

by John Leitch



Cleveland Bridge, the steel fabrication and bridge-building business, made a total loss over the past 10 years of £42m - a strategy of focussing on small contracts left the group unable to cover its overhead costs.

Kvaerner has sold the company to a management buy-out team led by chief executive Tony Rae. Seven of Cleveland Bridge's senior managers raised a total of £7.7m to purchase the company, which currently has an annual turnover of £125m, the workload being split between £45m in the UK and £80m abroad.

"Overall, the losses in the last 10 years amounted to £42m but the group made £50m from its major projects," said Rae last week. "In other words the smaller contracts were the disaster. When I joined Cleveland Bridge two-and-a-half years ago as commercial director we had 20 jobs with an average value of £1m and they were killed by overheads. Now we have four jobs each worth £20m."

Rae, who describes himself as "a hard-nosed contractor at heart", said the mbo had been done without financial assistance from any venture capital group. "The seven of us have done it with our own money," he said. "We're committed. Parts of the business were bad, but Cleveland Bridge is the best bridge builder in the world."

Rae has plans to double annual turnover to £250m by 2004. "We're on target for that sort of expansion," he added. He said that up until now Cleveland Bridge had ignored the biggest market in the world - the USA. "There's more work in the States on steel bridges than in the rest of the world."

Cleveland Bridge's most publicised project in the UK in recent years has been a bridge upgrade on the M5 near Bristol. Costain won the main contract to improve the stretch of the motorway with a bid of £50m and awarded the subcontract to strengthen the Avonmouth Bridge to Cleveland Bridge who priced the work at £25m.

Rae said Cleveland Bridge's element of the bill would pan out at £70m, with the final overall cost of the scheme costing the taxpayer £150-200m. While he described the project as "a mess as a total job" he added "what we've done is an engineering triumph".

"We bid against a set of documents that bore no resemblance to actuality," said Rae. "We've handled a total of 9,000t of steel - but in 130,000 pieces. That's crazy. On other bridges, we'd expect pieces to weigh between 2t and 5t.

"At East Bay, California, it took seven years to get the documentation done before we got the start on a similar job. The original Avonmouth Bridge contract was changed to a partnership form of working because of a lack of detail in the documentation. There was a lot you couldn't see - you had to assume things that didn't turn out right.

"We've done three times as much work as originally envisaged. It's not a blow-out in cost as the rates to do the work are set. People travelling over the bridge in cars think of it as a disaster, but in fact it's an engineering triumph and the guys on site deserve credit. The taxpayer has got good value for money."

With Cleveland Bridge's element of the contract now complete and the painting contractors ready to undertake the final element of the upgrade, the scheme will finally be done by the summer of 2001, Rae calculated.