McAlpine profits up as quality pays off

Alfred McAlpine’s civil engineering division’s two-year drive to work with clients on a quality basis continues to pay dividends, with operating margins showing a 35% rise on a 20% increase in turnover.

Currently, 85% of the business’s £300m-a-year turnover is won on a non-price sensitive basis, the result of either target-cost or framework agreements. Managing director Steve Smith said: “The beauty of these is that price is not an issue. All of the work we’ve won in the past three to six months has been on a quality basis.

“A good example is a £20m project in the Midlands that we won three months ago. We were on a shortlist of seven names. Our financial score put us second lowest, with one other player bidding under us. But on the quality score Alfred McAlpine was the best. We got the job. Another win, this time a £40m project in the North West, was achieved purely on a quality submission.”

Repeat clients now account for 30% to 40% of the division’s turn-over, said Smith. “Our reputation is based on giving good customer service and timely delivery. “The business’s customer satisfaction scores and staff satisfaction figures are at an all-time high.”
Alfred McAlpine civil’s accident frequency rate of 0.11 is well below the industry average; most contractors have a figure of between 0.3 and 0.4. “You saw the figure from Laing O’Rourke published last week, at 0.31, and that’s pretty typical of the industry,” said Smith. “We’ve recently had a six-month spell without a single accident at all, it lasted for 2.5 million man-hours. We’re all delighted with that.”

Smith said he has no plans to enter the current battle in the civils market, where one player has been undercutting its rivals by 10% to 15%. “It’s made the market tougher, but we’re not going down that route,” said Smith. “Alfred McAlpine is winning work on the basis of quality, customer service and delivery and we’re not about to change that policy.”

[Contract Journal, 18 October 2006, p 9]