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Came, saw, and conquered

Skanska had little involvement in UK construction 10 years ago, yet today it stands tall as one of the main players. Diarmaid Fleming speaks to man at the helm David Fison on the market and what's in store.

Just 10 years ago few in the UK would have heard of Skanska Construction.

But what was then a Swedish contracting giant is now in the top echelons of UK contracting, NCE Contractors File Major Contractor of the Year 2002.

The voyage to the top has been a thoroughly Scandinavian one.

It began with the Norwegian giant Kvaerner, whose Vikinglike raid in early 1996 gave it Trafalgar House. But the economic sea was to prove too choppy for the Viking marauder's longboat. The captain, Kvaerner chief Erik Tonseth, was ditched, and a 'refocussing to core businesses', prompted the sale of some of the booty of plunder.

Enter the Swedes. While Kvaerner courted Trafalgar House, Skanska was already making its own moves, with a stake in Costain opening the door to joint venture approaches and providing a bridgehead for work in the UK market. The former Trafalgar House businesses of Kvaerner were swiftly snapped up, ending the arrangement with Costain.

The mergers and marriages over the past seven or eight years reflect the sea change which has taken place in UK construction: household names have gone or rebranded; traditional contracting has made way for partnering, frameworks and Public Private Partnerships.

Yet strangely, in this market of flux, there is something quite traditional in Skanska's UK business' approach. Largely left to look after its own affairs by its Swedish parent, the company has continued to keep its hands dirty on big building work, be it large chunks of the Channel Tunnel Rail Link, or the prestigious Swiss Re building in London.

While facilities management forms around 10% of its workload, straightforward building, civil engineering, and the development of innovative technology to underpin these businesses, have remained the company's mainstay.

Not surprisingly, the man running the show has civil engineering coursing through his veins. A fellow of the Institution of Civil Engineers, David Fison joined Kvaerner in 1998 from Balfour Beatty. First appointed vice president of Skanska Construction Group, with responsibility for the company's main contracting businesses, he moved in June 2001 to head up the firm's specialist businesses, concentrating on worldwide mining and liquid natural gas. Elevation to the top came this March, when he was appointed chief executive, heading up Skanska's UK and Indian (an organisational quirk) businesses.

Whatever techniques of motivation he uses to gear up his colleagues, his raw enthusiasm for the job must help. The rapidly changing contracting environment is a challenge he relishes: 'Ten to fifteen years ago, the way you made money was much the same year on year. Now it has completely changed, and in five years time it will be totally different to what it is now. What I love about the job is managing that process.'

For the year ending December 2001 civil engineering turnover has shown a spectacular rise of 39%, up to £450M from £324M for the previous year.

Measured against competitors, only Mowlem betters this at 45%.

Carillion shows a rise of 8% while Fison's industrial alma mater Balfour Beatty actually shows a decline of 17%. But while there's plenty more muck, there's not much more brass: making money isn't getting any easier, he says, and pre-tax profits have remained static.

Fison says success in winning work has hinged on an improved ability to provide complete packages of work, using a broad range of design and construction skills developed within the firm.

Where these skills are not available in-house, partnerships are formed with others who do have them. 'Having all the skills and bringing them in-house is not easy and takes time, but I think we are leading the market now in that regard, ' he says.

In keeping with this approach, the areas where he sees most potential for growth are in design and build work, and term and framework contracts.

Speaking about new arrangements with other specialist contractors and also new relationships with clients, he says: 'Partnering does require a high degree of trust and we have shown it works. We really believe in it. But it is hard to do if you have not done it before'.

Responding to the argument offered by some that partnering and framework agreements can be just another way for aggressive clients to nail contractors and subcontractors to the floor, Fison says that good relationships involve everyone to the benefit of a job, and bad ones are better walked away from or avoided in the first place.

'I passionately believe that all parties should play their parts in relationships. They are not static, and can change even in the life of a project. But it should not be a case of one lying down for the other to walk over them - relationships should be a way of engaging the different players to come to a sensible way of moving forward on a project, ' says Fison.

'But you don't have to sign a contract. You can always suggest that a contract needs changing, and sometimes perhaps the industry doesn't say that forcefully enough. It is important that the industry sticks by its principles and doesn't take work on just for volume.'

'I would much rather walk away from taking on a job than enter into a wrong relationship. It's no good for us, no good for the client and no good for the project, ' says Fison.

The engine keeping the Skanska machine purring over the past year has been work in road and rail, with the large slices won on the Channel Tunnel Rail Link notably including the two largest tunnels on the job at Stratford in East London.

But other sectors are performing too. 'As well as rail, we have had a good workload in the water sector where we have built up a number of long-standing relationships, ' he says. 'We'll also continue our endeavours in ground engineering with Skanska Cementation. 'They may not be all big flash projects but this area of work has certainly been a steady earner for us'.

Design work for Skanska Technology, the firm's design arm, has faired well, and a venture into telecoms work has seen the firm establish itself in the market despite harsh conditions and a serious downturn.

But Fison is not getting carried away about prospects for civil engineering contractors at the moment. 'I think it is fair to describe the market as flat. For road and rail work to come on stream, you are really looking at 2003 and 2004. It will take that sort of time to build up, but we're not worried about that, ' says Fison.

In the meantime the firm is happy to keep plugging away. 'We have picked up pieces of work which have helped build turnover, ' he says. 'For example, we were lucky to be chosen to complete the Sunderland Metro when Christiani and Nielsen ceased trading in late 2000. It was quite a challenge, but we kept all the staff on and it gave us £25M of additional turnover. If we pick up jobs like that, we'll be happy.'

Much rail work is stalled behind the problems with Railtrack, and Fison is watching carefully. 'We'll be looking with great interest at how Railtrack sorts out its difficulties, but we believe there'll be a lot of work in hand when that happens, ' he says.

Government promises of a multi-billion pound transport spend are also treated with caution: 'Clearly we'd all like money to be spent on our particular sectors, but flinging enormous amounts of money all at once doesn't necessarily get efficiency.

'The government must be able to manage the amount of cash it's spending to get value for money. It's pointless to pour huge amounts of money into projects which are ill-conceived. You need to get everyone involved early to work out the best solution - all the stakeholders, including contractors. Otherwise you get problems - not good for the industry, or the country.'

If there is a boom, Fison sees the skills shortage as a major threat. 'We recognise the problem already, ' he says. 'We want to become an employer of choice by making the work environment more exciting.

There must be improved conditions of employment for people in the industry, and part of that is clearly the wage structure.

'The pressure on salaries is upwards, and I don't have a problem with that as long as it is carefully managed, ' adds Fison.

Training employees is also seen as essential. 'We want everyone who works on our jobs to be part of a full card carrying industry - not just a card covering safety but also skills and training, which makes the industry more professional. The industry requires a huge range of skills from people who join it, ' he says.

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