Australian property and infrastructure giant Lend Lease has its sights firmly set on the UK’s promised infrastructure bonanza. Mark Hansford meets its European chief executive Dan Labbad.
Generally speaking it takes a lot to get an Australian to speak positively about the English. As a rule, conversation revolves around sledging the cricket team (although less of that recently), knocking the rugby team (fairer game) or attacking the British joie de vivre (wingeing Poms).
But Dan Labbad, the antipodean chief executive of Australian property and infrastructure conglomerate Lend Lease’s European and Middle Eastern operations is downright enthusiastic.
Enthusiastic, and focused. Enthusiastic, because of the government’s vocal support for investment in infrastructure. And focused, because he’s building a UK-based team ready to exploit the business opportunities that the government’s support is set to present. “I am excited about infrastructure in the UK,” he says. “The government is serious about investing in it and that’s why we’re setting ourselves up. I don’t want us to miss this growth story,” he says.
The firm has already stated its intent on the £14.5bn Crossrail scheme. It is currently shortlisted for the £100M to £250M Bond Street station contract and the £100M to £250M Tottenham Court Road station contract.
It is up against some pretty established UK infrastructure contenders, including Bam Nuttall, Kier, Costain, Skanska, Laing O’Rourke and John Sisk.
The level of high-grade competition in those contracts is almost certainly going to be repeated on other work it bids for - so does it stand a chance?
“What’s key for us is that we have gone into different markets because we have an adaptability for what clients need. When you have been in a sector for a long time you get a kind of fatigue.”
“We are seeing that clients are open to freshness,” says Labbad. “I don’t think we would be bothering if we didn’t,” he adds.
“We have gone into different markets because we have an adaptability for what clients need. We are seeing that clients are open to freshness”
Of course, Lend Lease is not completely ignorant of working on infrastructure projects in the UK, having delivered Waterloo International station back in the 1990s and, more recently, the Olympic Village in Stratford, which came with its fair share of infrastructure work. Its services for the Athletes Village included project management, feasibility, design and constructability advice. It designed and delivered rail overbridges, railway sidings, and significant retaining structures adjacent to High Speed 1 to increase the available development area.
But Labbad accepts Lend Lease’s infrastructure presence needs building up.
“We are small at the moment. But there are still a lot of government projects that we could offer a differentiator in.
For example, I’d have no problem taking on a £400M to £500M infrastructure project. The Athletes Village showed what we could do,” explains Labbad. And that was to skill up to a major project by drawing on the firm’s global expertise.
“The first thing we do when we get a major new contract is to use the depth of the organisation,” he says.
“We have an unrivalled capability on a global scale.”
In infrastructure this capability was boosted last December when Lend Lease bought Bilfinger Berger’s Australian operation Valemus Australia for A$960M (£644M).
Valemus’ businesses Abigroup, Baulderstone and Conneq are major players in Australia’s civil engineering and construction markets. The move took the firm global staff to 17,000.
“I really can’t underplay the global scale we have here, and it is really coming off the back of some leading edge stuff we are doing in the Asia-Pacific region,” he says. “The way we set ourselves up means we have deep expertise in each market.”
But Labbad is well aware that when moving into newer ground, global capability along might not be enough.
“When you are moving into other sectors it is about pooling globally and then supplementing that skill base with local skills,” he says. “It’s about providing organisational horsepower and combining it with local expertise. With all the infrastructure planned, we are going to need more people,” he says.
And this is not just about numbers, he adds.
“Many others have failed because they have not understood the local culture,” he says.
This even goes as far as the brash Aussie at the top.
“Even my style has changed since coming here,” he says. “I’ve learnt to be less direct, and respectful of hierarchy,” he says. “I’ve also learned to read subtlety more,” he adds, admitting that that is not a trait commonly displayed by Australians. “I’ve enjoyed that,” he says.
So, armed with a Lend Lease’s organisational horsepower, gelled with local expertise and a leadership that understands the subtleties of the local market, Labbad is confident he can compete.
“Clients are going to want to see our horsepower; see our local expertise,” he says. “We will tick those boxes and then will ask some different questions.
“You’ll see it over the next 18 months,” he states.
It’s confident stuff, but then Lend Lease is a confident company. “Our mission is to be the biggest property and infrastructure firm globally,” he says. For Labbad, a civil engineer at heart who has spent seven years at a firm more known for its property development, that’s quite a joy.
“Ironically I am actually a civil engineer,” he states, explaining that his first job was with Australian civils firm John Holland, and his first project for Lend Lease was getting Sydney airport ready for the 2000 Olympics. “It’s in my DNA,” he says.
But of course, at Lend Lease, he is also a property developer, a facilities manager, a project manager, and an investor.
Elephant & Castle
In the UK that means master planning the £1.5bn redevelopment of Elephant & Castle in south east London, investing in - and project managing the delivery of - the £200M North East Energy Recovery Centre for client South Tyne Waste, and facilities managing the £213M Queens Hospital in Essex, to name but a few live projects in the bulging portfolio.
Many are PFI projects, with Lend Lease putting in capital as well as project managing the work. Indeed, Lend Lease has £7.3bn of funds currently invested in projects and developments around the globe. Naturally, therefore, Labbad is keen to see the cloud hanging over PFI lifted.
“A form of PFI will need to come back and the government is going to need people that understand that,” he says.
“The system did go off piste,” he accepts. “But that was not the private sector’s fault,” he adds. “It became an engine room and it went awry. It was a collective failing,” he says.
“But it has to come back, simply because the government can’t afford to do what it needs to do without it,” he says, adding that it is easy to forget the successes amongst the recent, high profile failings.
“We do PFI around the world and when it is done well it is a remarkable vehicle. If the risk share is right and it is win-win.”
Part of the failing lies in over specification, which leads to massive bid costs that then need to be recouped, explains Labbad.
Different process, same result
“There are countries around the world, like Italy, like Brazil, where it is a different process that leads to the same result. As a result, bid costs are a quarter of what they are here. It is a faster process because you don’t take the design to the nth degree before you get to preferred bidder stage. The process then allows somebody to lead the bid and then be covered if somebody else comes in to win.
“Here, the process was such that clients tried to commoditise the private sector as much as possible. But this is in efficient.”
Labbad is confident PFI will return to the agenda, and it is not a bad bet that this week’s Budget will see efforts made to re-establish its credentials. The move can’t come too soon for Labbad, not least because he sees investors - including chancellor George Osborne’s much-touted pension funds - lining up to get involved.
“The political disconnect with PFI is a pity because there is global equity out there that sees infrastructure as an attractive segment.
“The good thing is that the UK is seen as a stable place to invest. It has a stable economy, and is stable politically,” he adds. “A lot of pension funds are carrying defined benefits and so need stable growth opportunities. If you’ve got good product you are not going to have an issue getting capital,” he says. Let’s hope he is proved right.