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Global asset savvy clients are the future

Clients are increasingly looking to consultants to help them manage existing assets as well as design new ones, according to URS. As part of the 40 thought series marking 40 years of NCE, Mark Hansford finds out more.

The industry has changed dramatically over the last 40 years, and nowhere is change more marked than in client organisations and their expectations of the industry. Long gone are days of ICE 5th contracts with formal, arms-length client-engineer-contractor relationships. Nowadays clients want far more from their suppliers, and it is driving a fundamental shift in the industry.

It was all so much simpler back in 1972. Client has a need – be it a bridge, a building, or a road. Client hires a consulting engineer – on a set fee rate - to design it, procure a contractor, supervise construction and assess payment to said contractor. Contractor builds it. That’s it. That is how virtually all construction projects were scoped, designed, procured and built. Now, of course, it is very different, and is now leading to some fundamental changes in the look and feel of the construction industry.

Just look at NCE’s exclusive survey (see related stories link); by 2052 more than half of those polled expect civil engineers of their level to be working for programme or project managers. A huge 86% expect most UK civils firms to be foreign owned and more than 40% expect their firm to be employing more than 10,000 people.

The message is clear – civil engineers expect to be working for bigger, globally-focused organisations that offer far more than simple design or construction expertise to their clients. It’s a shift that is already being played out, with Halcrow now part of US giant CH2M Hill and Scott Wilson now firmly integrated into URS.

It is, therefore, a shift that is of no surprise to URS managing director for the UK and Ireland Jerome Munro-Lafon. “Forty years ago the majority of our clients employed us for our technical expertise. We weren’t doing strategy work – they were doing that themselves,” he explains.

But a gradually increasing hunger of clients to better understand their assets – accelerated by the recent recession – has changed all that.

“It has been a convergence of a lot of factors and the recession has been a real catalyst. Clients are now paying more attention to their assets,” explains Hugh Blackwood URS senior vice president and group general manager for the UK, Ireland, Middle East, India, China & Europe. “They want more for less. But they are also thinking global, and they also want sustainability. It is all coming together and changing what they want from their suppliers.”

URS executive director of strategy and business development for the UK, Ireland, Middle East, India, China & Europe, Stephen Wells agrees. “Clients are procuring more globally and strategically and they want to understand the functionality, durability and longevity of their assets.”

Clearly, it is difficult to generalise; public sector clients are different animals to private sector ones, multi-national industrial clients behave differently to national and regional governments, and there are different approaches all over the world. But there is a clear, overriding message, says Blackwood.

“Clients are clearly paying more attention to the ownership of their assets than they ever did”

Hugh Blackwood

“Clients are clearly paying more attention to the ownership of their assets than they ever did. They were capex merchants; they didn’t care about the cost of managing or maintaining them; they didn’t even know what they owned. Now, they are looking at the whole life cost of their assets. And that affects our business,” explains Blackwood, “widening out the scope.” The government’s current drive towards mandatory use of Building Information Modelling is a great example.

“We believe that operations and maintenance has become the new front end,” explains Wells. “The opex spend of our key clients is huge – it could be as much as four times their capex costs. So we as engineering firms have to understand the total operational and maintenance cost envelope of an asset right at the start of any project, and support that with real-long term data.”

Financing is also an increasing part of the mix, adds URS commercial director for the UK, Ireland, Middle East, India, China & Europe John Horgan. “The important question is going to be who will own the asset?” he explains. “Assets could be paid for and leased by investors or pension funds. “So a lot of talk about understanding assets and operations and maintenance will come down to finance.” 

The fact that money is tight for private and public clients, meaning more has to be squeezed out of what is available – whether its roads, airports or buildings – also drives the need for a different approach.

“We are using more and more of our assets every day,” explains Munro-Lafon. “Roads, railway and airports are operating at capacity. That has massive implications for the way you manage and maintain them; managing the asset becomes an integral part of how you operate it. You need a much more holistic approach.”

It does, of course, mean that the job of the engineer in such companies is changing rapidly away from designing big, bold sexy projects. “Traditional consultancy is now a small part of our business,” says Blackwood. “And it’s diminishing. That role will still exist, but is going back to specialist consultants. We are now integrated service providers.”

Instead URS provides a service that could easily be described as a commodity. “When people say what we do has become a commodity what they mean is that they expect the technical part to be done without a hitch,” explains Horgan. “We are service providers who provide a wide range of skills.

Whether you like that or not depends on your standpoint. “Yes, in many ways it’s sad,” admits Blackwood, a civil engineer through and through and a 40 year supporter of the industry who spent his early career empire building in Nigeria and Libya. He even remembers the first NCE. “But you’ve got to deal with it and get on with it,” he says.

Munro-Lafon sees it differently. “Are we moving away from design? I think we are moving away from being technicians to being professionals. It is a much more rewarding situation for us,” he says.

Clients are asking us to be inventive; they want new ideas on how to manage their assets better

Jerome Munro Lafon

“Engineering is now much more like it was in the 19th century. Clients are asking us to be inventive; they want new ideas on how to manage their assets better. One of the things we really focus on is how we can up the innovation. And actually that is much more exciting and challenging,” he adds.

“I think it’s even cleverer,” Wells argues. “I think we are trying to use our engineering, environmental, facilities management and operations & maintenance capability in a way that is almost philanthropic. If we can say to a client that we understand your 20 year plan and care about it, and through being embedded in your team can refine your asset and make it more efficient, and through that you can provide more beds, teach more children, or have more road space, then that is a truly powerful driver.

“O&M is our front-end now,” he reiterates. “So we are re-equipping our engineers and environmentalists to think differently, as we are different. It’s another form of design,” he says.” But I think it’s much more interesting. Or do we want to keep designing monuments to our posterity?” he asks.

The extent to which clients are prepared to embrace Wells’ level of embedded, collegiate working continues to vary. Indeed, many UK clients such as BAA, Gatwick Airport, Network Rail and even the Highways Agency are currently looking to grow larger as a body in order to be less reliant on the supply chain. For Wells it is human nature.

We are seeing more of our clients outsourcing more because they can be more efficient that way.

Stephen Wells

“I think there will always be the seven year cycle of revisiting and reflecting,” says Wells. “So whether an organisation becomes very slim or very large goes in cycles. We are seeing more of our clients outsourcing more because they can be more efficient that way.”

The changing relationship between consultant/designer and contractor is another of those cycles, says Blackwood. Right now the vogue is for contractors taking the lead in design and build contracts, but this will change, he says.

“The contractor as a client to us is cyclic. We managed to build half the world with the ICE 5th, and I was in the front line of it,” says Blackwood, explaining that its demise was more down to the way it was used than anything wrong with it conceptually.

 “The design and build process was originally quite confrontational,” admits Munro-Lafon. “But that relationship has now changed completely to one where we have contractors embedded in our design teams and vice versa.”

And that will continue to be the case, even if UK contractors follow the European model of having large in-house design teams, such as Balfour Beatty has done with its purchase of Parsons Brinckerhoff. “Many major contractors have their own internal design teams but what they find is balancing the resourcing is difficult. Even the major Spanish contractors come to us as they can’t resource it all internally.”

Looking forward, big is definitely better, though. Even the clients at national level are going global.

“It’s a trend that you can’t deny is happening,” says Blackwood, citing prime minister David Cameron’s recent enthusiasm to inject private cash into Britain’s roads. “Governments are realising that they don’t need to own roads or railways. Why does the government want to own a Highways Agency?” he asks.

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