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Hugh Blackwood: Strength in depth at URS

Scott Wilson is now firmly embedded in US giant URS but its world-conquering spirit lives on with international operations boss Hugh Blackwood. Mark Hansford reports.

After a year of intensive behind the scenes work to integrate his company within $9.1bn (£5.8bn) turnover American powerhouse URS, former Scott Wilson chief executive and now URS vice president for international operations Hugh Blackwood is ready to burst back onto the scene with more plans, more goals, and more targets in his sights.

Operationally, the company is working as he thought it would be, he says, with the what was Scott Wilson operating effectively as URS’ international arm. He says the organisations have gelled well; well enough to drop theScott Wilson name across the UK & Ireland, Europe and the Middle East last month.

In some regions, such as India and China, the transition will be phased in recognition of current brand exposure in each area, but the over arching vision of global unity is well established.

Cultural fit

Moreover, the cultural fit among URS’ 48,000 employees across 40 countries is spot on, he says.

As part of the September 2010 takeover, Blackwood was installed on the main URS board, and he has now got to know his new colleagues well. “They are super guys to work with,” he says. “We have kept the international hub in the UK; they have delegated a lot of authority to London, and we are taking a lead on that.”

“That” extends as far as eying up more international acquisitions for the group. “URS is still very ambitious in China and is still looking for transformational growth in China,” he says.

And when it comes to China, Blackwood and his former Scott Wilson colleagues have a lot of useful knowledge and contacts. Scott Wilson would be celebrating 60 years in Hong Kong this year and it went on its first mission to mainland China as long ago as 1989.

It has formed a succession of joint ventures with Chinese companies, and Blackwood says that forming local alliances fits well with URS’ favoured approach of going into foreign territories in support of key multinational clients.

It’s a situation that is being played out across the globe as the two firms unite.

“URS didn’t have a presence in India at all, but what URS did have was the big multinational clients”

“For example, URS didn’t have a presence in India at all. But what URS did have was the big multinational clients,” he explains. “Scott Wilson was a firm that largely worked for public sector clients, on engineering projects, in the developing world (see box). URS works for private sector clients, on environmental projects, in the developed world,” says Blackwood. “There are a lot of synergies.”

The histories tell the story, explains Blackwood. “We’ve come up through the Commonwealth, using British Standards, British language and British culture. URS has built itself on the back of supporting US military operations outside the US.”

That URS chose to make the UK and the former Scott Wilson its centre of international operations is clear recognition that it respects the British approach.

World class engineers

“One of the very few things Britain still has is world class consulting. Our industry is well educated and culturally aware and it is good to be a part of that,” says Blackwood.

Sitting behind him on the bookshelf of his London office are biographies of engineering greats and he is passionate in his defence of the art of UK engineers.

“I’ve been a 40 year supporter of this industry,” he enthuses. “We are far better at working internationally and creating indigenous companies. US firms have been tourists, or big project players, or supporting big US clients or the military.”

Blackwood is well placed to comment as he spent his early career working in Nigeria and Libya.

“Brash Americans don’t sit well in some of these countries. That’s why I’m here - a brash Glaswegian does better,” he notes wryly.

Access to new clients and new markets was a key reason for selling Scott Wilson to URS. At the time of the deal, revenues were plateauing after 40 years of non-stop growth.

“When you look at the domestic market all our peer group has downsized considerably,” he says.

The UK market is, of course, still Blackwood’s bread and butter, but uncertainty about future workloads remains a major worry.

Blackwood is adamant that what is needed is a stronger lead from the government, particularly when it comes to building new nuclear power stations.

“We have lost the ability in this country to do things quickly. When you see what happens in China, you can see what can be done”

URS’ UK operation is part of the Balfour Beatty/Vinci dream team bidding to build EdF’s new nuclear power station at Hinkley Point - if and when it happens.

“The programme has slipped badly,” says Blackwood. “It’s now about a year behind schedule.”

Blackwood looks back to headier days before the Fukushima disaster in Japan changed attitudes to new nuclear.

“I had lunch about 18 months ago with a Frenchman from EdF who was adamant that Hinkley would start generating power in 2017. The industry needs government commitment. It needs a guarantee [about energy prices

Without it, it is just too risky. We thought new nuclear would be a real light on the horizon, but it has not been.”

Softening targets

Blackwood says the same applies to renewable energy. “The targets are becoming so unachievable that they aregoing to get softened, and that’s no incentive for the energy industry,” he says.

He cites Crossrail as an example of a project where government commitment has translated into real work.

“Crossrail has been great. Its been in doubt a couple of times, but has now got cross-party support, some private sector funding and is going ahead. We had 150 people working on it at one point and during a recession that was a godsend,” reflects Blackwood.

“Especially as there was blessed little else going on at that time,” he adds.

High Speed 2 could be a similar story, but Blackwood has his doubts. “We have lost the ability in this country to do things quickly,” he bemoans. “When you see what happens in China, you can see what can be done.”

Blackwood is taken by chancellor George Osborne’s idea of coaxing pension funds to invest more in infrastructure projects. “We need the pension funds,” he states.

“It is a good idea. The private sector is desperate for opportunities to invest,” he says. “There are just two things you need - a project, and a reasonable risk sharing formula. Pension funds are not looking for PFI-type returns, just something better than inflation.”

In the meantime, hope is not lost. URS is working on Emirates Air Line cable car in east London, a project that blew up out of nowhere, and which epitomises the “can do” spirit that Blackwood advocates (NCE 10 November 2011).

Hugh Blackwood cv

1971 BSc in civil engineering from University of Strathclyde. Joins Scott Wilson

1974 Chartered and then seconded highways projects in Nigeria and Libya.

1987 Becomes Scott Wilson director

1995 Put in charge of newly acquired former British Rail design offices in Glasgow and Swindon

2000 Appointed chief executive of Scott Wilson’s Railways business

2005 joins main board

2006 Helps lead the flotation of Scott Wilson plc as joint chief executive officer.

2007 Becomes Scott Wilson chief executive.

2010 Becomes URS senior vice-president, international operations after Scott Wilson takeover. Also senior vice president of URS Corporation

“It just shows what can be done. It opens in May and the towers aren’t even up yet,” he says. The project has been pushed through by a sponsor eager to capitalise on the London 2012 Olympics and a London mayor in Boris Johnson who recognises the value of infrastructure investment.

“Boris is good for transport investment,” says Blackwood, who, sees Johnson as a major player.

“I suspect we are becoming a world of city states. Airlines like British Airways don’t even recognise countries any more - they fly to cities. London for me is more buoyant than the rest of the UK and that will continue.”

The London cable car project is interesting for another reason: it is the first time Blackwood’s operation has worked with project manager and contractor Mace and it is offering him a good chance to have a close look at the position of its business in what he dubs the “procurement space”.

“We need to develop our client-side delivery partner role more with URS,” he acknowledges.

“Contractors are moving up into it and designers down into it. Everyone wants to be next to the client and calling the shots. It’s the position with the least risk and highest value.” In this game, size is important, he adds.

Consolidation

“It is driving the consolidation of our industry, and was one of the key reasons that drew Scott Wilson towards a bigger parent. We saw it coming a long time ago; we saw us increasingly partnering with large Americans to get on to tender lists.

“We have still got examples of that,” he adds, “projects like Saudi High Speed Rail and the Bosphorous crossing where we have teamed up with big US firms.

“So we thought: ‘why not get involved with one and save ourselves the hassle of finding a new partner every time’.”

Bribery bugbear

Possibly the biggest threat to URS’ international aspirations is coming in the shape of Wall Street. URS is listed on the New York Stock Exchange, and US investors are very nervous of overseas operations, says Blackwood.

“Wall Street is far more cautious about overseas territories,” he explains. “It is scared of US anti-corruption laws and is scared to death of the UK Bribery Act. It sees the risks of even getting involved as disproportionate to the rewards. And it is a huge risk - firms found guilty get not just a fine, and a possible prison term for the guilty individual, but also face a long ban on working with funding agencies such as the World Bank.
“Scott Wilson’s heritage is working in developing countries, and it would be a real shame if we cannot continue to do that,” he says.
“But if we are going to be subject to scrutiny every time we come across some [official] looking for a bribe, its going to be difficult.
“It’s not manifested itself yet, and the guidance talks of gifts and payments being acceptable if “proportionate”, but the law is zero tolerance. We don’t want to be the first person trying the “proportionate” defence,” says Blackwood.
“Scott Wilson stood there for years as bastions of integrity. One of the qualities the UK gave these countries was honesty and integrity. But the UK Act now distrusts the private sector,” he states.
It means Blackwood has to look again at places where Scott Wilson has previously worked successfully.
“We are having second thoughts about some areas,” he says, “mainly equatorial Africa and south east Asia, where we now wouldn’t work for the public sector. We do work with funders and the private sector, but even then you still have to deal with it all.”

Of course, Scott Wilson settled on URS, but only after a late charge from CH2M Hill forced URS to up its original offer by more than £60M. The company was sold for 290p per share, valuing it at around £223M.

Not bad, considering Scott Wilson was turning over just £1M when Blackwood joined just over 40 years ago.

Then, it was a very different world, where design excellence was the goal. Now, there is project and programme management to master, along with the dark arts of asset management. Blackwood acknowledges it’s another area where his firm needs to beef up its offering.

“Extending asset life is the big driver now - looking after physical assets from cradle to grave. For us, it’s getting into markets we have not always been known in,” says Blackwood. Highways maintenance is a good example of an area where URS lacks presence, and Blackwood is aware of the need to bolt on these skills - and quickly.

“One of the strategies of URS buying Scott Wilson was that Scott Wilson could advise on European acquisitions,” he says. “We have not ruled out strengthening some areas by acquisition. We are always looking,” he says, accepting that there are fewer and fewer candidates out there. “So unless we get on with it, we will run out of potential partners,” he admits. Troubled Mouchel is not on his list though. “URS likes to buy successful companies,” he says.

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