LAING IS to become the first premier league UK contractor to entirely abandon bidding for fixed price competitively tendered contracts. The reorganisation is likely to cost up to 500 Laing staff their jobs.
Laing Construction chairman David Blair told NCE on Tuesday that the contractor is aiming to derive 100% of its workload from negotiated, partnered or private finance contracts within two years.
The decision to stop all fixed price bids followed Laing's announcement that it was being forced to take a pounds 20M plus hit on its design & build contract to construct Cardiff's Millennium Stadium, the new home of Welsh rugby. The provision arises from the failure to allow for design changes on the guaranteed maximum price job (see below).
Laing's profits will be further reduced by a pounds 7M provision for the reorganisation of the business. Taken with provisions for difficulties on other projects, the total hit will be pounds 33M.
Analysts had been predicting that Laing would file pre-tax profits of about pounds 40M, compared with pounds 32.5M in 1997. The latest estimate is that profits will be a little above pounds 10M.
Laing Construction's reorganisation will see its three businesses - Building, Management and Civil Engineering - consolidated into one company called Laing Ltd.
Details of the reorganisation have yet to be worked out, but the decision to exclude fixed price work is likely to reduce the size of the pounds 1bn turnover business which currently employs 3,000 staff. The reorganisation is due to begin early next month and be completed within 12 to 18 months.
Blair indicated that the size of the business was likely to reduce by about 15%, regardless of market conditions.
He explained that the shift to negotiated work was an attempt to reduce risk levels, avoiding the sort of problems experienced at Cardiff. With the contracting business operating as one company, Blair said senior management would be better able to prevent high risk contracts being taken on.
'We want to be more like [construction manager] Bovis and less like Laing,' said Blair.
In preparation for the switch to 100% negotiated work, many staff - mostly younger engineers and managers - will be retrained in skills such as design management, cost planning and financial engineering. Blair explained that about 60% of Laing's workload is negotiated, but this was growing steadily, particularly in civil engineering.
He said the reorganisation would only affect Laing's UK operations, but claimed that the overseas arm would also be pulling in its horns. 'It will be difficult to have the same presence in South East Asia, for example,' he said. 'There just isn't the work there.'