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The happy contractor

Cover story Andrew McNaughton

Andrew McNaughton hits his second anniversary of running Balfour Beatty civils this month and he has his eye on some major prizes to celebrate.

Jackie Whitelaw reports.

In a couple of weeks, Balfour Beatty is expecting to find out whether its bid with Carillion to win the main contracting works on Transport for London's £1bn East London Line scheme has succeeded.

Early next year the business will discover whether it has seen off its rivals for the £300M plus Tyne Tunnel contract. And then it's all to play for on the massive M25 widening deal where Balfour Beatty with Skanska are up against just about everyone else in construction, plus Macquarie bank, for the another £1bn of capital spend over five years.

Contractors, like farmers, usually find it hard to put a positive spin on their bit of the economy but Balfour Beatty Civil Engineering (BBCEL) managing director Andrew McNaughton cannot help being upbeat.

It's his part of the Balfour Beatty business that expects to pick up the lion's share of work on all three of those jobs after all.

Added to that he's just escaped from Disneyland (best ride fi 'the trip back to the airport'), and he's enjoying the prospect of integrating Balfour Beatty's new £32M purchase of Birse into his division.

'Those three contracts, I really want us to win,' he says.

'The East London Line is a tremendous scheme and really important to the capital; the Tyne Tunnel is in our traditional heartland and is just right for us; and the M25 is fascinating fi one of the things the Highways Agency has got over really well is that it is not a construction project, it's operation and maintenance of one of the country's main arteries fi very exciting.

'The market is looking much more optimistic. The volume of opportunities is expanding significantly,' he says.

'The last three or four years in infrastructure have been pretty gloomy though,' he adds, revealing just enough of the dour contractor to allow him to maintain credibility with his peers.

'We've managed, and been successful, and got our share of the work that's there. And we've maintained our market position in a shrinking market, and that says a lot.

'But right now, it's a really exciting time.' McNaughton, who is only 42, has been MD of BBCEL since 2004 a couple of years after the group brought all its civils activities into one division.

Current turnover is £450M, McNaughton employs 2,000 people and he's making a 2.9% margin.

The numbers will change as the impact of the Birse acquisition and an extra £310M of turnover works its way through.

McNaughton trained as a civil engineer, made his name on Balfour Beatty's contract 440 on the Channel Tunnel Rail Link and was named ICE's civil engineering manager of the year in 2002. NCE hailed him as a modern day Brunel on its cover (NCE 18 November 2002) and he's been dealing with entertaining comments about that ever since.

'Peter Lloyd of Fairfield Mabey even sent me a stove pipe hat fi I've still got that, ' he says with a grin.

Even without the headgear McNaughton is a great advert for civil engineering. 'I am a civil engineer and I love being a civil engineer and getting involved in a lot of really great projects.

'There's no such thing as a boring project fi you are always making a decision.' He's keen to get over to engineers and nonfiengineers that 'what we do every day is run a business. Every time we start up and close down a project we've gone through all the processes involved in running a business.

'So in this profession we have people in their 20s setting up and managing businesses. It's a strength we don't sell enough.' His enthusiasm for his profession translates into action.

He is a professional reviewer forthe ICE. He is also a supervising civil engineer and drives his own graduates to get qualified.

'We are a civils business fi we want our staff to get their civils qualifications to maintain our professionalism. Civils training, if done right, develops leaders fi people with technical knowledge who can take decisions and manage risk.

'It's good that people know I'm the MD of BBCEL, that I represent a significant business and take the supervising civil engineer role seriously. I hope it demonstrates that it's important for everyone to develop people and train them. And it's part of my development too fi I learn from other parts of industry and meet a lot of very talented people.' Contractors, McNaughton says, have gone through a special learning curve of their own in the last few years.

'We've all had to understand that major civils works are highly political and involve significant taxpayers' money. And they all involve the community fi there's a big interaction with the public that has a direct impact on the destiny of projects.

'A number of organisations fi and we are one fi have gone through some significant learning in the way the macro management of these projects is handled in the public sector. We have moved upstream.

'As a profession we have to work with the people making decisions so those decisions are the right ones.' The Highways Agency's move to early contractor involvement was a major step change, for Balfour Beatty at least.

'It forced our business model to change. It took some of our best project managers who were used to running construction projects and put them in a whole new environment.

'We're seeing that they have the management skills and technical knowledge to work alongside consultants.' It also demonstrated very clearly the huge cost of tendering, and that cost, he says, is forcing contractors to pick and chose carefully what they actually bid for.

'The public sector needs to recognise the investment that goes into tendering. You are using shareholders' money after all fi in excess of £1M to bid in some cases. There's also demand for bidders of a certain size, which restricts the lists again.

'All that will happen is that there will be less bidders fi most private finance deals already only have only two competitors.

'It has been said that if we don't bid it leaves the door open to foreign competition. But we've had EU procurement rules for years and how many successful foreign bids have we seen?'

ECI, McNaughton believes, is a good model to work from.

'Select someone to develop the job with, rather than waste money on a tendering exercise.' There is a lot of pressure coming on the infrastructure market, says McNaughton. There are the immediate huge projects he has his eye on.

'But there are tough, long term decisions to make fi on how we produce power, for instance. Do we manage our lives differently so we don't have to contain the nuclear demon?

'And in transport fi where's the growth in airports taking us, what do we do about road transport. I think contractors have their part to play in those decisions.'

You get the feeling that McNaughton for one, will be in the thick of it.

Balfour Beatty fi what next?

Balfour Beatty Civil Engineering is split into three divisions. On current turnover, the regional business generates £220M annually, major projects another £120M and Metro projects fi work done for the Metronet organisation of which Balfour Beatty is part fi another £110M.

The arrival of Birse as part of the division will help boost regional work particularly in the rail sector where Birse is very highly regarded.

'The focus of work for Network Rail is changing. It has moved from the large infrastructure projects of a few years ago to smaller, regional projects,' says McNaughton.

On Metronet projects McNaughton is also predicting change. The organisation is under pressure to open up work to nonfiMetronet companies.

McNaughton is sanguine about that.

'I think it is wholly right for Metronet to continue to challenge the delivery programme and the way it is procured. If it means more work being tendered because the people investing in us think that is the right value for money solution that's OK. There is a large programme of work to be delivered. The last thing we want to do is turn away work from other customers because of the volume of work to be delivered for Metronet,' he says.

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