Examination of Witnesses (Questions 500-509)
CONSTRUCTION CLIENTS'
GROUP, BAA
15 JANUARY 2008
Q500 Mr Clapham: On the PI insurance,
for example, here you are bringing together hundreds of workers,
a large number of small and medium size enterprises. Has it been
possible at all to be able to offer, in exchange for training
their workers particularly in health and safety, lower insurance
premiums? Was that something that you were able to work with,
for example, on T5?
Mr Wolstenholme: I think that
we have had a remarkable record. The insurance industry will be
holding T5 up as a benchmark, a remarkably low incidence of claim,
either from the projects in construction or risk insurance or
from the professional indemnity insurance. One must take a view
when one is ensuring the next set of projects as to whether this
client is likely to impose a larger risk and, therefore, demands
a higher premium or a lower risk. I would like to think that the
results we have demonstrably delivered on T5 will lead us to a
place where we can buy ourselves insurance at low premiums. Again,
a question some time back around supply chains training clients:
supply chains know who the good clients are, the insurance market
will know which teams work well together and, through history,
which are likely to be more risky for them; so these premiums
will be set, hopefully, around the output that you can deliver.
Q501 Mr Clapham: Given the experience
of Terminal 5, have other large construction clients sought to
learn from your experience? Could you give us some examples of
that?
Mr Wolstenholme: We have had probably
for the last two and a half years, queues of people may be a slightly
overestimate, but lots of very large, mainly private sector, clients,
whether that is from the water industries, the defence industries,
traditionally those industries from whom we would go and seek
to get learning ourselves, so we would steal the lessons of the
oil industry from the late eighties and the early nineties, fantastic
industry programmes to put things together to seek to pre-assemble
things off site, to take things off site. The trend for the last
18 months or so has been people coming to see, and to learn from,
T5, whether it is how the client has acted, whether it is how
the governance structure has acted, whether it is how you reduce
the risk to take these off site, whether it is looking after the
construction work force. So, yes, we have had a long queue of
people coming to take learning from us and I feel it is our responsibility
to be able to share the lessons. We are a learning organisation,
we will go and steal anyone's good ideas and, in return, we are
very pleased to try and articulate what those transferable lessons
are and to help people through their own risk profiles.
Q502 Mr Clapham: A little earlier
you said it is difficult to actually sell the business case for
that investment in health and safety. Have you found, in terms
of dealing with the large clients who have come to you to ask
about the experience of T5, that it has been easy to sell the
case based on your experience?
Mr Wolstenholme: The health and
safety case?
Q503 Mr Clapham: Yes.
Mr Wolstenholme: As I said, no-one
would argue the moral business case to actually make improvements
and changes to the way in which we work. I think people have been
interested to observe the straightforward business generated case
and, as I said, from a health and safety point of view I think
people have been clearly turned in their view of how they may
pre-invest in things like health centres. I do not think, generally,
people are slow in taking up any opportunity to improve the environment
and the output that they can hold against their own record for
improving health and safety. Generally people have been very interested
in what we want and generally people have been very interested
to take those lessons forward to their own risk profile.
Q504 Mr Clapham: Before I move on
to my final question, earlier you referred to negotiations with
the trade unions that have taken some time. You met with the trade
unions over a period, I think, of five years. Would you say that
the trade unions have been enormously important in ensuring that
you got the standard of health and safety that you had on T5?
Mr Wolstenholme: The trade unions
are an incredibly important stakeholder as part of a single integrated
team. We treated them as a stakeholder, as we would some of our
suppliers or some of our third parties. I think the process of
going into conversation—this has not been a negotiation,
this has been aligning our objectives collectively and creating
an environment that happens to be very closely aligned with some
of the problems that were occurring. Before the programme started
we met on a quarterly basis, we met on a quarterly basis throughout,
dealing with the high-level issues, not dealing with the day-to-day
incidents that inevitably happen on a site with eight to ten thousand
people, but, yes, I think they have given us huge support. At
times when we have had setbacks on site the unions have given
us huge support because we bothered, I think, to create that environment
where the context was aligning people's objectives; and I am delighted
that they were able to come here today and to look at the T5 programme
to say, "Yes, collectively we have moved the industry on,
including those areas that are highly unionised", because
we have sought to look at those parts that are important to them.
We took on three national working rule agreements. One of those
national working rule agreements was the major projects agreement
that looked at the industry's behaviour around mechanical and
electrical, and I think the Amicus Union in those days that was
designing the new agreements tried to get a concept of integrated
teams, tried to get a balance between rewards, if you like, and
performance, and it is that sort of forward thinking that was
consistent with the T5 approach. I think that there is an analysis
to do at the end of the day as to whether that provided value
for money or not. Actually the fact that we had industrial relations
stability over a period of four and a half years is very demonstrable
evidence. The value in creating stability, the value in creating
a healthy, well-trained, well-motivated workforce is very often
misunderstood and very often the difference between a good project
and a great project.
Q505 Mr Clapham: Finally, are there
any changes or reforms that you would like to see government make
to ensure that we get better delivery in large construction projects?
Mr Wolstenholme: As the question
was posed I thought that was relevant to sort of the 10 billion
pounds, if you like, we are spending over the next 10 years. If
that is the context of the question, then planning processes are
very important to support major programmes. If T5's decision had
not taken the four plus one years to get permission, then everyone
would have been home and dry on T5 and the release of the busy
congested central terminal area three years ago. So the planning
processes we look to for our major programmes in the future is
vital; from our own context, a regulatory outcome that actually
encourages and incentivises good value, environmentally conscious
projects, is vital to our own portfolio as we look forward. The
third one, as I look back over the least decade, in the sense
of changing the UK construction industry, is that governments
should not underestimate, I think, the purpose and the strength
and the influence it had with the Latham Report followed by the
Egan Report and, I think, a highly focused construction initiative
that saw great change or saw significant change over a period
of time. My request, in a sense, back to government, and I think
the observation of government and the industry 10 years ago was,
"You seem a bit dispersed and we seem quite well organised",
yet I think we are slightly better organised and perhaps slightly
less emphasis in government on this highly important sector. You
know £120 billion, ten to 12% GDP, 50% public sector. There
are still huge opportunities, I think, for efficiency savings
on this programme and, if you look back over the last 10 years,
it does make a difference when I think governments, private, public
sector, every stakeholder in the industry forms together with
a clear aspiration as to where you can get to. So my request is
that the changed programme that government had previously sponsored
would be very important to see further improvements as we go forward
from here.
Q506 Chairman: There is just one
question, Mr Wolstenholme. You have a big capital programme still
to come at BAA which you are in charge of. Building magazine
reported last week massive redundancies in your construction projects
division and its headline was, "Cost-saving measures signal
shift away from construction management method used on T5".
Mr Wolstenholme: That is how the
press put it. For the last 12 months now, we have been looking
at how we look at the next five years of our construction programme,
we have taken the lessons learned from our first and our second
generations from T5 and we have segmented our construction risks
into a number of different pots. If the article had said, "Look,
BAA are moving to a model where one cap doesn't fit all",
we will be using construction management techniques against the
risks for which that is appropriate. Where we have very simple
projects that are easy to find with no interface with the operation,
then we will move perhaps towards an Emirates Stadium-type project
where at the right time you pass the risks down. What we are doing
too in matching the third generation of supply chain is reorganising
our own resources, slightly slimmer, slightly lighter touch on
those programmes where we will have more reliance on the construction
supply chain and slightly more resource up at the upfront construction
plant end, so this is, I think, the next generation, a more sophisticated,
a slightly simpler approach, but actually providing the people
and the value in the right places. If you look at the size of
our organisation over the last two or three years, it has crept
up to a level where we now feel we can downsize ourselves, but
this is not axing 200 people to save money, this is actually getting
a simplified process in order to make sure that we are fit to
deliver at Heathrow a £3.5 billion programme. It is extremely
important to the airport, very important to the UK, and I think
it is a programme that matters to London, so we are getting ourselves
fit to deliver that and we are doing the responsible thing in
readjusting and simplifying our processes.
Q507 Chairman: So there is no retreat
from the principles?
Mr Wolstenholme: No retreat from
the principles at all.
Q508 Chairman: Finally, and either
or both of you may want to answer this and it is a very unfair
question because it refers to those who are probably already in
the room for the next evidence session, but you have had a lot
of publicity for T5, all very favourable, you have had deadlines
to meet and you stayed on time and on budget, but the Olympic
Delivery Authority have a unique challenge in that they have an
absolutely unmoveable date by which they have to complete their
very ambitious programme, a series of projects, so what is your
judgment on how the ODA is doing as a client?
Mr Cunningham: I am conscious
that our friends are behind us. In our view, we believe that the
ODA as a client is showing some of the exemplary principles that
our industry should be following or the clients should be following.
They have shown exceptional client leadership, they have engaged
all stakeholders at an early stage and some of their supply chain
principles in terms of their procurement methodologies follow
the principles of the change agenda from the last 10 years, and
I commend the ODA for doing that. On the downside of that, I talked
earlier with regards to the failure of Wembley being due to decisions
being made by committee and I am just conscious of the huge number
of select committees and different committees that the ODA, as
a client, have to report to. Therefore, my sort of caveat to you
and to your colleagues would be just to be careful of scope creep
and the impact that will have on the ODA as the client that they
are at the moment in terms of showing true leadership, and our
concern is that that might be clouded in some way in the future
if there is too much intervention, shall we say, from the committee
approach. At this mid-term report, if you like, if I was asked
to give an out-of-ten performance, I would give eight out of ten
and, if I was allowed to go for half marks, I would go for eight
and a half, but they are showing exceptional leadership. Obviously,
the proof of the pudding is in the eating and we will look to
see how the programme develops.
Q509 Chairman: And BAA for T5 would
have got how many out of ten?
Mr Cunningham: I can only give
ten out of ten for that!
Mr Wolstenholme: I never give
people ten out of ten and I think there is always a gap, there
is always learning. If you go back in a sense to the first question
of what should people be worried about, is there a strong client
in place, is there strong leadership being provided, is there
a clear brief against which you can set very clear targets and
is there an effective governance process, the ODA is a new organisation,
it started up a year and a bit ago, several months in a sense,
on a programme of works that is inevitably still being defined
and I think, rather than seek to say how many marks out of ten,
ask the right questions around whether the Government is providing
the right support to the ODA to make sure that there is clarity
of brief, to make sure there is support both when things go wrong
and things go well and a clear and clean governance structure
that enables it to make decisions quickly. If you can score highly
against those marks, there is absolutely no reason why the expertise
of the supply chain and the integrated teams being developed will
not produce a benchmark result for the future.
Chairman: Gentlemen, we are over our
time. I am very grateful to you for your very clear and persuasive
evidence. Thank you much indeed for your trouble. If there is
anything, on reflection, which you wish you had said, we are open
to receiving further written representations and you can discuss
that with the Clerk. Thank you very much indeed.
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