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Balfour Beatty chief warns against ‘false procurement’

Balfour Beatty chief operating officer Andrew McNaughton has warned against the dangers of trying to create a ‘one-size-fits-all’ procurement model.

Mr McNaughton spoke to Construction News after the contractor reported 2011 group pre tax profits of £334m (2010: £306m) on revenue of £11 billion (£10.5bn). He expects Balfour Beatty to keep construction margins for the UK and US above 2 per cent in 2012.

Asked about the industry’s efforts to create intelligent clients that procure efficiently, work collaboratively and drive out waste, he said there is “a lot of rhetoric” on the subject, along with a recognition of a need to improve capability, particularly with public sector clients.

But he said: “I think it’s an unfortunate phrase because actually a lot of public sector clients do procure very intelligently, they think carefully about contract modelling and procurement processes, so it’s a fairly blunt criticism of the public sector.

“You have to pull out and differentiate between some of the pretty hefty programmes that the public sector is procuring, compared with local procurement. There’s a danger that everybody gets challenged to deliver procurement in the same way and that’s a false thing you can do, because customers need to procure in a way that’s appropriate for them.

“I think there’s a recognition it’s got to move, but there’s also a danger that comes with that, that you just assume public sector procurement is going to be one particular model.”

Mr McNaughton said there has “without a doubt” been a significant change over the last five years with the way major clients procure.

“If you add together people like BAA, National Grid, the water utilities, the Highways Agency, they are all procuring in a much more sophisticated way than they were,” he said.

Mr McNaughton declined to make any predictions about the government’s plans for an improved private finance iniatiative model, but said “everybody recognises” the need for private investment to work alongside the public sector.

The chief operating officer also told CN he is looking to Wednesday’s budget for some clarity over pension fund investment in infrastructure after Chancellor George Osborne said at the autumn statement that he expects to secure £20 billion from UK pension funds.

Discussions are ongoing with the National Association of Pension Funds and the Pension Protection Fund to create an investment platform to enable UK funds to invest in existing assets, as Infrastructure UK chief executive Geoffrey Spence told Construction News last month.

The NAPF investment conference last week revealed a potential launch date of January next year for a £2bn platform, although the detail of how it could work is yet to be confirmed.

Mr McNaughton said: “Do we have any wishes for the budget?  The one would be that they get that mechanism in place, so that things can progress.
“Am I certain that it’s going to happen in the budget?  No I’m not, because I can’t be.”

Mr McNaughton also hit back at critics of the National Infrastructure Plan pipeline, in which the government listed a range of priority projects, including some already underway and others in need of planning and funding.

He said: “The truth of the matter is that they’ve now prepared a pipeline – and what they now have to do is take that pipeline and use it intelligently and add to it, develop it, keep it moving with whatever feedback they get from industry for it.  I’m pretty confident that now they’ve taken the step to do that, even to prepare it, that they will do.”

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