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Kier profits from ‘serial clients’ focus

Winning a place on a framework is 70 per cent down to the quality of the proposal, according to Kier’s chief executive.

Paul Sheffield told Construction News that only 30 per cent of the selection process was based on price, after the firm was selected as the sole contractor for the  £1 billion four-year Scape National Minor Work framework.

Any public body will be able to use the Scape deal, which includes refurbishment and new-build works, on every public sector building type ranging from schools to fire stations.

The framework has been put out by Derby City, Derbyshire County, Gateshead, Nottingham City, Nottinghamshire County and Warwickshire County councils.

Last week Kier reported a 24 per cent hike in pre-tax profit to £68.9 million for the year to 30 June 2011, with revenue up to £2.18bn from £2.1bn in the previous 12 months, largely due to its success on frameworks.

Mr Sheffield (pictured) said the latest win follows the focus on ‘serial clients’ who are putting more of an onus on quality.

“Price will be perhaps 30 per cent of the mark you get in that assessment and the quality areas of the bid could account for about 70 per cent; every framework has a different set up in that respect.”

Clients are asking for a commitment to the local environment, training and development of young people,  and collaborative working with SMEs and the supply chain, Mr Sheffield said.

Under Scape, Kier is set to work on 2,500 projects valued under £500,000 and at least 350 projects valued from £500,000 to £2m.

Mr Sheffield said that once on  a competitive framework there  is more room to negotiate and work with the right material suppliers to enable Kier to protect its margins. But there is also a greater expectancy from the client to drive down cost.

“Obviously within these frameworks there is a demand and need to demonstrate year-on-year cost savings, which you are benchmarked against, and if you fail to achieve them, you won’t get much work in year three.”

He added: “They tend to be repeat procurers. Where you have a one-off project for a one-off customer, they are much more likely to go down the less informed route to lowest price – and we tend to steer clear of those.”

Long-term relationships with these clients were vital to win work, he said. “If you don’t hear about the job until it comes to market, then you’re too late.”

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