Heathrow decision launches £16bn spend
The UK government’s decision to support a third runway at Heathrow means a procurement strategy developed over the past year can click into action.
The government said it would be drawing up a national policy statement that will be publicly consulted on before MPs get a vote, which means the decision still faces political hurdles. A planning application will then follow the vote.
Ian Ballentine, who as executive procurement director at Heathrow has a seat on the board, told SM a “client organisation” had been created made up of the airport and four key strategic suppliers to deliver the £16bn project.
He described how other big projects such as HS2 and Hinkley Point C had been studied for learning points before they arrived at their current strategy.
Ballentine said they had identified four key areas where they needed expert help to deliver the third runway: Design, cost and planning, programme management and construction.
His team conducted a tender process to appoint suppliers in these areas, splitting the tender into four corresponding lots and receiving six or seven bids in each. The evaluation criteria was weighted 20% on cost, 40% on technical and 40% on behavioural.
Ballentine said behaviour was rated so highly because of how closely the partners would work to deliver the scheme. “We are all in this as one,” he said. “They [the partners] are costing 1% of the programme but they are influencing 99%. The focus of their value is what they do, not how much they cost. What we don’t want is to bring on board cheap organisations that don’t have the skills to deliver value down the programme.”
Arup, Turner and Townsend, CH2M and Mace were appointed as partners.
However, until the green light from the government these suppliers were paid on a cost-only basis. Now an incentive structure will be finalised and detailed contracts drawn up, said Ballentine.
He told SM they had worked to get suppliers on board despite the previous uncertainty around the project. “We’ve been totally open with the market around getting them on board with us: ‘If we can make this work it will proceed and we proceed as a partnership. If the government doesn’t give the go-ahead we all lose out’,” he said.
Ballentine said a focus on good planning and strategy was now the best protection against the spiralling costs so familiar to large infrastructure projects.
“The reason why a lot of programmes fail is they get straight into delivery mode and push against a timescale. They haven’t thought through the scope, they meet hurdles and technical changes they were not prepared for. We are putting this [strategy] in place to begin with so we don’t have risks and issues occur, and if they do, we have a plan.”
Ballentine said the project would involve creating supply chain hubs in Scotland and the North of England where construction would take place, with preassembled parts brought to Heathrow.
Some 180,000 jobs are expected to be created across the supply chain and Ballentine said it was important to spread economic benefits across the country.
Pending final approval, he expects work to begin in 2020 with a completion date in 2025.
The decision has been welcomed by business groups.
The CBI said the country had waited nearly 50 years for the decision and it would “provide not only a welcome economic stimulus but will show the world that we are well and truly open for business as we negotiate our exit from the EU”.
The Chartered Institute of Logistics and Transport said freight companies should use the decision to invest in more sustainable infrastructure, equipment and working practices.