An Evaluation of BAM Construct's Business Performance - Research Proposal Example

An Evaluation of BAM Construct’s 2008-2009 Business Performance Thesis: BAM Construct has deployed effective strategies for securing and the delivery of projects in construction during 2008-2009 Contents Executive Summary 2 1.0 Introduction 2 2.0 Hypothesis 4 3.0 Methodology 4 4.0 Project Management 4 5.0 Analysis of Findings 5 6.0 Conclusions 12 7.0 Recommendations 14 References 14 Appendix A: Tables 15 Appendix B: Figures 20 Appendix C: Select Projects 23 Executive Summary BAM Construct has established itself as a major player in the construction and property industry. BAM Construct has developed a range of facilities including schools and hospitals, shops and offices, and other landmark developments. BAM Construct has the ability to develop and deploy strategies for the effective delivery of construction projects in challenging environments. A study has been conducted to analyse the business strategy, and performance including financial and other measures. BAM Construct has emerged as the leading player in the education and health care sectors. BAM Construct has effectively deployed best practices, and leveraged on the abilities of specialists for the management of risks, and achieve the highest levels of performance. Despite the financial downturn BAM Construct has achieved good financial performance. Recommendations include use of IT, and use of appropriate tools for visualization of work flow. 1.0 Introduction BAM Construct (2010b) is one of the biggest and busiest construction companies in the UK, with business activity going back to 1874. The company’s innovative and versatile approach has been responsible for its growth. The company has acquired a wide knowledge and skill base acquiring the tools for being responsive to the industry’s changing demands and issues. The company has access to seven regional bases within the UK, and has a project portfolio covering every major town and city. BAM Construct has been responsible for the delivery of the highest calibre buildings in the UK on time and on budget. BAM has a team of experts for the delivery of construction, property development, design, services engineering, and the management of facilities. BAM is a worldwide construction services enterprise, and works with BAM Nutall and with BAM PPP, that have a specific focus on public private partnerships. BAM Construct is responsible for building, refurbishing and extending buildings in the UK. BAM has a strong regional presence allowing foster trust and beneficial partnerships with stakeholders including customers, consultants, and members of the supply chain. A brief description of projects under construction has been included in table A-1. BAM Construct (BAM, 2010b) has been responsible for building a range of facilities such as schools and hospitals, shops and offices, and other landmark developments. Projects vary in terms of size, complexity and methods applied for construction. The company has an emphasis on satisfying customer’s needs in terms of timing, quality and budget, helping the company to differentiate from its competitors. The company also emphasizes on its responsibilities towards the communities and environments of its operation. BAM Construct (BAM, 2010b) employs approximately 1400 people in sites, regional offices, and support services. Employees are considered an asset, and the company attributes its success to its employees. The company has reaffirmed that it is committed to attracting, retaining, and developing high calibre staff at all levels. Investment in professional development allows development of skill which is passed on to customers as evidenced by the quality of work. 2.0 Hypothesis BAM Construct has the ability to develop and deploy strategies for the effective delivery of construction projects in challenging environments. 3.0 Methodology The methodology for the assessment includes a review and analysis of published data in the form published documents such as annual reports and other publications. The process flow diagram for the development of business economic model and implementation plan has been illustrated in figure B-1. The process begins with the assessment of capability for the industry structure and development of delivery model. This is followed by the development of corporate strategy, and development of economic model and implementation plan. The analysis includes the review of performance in construction projects during 2008-2009. The analysis includes a review of business strategy, and performance including financial and other measures. 4.0 Project Management The study has been managed in stages. The stages, activity for each stage, timeline, and deliverable have been illustrated in the table A-2. Stage one includes the development of the thesis. Stage two includes the development of the study. Stage three includes the analysis of data. Stage five includes development of conclusions. Stage five includes the development of dissertation. Resources utilized for the study include computing resources including computer and accessories and publications including Annual Report and other corporate publications. 5.0 Analysis of Findings BAM Construct is led by Richard Gregory as the Chief Executive Officer (CEO). The CEO acknowledged that they have risen to the challenge of market conditions by competing harder, offering greater value and ensuring that client’s requirements are well understood. BAM Construct (2009a) won 51 projects worth more than £750 million, and the forward book order stood at £1.2 billion. Strong areas of expertise include education and health, with BAM completing six university projects, eight schools and three colleges. Projects in health include the Cardiac Centre, John Radcliffe Hospital, Oxford; Stanley Primary Care Centre, Durham, Trafford General Hospital; laboratories, Gartnavel Hospital, Glasgow; Morriston Hospital, Swansea; Caerphilly Local General Hospital; and Ysbyty Aneurin Bevan . The value of work has is 206 million. Other work includes Dumfries and Galloway Royal Incompanyary; and Royal Hospital for Sick Children, Edinburgh (see table A-3 and table A-4). The value of this work has been estimated at 200 million. BAM (2009a) completed 50 construction projects in 2009. The projects were completed on time and on budget. Redevelopment of the Ashmolean Museum, Oxford (see figure C-4) was an iconic project. Projects such as Solihul BSF schools; state-of-the-art Brindley Place Birmingham; and projects including commercial office developments ; Fore in West Midlans; and St Peter’s Square Stockport have added to the transformation and education in Britain (see table A-3 and table A-4). According to industry league tables published in Construction News, BAM is UK’s leading contractor for health and two in education. BAM (2009a) is also involved in the leisure and arts market. Projects include National History Museum, London; and Ashmolean Museum, Oxford (see figure C-4). An area of expertise includes sustainable and high quality commercial buildings. Other projects include the award of new corporate headquarters for Severn Trent Plc, Coventry; Co-operative Group’s Head Office; Manchester (see figure C-1); and Network Rail National Centre, Milton Keynes. BAM (2010a) has been delighting clients by being on time and on budget. This has also been ascertained by awards for people and buildings from independent assessors and professional bodies, and testimony from customers. Awards won include one gold award and seven RoSPA gold medals for performance in safety from the Royal Society for the Prevention of Accidents; six gold medals from Industry’s Independent Considerate Constructor’s Scheme; gold medal for Richard Tyler for work on Redcar and Cleveland College, Construction Manager of the Year Awards; Prime Minister’s Better Public Building Award for Joseph Chamberlain College; Best Contractor of the Year at Yorkshire Property Awards; RICS sustainability awards; Regeneration Development of the Year for Mann Island, Liverpool; and Concrete Society Award for Excellence for Darwin Centre II, National History Museum, London. Specialists at BAM (2008; 2009c; 2010b) understand the challenges associated with delivery of education facilities. Facilities and their design should not only be modern and flexible, but also integrate seamlessly with ICT provision, and support curriculum. Buildings have to be hubs within localities, and draw in the community. A striking feature of BAM design is the design of St Peter Apostle School in Clydebank, which is low carbon, sustainable building using low ground source energy and natural ventilation. BAM (2009b; 2010b) also specializes in retrofitting and refurbishing older buildings for helping them become more sustainable. Bam plays leadership role for the sector. BAM chairs the waste working party on UKCG Environmental Group, and advises the Government on Strategy for Sustainable Construction Waste Group. BAM also chairs the CO2 working group for the European Network of Construction Organisations for Research and Development for the development of standard measurement protocol for construction companies across Europe. A strategy deployed by BAM has been to educate pupils and teachers and involving them in energy measurement and management. BAM (2010a) has exposure to credit risks on financial instruments. These include financial instruments including liquid assets and trade debtors. The management of credit risk involves spreading investments in liquid assets across financial institutions with high quality. The company is party to a guarantee in respect of overdraft. The risks associated with the provision of this guarantee have been considered by the directors, who believe that the guarantee will not give rise to loss for the company in the future. Liquidity risk and cash flow risk are managed through the preparation and monitoring medium term plans, budgets and quarterly forecasts. Value risks are considered at the properties level and project level, which are monitored on an ongoing basis. Development projects are financed through a mix of project-specific bank facilities and loans from the parent organization. One of the elements considered while evaluating new projects include financing. In case of existing projects performance is monitored against loan covenant compliance, and the potential requirement for refinancing. Commercial risks faced while operating in a competitive market are mitigated by a focus on provision of high quality buildings in prime locations, and having a mixed portfolio of office and retail projects. There is a rigorous appraisal process and site selection that includes a thorough assessment of letting risk while considering new opportunities for development. The company complies with all applicable legislation including construction industry scheme, health and safety, and relevant building standards for construction and property (BAM, 2010a). 59 developments including schools, colleges, universities, hospitals, offices, and retail were delivered in 2009. Services were delivered on 29 PFI projects in UK. Collaborative working with customers is essential for every project, and customer feedback has been excellent. BAM (2009a) worked hard to gain a clear understanding of customer’s requirements at an early stage, and use feedback questionnaires for measuring the levels of service provided. Ways of adding value include reduction in costs, improving quality, and incorporating quality in construction projects. This is achieved by the independent management of customer partnering through workshops, and ensuring that every possibility to add value has been explored. The workshops also allow identification of potential challenges before they arise, and ensuring that close project teams are built including customer and project design team. BAM (2009b) is a leading provider in the education sector, and it regards engagement with schools and colleges an opportunity to make a difference. This form of engagement helps achieve a wide range of corporate social responsibility opportunities. These include supporting the national curriculum, building relationships with local communities, promoting careers in the construction industry, and communicating important safety messages. BAM manages 30 schools in the UK. The approach is that site teams make projects a focus of learning about the construction sector, and build strong relationships with pupils and teachers. A range of work placements, employability and support programs have been developed. This includes work experience for students in sites run by BAM, and the most successful ones would be replicated across the country. Educational co-ordinators have been recruited to support regional teams, and they have delivered a wide range of projects to support projects feeding into the national curriculum and promote the construction industry. Such projects ensure that BAM team members have opportunities for sharing their professional experience with others. The financials for the period from the year 2008-2009 have been analyzed (BAM, 2010a). Group turnover increased from 25.71 million to 38.123 million, and the cost of sales increased from 27.589 million to 46.794 million. The gross loss increased from 1.879 million to 8.671 million, while operating loss and administrative expenses declined from 2.485 million to 2.395 million. The other operating income decreased from 2.049 million to 1.447 million. The group operating loss increased from 2.315 million to 9.619 million. The total operating loss increased from 2.262 million to 9.620 million. The loss for the financial year increased from 5.295 million to 8.869 million. The net assets declined from 22.232 million to 20.863 million, which are also known as the equity holder’s funds. The net assets of the company declined from 21,460 million to 13,278 million. The financial performance is better than its peers. Corporate social responsibility is of prime importance to BAM (2009b), especially in the current economic environment. Strong financial performance could be achieved by efficient working practices, and there has been an increasing demand for sustainable and social responsibility in practices from customers. In anticipation of new legislation, the company has been concerned about delivery of energy efficient and cost effective building that are fully compliant with new regulations. Reducing CO2 emissions is important to BAM, and a climate change manager was appointed in 2008. The first carbon footprint report was completed in 2008, and the second report has been completed allowing benchmarking of the process. As the business has been growing the year 2008 saw an increase in carbon emissions. However, a reduction of 7 percent per 1 million contract value has been achieved. Another area of importance to BAM (2009b) is waste management. The year 2008 saw construction sites divert 65 percent of their waste away from landfill, placing the company among industry leaders. Though the company was short of the 70 percent target, the target for 2009 has been set at 75 percent, and the target has been no waste by 2015. The agenda for health and safety is of high importance to the company. It has been reflected by the 7 percent decline in accident rates, and a 48 percent reduction over a five-year period. The company provides opportunities for people to learn, work, and recover from illness. In the year 2008, the company handed 59 buildings with 11 school and 18 hospital projects. The company being a constructor and manager of buildings has acknowledged its role in strengthening of communities, and developing lives and careers of employees. The company was featured in the Sunday Times “top 100 best companies to work for” list. The management has reaffirmed that it is committed to provision of a positive working environment, and maintaining its positioning to deal with challenges in the future (BAM, 2009b). The company is responsible for designing, building, and managing facilities such as hospitals, places of learning, law courts, offices, stores, industrial buildings and leisure facilities. The strategy for corporate social responsibility has been developed by feedback from stakeholders, research and benchmarking. The use of these methods has allowed identification and prioritization of key elements of the corporate and social responsibility activities. The company has achieved a “Bronze” ranking in the Business in the Community Corporate Responsibility Index in 2008. The score of 78.5 percent represents a 15 percent improvement on the performance from the previous year (BAM, 2009b). Gaps are identified by measurement and benchmarking of performance, allowing a focus on efforts for ensuring continual improvement. The company has recently achieved ISO 14001 certification demonstrating that the company is capable of annual improvement in environmental performance. The next year will see a further focus in the reduction of environmental impact, especially reduction of carbon footprint including the “near-zero” target for waste to landfill (BAM, 2009b). Community activities are being measured more systematically, and the company is broadening its responsible sourcing activities. The management has emphasized that a totally transparent approach is required in the management of these issues. Challenging targets have been set, and progress is monitored across all activities. The considerate contractors’ scheme is national that improves the image of construction minimizing the impact of construction projects in the environment and local communities. Assessment includes scoring criteria including considerate; environment; cleanliness; good neighbours; respectful; health and safety; responsible and accountable. BAM achieved an average score of 34.93 out of 40, and 100 percent of sites being registered. The score is better than the industry average of 31.45. The company picked up six Gold, nine Silver, and eight Bronze awards. As construction projects are public statements of organization’s values, these achievements are valued by the company (BAM, 2009b). Reduction of emissions and climate change are important to BAM (2009b). According to new legislation, businesses will have to report carbon emissions to the government as a part of the carbon reduction commitment, besides having to pay taxes on the carbon emitted. Risks posed by legislation and reduction in operational costs could be achieved by minimizing emissions and reducing energy use. Customers could also achieve their own emission targets by the delivery and management of buildings with sustainable construction, and optimum levels of performance. There has been an improvement in the quality of data on carbon reporting, and the number of estimates has been lower. This has been possible due to the continued improvement in data capture in construction sites, and better data from energy and fuel suppliers. This has led the company to assist subcontractors in the development of their workforce skills. This was enabled by the strong safety and health management commitment, and training of 54 percent of subcontractors’ supervisors. In the future, this will be a minimum requirement for subcontractor supervisors (BAM, 2009b). An area of focus will be integrating environmental requirements with subcontractors’ procedures, and ensuring that they have undergone appropriate health and safety training. BAM (2009b) is a patron of CRASH, which is the construction and property industry’s charity for homeless people. The support includes a donation of 7,800 and encouraging employees support CRASH through various fundraising activities. 6.0 Conclusions BAM is a major player in the construction and property industry. BAM operates in a wide range of sectors including education, health, commercial, leisure and retail. BAM works by developing close relationships with its customers and has built a reputation for high standards of quality and safety. BAMs expertise spans core areas including construction, property development, design, facilities management, services management and plant hire. As the businesses are integrated, customers get the full benefit from a wide network of offices with a diverse range of skills and experience. Recent industry reports indicate that the construction sector was struggling, and completing work on time and budget consistently exceeded expectations. The market has been estimated to be very challenging in the next few years, and the goal of BAM has been to anticipate clients’ changing demands. In addition to economic challenges, commitments for carbon reduction will be tough to be satisfied. Such practices have led BAM become leaders in sustainable design, and why specialist teams offer advice on issues ranging from climate change to reduction of carbon footprint and extensive monitoring of the environment on all sites. Best practices that are readily available and specialists with relevant knowledge and experience are utilized for the management of potential risks, and highest level of compliance. BAM has a strong cash flow that allows mitigation of potential interest rate and cash flow risks that are associated with the tightening of credit markets that could affect funding for future property developments. This practice allows BAM to be well positioned for taking advantage of new development opportunities, and put existing properties in the market when there is an improvement in existing market conditions. Stringent financial assumptions are used for the estimation of tenant demand, rental values, expected yields, and construction inflation. Education and health care are areas of expertise with projects ranging from schools to university buildings, and special needs schools to academies. The aim is to build inspiring places of learning for helping students and teachers aim high and achieve. Other areas of focus include employee development, working with local schools, and activities such as health and safety. The management has emphasized that excellent relationships with suppliers are necessary for the achievement of targets for quality, safety, and environment. 7.0 Recommendations Froese (2010) suggested that management processed must accommodate changes brought about by advances in information technology. These include architecture, engineering, and construction. A unified approach to the management of projects includes extensive use of project information, definition of inter-relationships, and modification of project management tools and procedures for working with these integrated views. Sacks et al. (2010) argued that an area of difficulty is the visualization of work flow in a construction project, which could be overcome by the use of visualizing platform for enabling pull flow and deeper collaboration between teams. The use of appropriate tool allows maintenance of work flow stability, negotiation and commitment between teams, lean production planning, and effective communication of visualization flow. References BAM. (2008). From every angle in 2008. BAM Construct UK and BAM Construction. London. 1-13. BAM. (2009a). BAM Construction. Available: http://www.bam.co.uk/brochure/BAM_Construction.pdf. Last Accessed June 16 2010. BAM. (2009b). CSR Report. BAM Construct UK and BAM Construction. London. 1-32. BAM. (2009c). Never Waste a Good Crisis. Construction Excellence. BAM Construct UK and BAM Construction. London. 1-32. BAM. (2010a). Report and Accounts 2009. BAM Construct UK Limited. London. 1-42. BAM. (2010b). Review 09. Available: http://www.bam.co.uk/brochure/2009_Overview.pdf. Last accessed June 21 2010. Froese, T. (2010). The impact of emerging information technology on project management for construction. Automation in Construction. 19(5):531-538. Sacks, R., Radosavljevic, M. & Barak, R. (2010). Requirements for building information modeling based lean production management systems for construction. Automation in Construction. 19(5): 641-655. Appendix A: Tables Table A-1. Current Project Descriptions (BAM, 2010b) Project Description 11 Brindleyplace The project is a 14-storey office building. It is in the final stage of BAM’s ten year involvement in Brindleyplace regeneration development. Slingfield Mill, Weaver’s Wharf This is a 5.26 million project. The project involves shell-only refurbishment and extension of Grade II listed mill. The building is to be used for future retail and hotel tenants. Cressex Community School The project will replace the existing Cressex Community School. This project is to be completed under wave 2 BSF One School Pathfinder funding, which is a part of the SECE framework. Table A-2. Project Management Stage Activity Duration Deliverable One Development of thesis 01/06/2010 – 04/06/2010 Thesis Statement Two Development of study 07/06/2010 – 09/06/2010 Study Design Three Collection of data 10/06/2010 – 11/06/2010 Annual Reports and other publications Four Analysis of data 14/06/2010 – 18/06/2010 Findings Five Development of conclusions and recommendations 21/06/2010 – 22/06/2010 Conclusions Six Development of dissertation 22/06/2010 – 24/06/2010 Dissertation Table A-3: 2008-2009 Project Costs (BAM, 2009a; BAM 2010b) Project Cost (£) Tresham Institute of Further and Higher Education, Corby 23 Culcheth High School, Warrington 25 Liverpool Community College 20 Skelmershdale and Ormskirk College 26 West Cheshire College 44 Heslington East Campus, University of York 70 North West Kent College, Dartford 39 Chobham Academy, London 30 Shelton Mental Health Facility, Shrewsbury, Shropshire 31 Transplantation Institute, Freeman Hospital, Newcastle 30 Health and Social Care Centre, Scunthorpe, NHS Lincolnshire 11 Dumfries and Galloway Royal Incompanyary 100 Royal Hospital for Sick Children, Edinburgh 93 The Co-operative, Manchester 95 National Centre Network Rail, Milton Keynes 25 Office, BAE Systems 15 Civic Offices and Community Hospital, Selby 15 ASDA, Ashington 14 Tower Block, Royal incompanyary, Hull 6 Leisure Centre, University of Lancashire 7.5 National Portrait Gallery of Scotland, Edinburgh 7 Table A-4. 2008-2009 Percentage of Work Sectorwise (BAM, 2009a; BAM 2010b) Sector Percentage (%) Retail 4 Office 19 Education 43 Mixed development 11 Leisure 6 Health 16 Industrial 1 Appendix B: Figures Figure B-1: Process Flow Diagram (BAM, 2009c) Figure B-2. Value of Work Sectorwise (%) (BAM, 2008) Appendix C: Select Projects Figure C-1. Co-operative Group Headquarters Figure C-2. BAE Systems Reception Figure C-3. Sutherland Building Figure C-4. Ashmolean Museum Read More