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Business: A hole new procurement approach

Heathrow is aiming to better deliver its next deep basement project by taking a fresh look at its approach to procurement. 

Heathrow is currently in the middle of a mega basement project with the Kilo Taxiway scheme but could be going out to the contracting market soon with an even larger scheme. While work on Kilo is progressing well, Heathrow Terminal 2 Future Baggage programme manager Stephen Lunn believed that the procurement process for the next scheme could benefit everyone involved.

“The work on the Kilo box helped to present the perfect opportunity to learn and do things differently in terms of the procurement and building on collaboration,” he says.

“We are within contract on the current project and planning the next hole. This allows us to learn from our current way of working and corral the teams in the right direction.”

The next big hole is to create a new baggage system for the whole of T2 and the total project, including the M&E, is worth between £600M and £1.2bn depending on the final scope of the work.

This uncertainty about the scale of the project is partly down to Heathrow’s funding model and is what has driven Lunn’s determination to find a different approach to procurement.

shutterstock 447112078

shutterstock 447112078

Heathrow as a whole is looking to spend £600M this year, £900M next year and £1.2bn in 2021

“What we do know is that Heathrow as a whole is looking to spend £600M this year, £900M next year and £1.2bn in 2021 and that is before work on expansion even begins,” says Lunn. “In order to spend that kind of capital effectively, we need to do things differently and that starts at the procurement stage.

“Spending £1.2bn in a fairly short space and while keeping the operation safe and working will be hard work.

“It would be ideal to bring units in and just plug them in but not everything can be achieved with modular construction.

“Nonetheless, where possible this is being done on the Kilo box project with diaphragm wall cages brought in in one piece and steel columns being used to support the span of the roof slab rather than cast insitu concrete ones.”

To understand how Heathrow has become set in its ways and the challenges this presents, it is important to understand how Heathrow’s financing and spending periods have worked in the past.

Heathrow’s last five year spending period – Q6 – ended in 2018 and its next period, named H7, will run from 2022 to 2027, the start of expansion. The airport is currently in an interim spending period aimed to bridge between the last five year period and the expansion work.

The spending periods and the investment supporting them is essentially all about regulation by the Civil Aviation Authority and negotiation with airlines over services and passenger forecasts and capital expenditure.

“There are lots of different charges for different services but it averages out at approximately £21.90 per departing passenger,” explains Lunn. “We need to be able to draw a line in the sand before the spending period and the cost to deliver and time etc is all set out from the start and what the project is measured against.”

The current programme designers are Atkins, Jacobs or Arup who work on the projects prior to the G3 investment decision. It is then given to one of Heathrow’s delivery integrators, who are currently Mace, Balfour Beatty, Morgan Sindall and Ferrovial.

“G3 is not the ideal point to go make the investment decision on due to the level of uncertainty and thus change, our airline partners would like more accurate numbers but that is difficult at that point,” says Lunn. “They want low risk but that means that Heathrow has higher cost risks.

“There is also an expectation that once a project has gone through G3, it will be on site within a month.

“Going into contract with a delivery partner without the right level of detail will always result in lots of changes.”

The majority of contracts at Heathrow are let under NEC with target costs but Lunn says that with millions of pounds worth of changes still to be made on a project, it makes it difficult to have true collaboration.

“Nonetheless, lots has changed over the last five years and we have worked with our delivery partners to help them understand the drivers for the changes and our need for cost certainty,” he explains. “Some felt that we were trying to catch them out but actually it was all done to our investment model.

“The other concern I have about the conventional commercial approach is that the contracts were negotiated on low profit. But why agree to a price for a scheme when we know it is too low for the contractor to run their business and know that the price will be negotiated up as the changes happen.

“Wouldn’t it be better to sit down at the start and agree a sensible number for the profit? This honesty improves relationships so that we can then get on and deliver the work.

“It is still work in progress but the reaction so far from Heathrow’s procurement team has been positive.”

shutterstock 303273335

shutterstock 303273335

The project will create a new baggage facility for T2

The new approach led to the T2 Future Baggage team pulling the project to piece to look at it objectively.

“Rather than go to the incumbent designers we have decided to start afresh,” says Lunn.

“I get bored reading in-depth technical briefs – most are copy and pasted from past projects but essentially they make it hard to compare bids.”

Instead the selection process was based around behavioural workshops. The aim was for the Heathrow’s team to understand what each company can offer for this project rather than based on previous projects at Heathrow. We wanted to see what outside thinking could bring to the party rather just the same old way.

The workshops ran in August last year with six companies taking part– Aecom, Arup, Atkins, Motts, Backer Hicks and WSP – invited to each take part in the three-hour sessions.

Jacobs declined as it felt it already had enough work with the current projects but each of the others attended the sessions planned in conjunction with Mark Hopkins of Axon and the Heathrow team.

The workshop was broken into two main parts, an initial 10 minute brief followed by 90 minute workshop. The initial brief was to use industry experience to define what role the principal designer should play throughout the programme.

“The second part was loosely based on the three main areas,” says Lunn. “The key steps and phases to deliver an options report; how so you build an integrated team; and how do you ensure and maintain a high level of performance throughout?”

The workshop was designed to ensure the teams understood the criteria and scoring and could demonstrate how their work fitted within Heathrow’s core values, this was about relationships.

“There was a price check but it was not part of the selection process,” says Lunn.

“At that point we couldn’t sit down and give a clear technical brief of the project – we genuinely didn’t know what it would look like but we knew we needed a new baggage system and that was the problem we wanted them to help us solve.

“Yes, we’re the client but we don’t have all the answers.”

The results varied hugely and at one point Lunn worried that the approach was wrong but Aecom “blew the others out of the water”.

“They ran through their plan and asked and engaged with the procurement team throughout,” explains Lunn. “Others had some really great teams or people but a couple got too bogged down in the workshop itself rather than focusing on their capabilities. Some had great conversations but there was no plan behind them. What we wanted to see was what they as a company could bring to the party, not just what they think Heathrow already wants.”

Aecom was awarded the design contract in autumn 2018.

“We were not just looking for a designer but a design team that could sit alongside us during the lifecycle of the project,” says Lunn. “We don’t have the internal expertise, so we need a team of people we can trust.”

Lunn has not ruled out bringing in other designers to work on specific elements of the T2 Future Baggage project though, we want the best athlete for the job.

What the actual job entails is yet to be defined though but Lunn is clear on what the problem is.

“When T2 was built, the Piccadilly Line was too shallow for a basement to be constructed for baggage processes so the baggage operation was located in T1,” he says. “This was built for a different era and has reached 80% of its lifespan – it struggles in terms of volume and processing speed.

“T1 is in the wrong place to service T2 and T2B so it adds time to processing of bags and the use of T1 is also delaying redevelopment of the T1 area.

“The affordability of the project is also a huge question – there is money set aside for the work but further down the line, however, with the work on Kilo currently underway there is an opportunity to ensure the two projects work together.

“It is an asset replacement project that won’t deliver extra passenger revenue.

“If we were to start now, then it could be delivered by 2024-2026 but that could stretch out to 2034.

“We are looking at all the options from just creating a cut and cover tunnel from the Kilo box to create the option to connect the two in the future through to a full size 530,000m3 basement – double the size and deeper that the Kilo box.

“The answer lies somewhere in the middle. The right thing is trying to enable the future but enabling us to build the right baggage system now.

“We are not waiting for the answer from the expansion project but trying to fast track this scheme ready for when the decision is made.

“It is a chunky civil engineering problem to solve and there is also the baggage technology piece.

“We may go for a more conventional approach for the civils work and an alliance approach for the fit out.

“We hope to start having conversations with the civil engineering sector in the next quarter to understand the appetite for the work. We need to understand how this fits around the current work with Ferrovial and how the two interface. Ferrovial winning the work is not a given.

“The approach used for the kilo box left Heathrow out of the loop slightly as the contractor held design liability and there is a feeling that this approach means that the contract saves the innovative options until after G3.

“Kilo is just a box at the moment and does not have integration elements but the baggage system will be integral to this project.

“We will be inviting other contractors to have similar conversations to the ones we will have with Ferrovial but we are concerned about how interested they will be. We are considering paying bidders for their work to level the playing field.”

While the approach to procurement for the construction is more conventional that the design work, Lunn is also looking to create a more open culture, it is essential to getting innovative solutions.

“It’s about being more open,” he says. “I hope it will create a better flow of information and lead to more innovation at the outset.

“For me, it is like playing poker where the aim is to get the best had from the cards dealt to the whole table and this only works if all the cards are laid on the table.

“We are also looking at risk too. Normally we give the contractor a chunk of risk and retain some ourselves, which they know. If we can take risk out of the equation and just pay for the cost of change and the contractor’s margin on top then surely we will get more value and cost certainty? Change can be agreed quicker leading to better value overall.”

Heathrow has not previously used geotechnical baseline reports and Lunn has not ruled out their use on the baggage project. He describes the adjacent Kilo box as the “world’s biggest trial hole”.

“The biggest risk on Kilo was ground heave but for the T2 Future Baggage project, it will be creating an even bigger hole between T1 and T2 right next to the Piccadilly Line and connecting it to the Kilo box,” he explains.

“The ground anchor solution used on Kilo won’t work for this project and it lends itself more to a top down approach than bottom up. There will be lots of temporary work design on the project.”

Lunn has challenged Aecom to undertake a scheme design for the most likely option but he says this involves “chunky” assumptions as well as integration with Ferrovial.

When could it kick off? Lunns says that, if he was a betting man, it could be before mid-2019.

















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