WET News

4 WET NEWS february 2015 News+ Balfour Beatty takes action following KPMG review conclusion • Infrastructure group implements programme to rectify problems as it knocks a further £70M off CSuK's 2014 profits. B idding, commercial and contract management, as well as accuracy of cost and programme forecasting are the root causes for poor opera- tional performance within Bal- four Beatty's UK construction services operation, a review by KPMG has concluded. As a re- sult of the review findings and its recommendations, Balfour Beatty expects to reduce the 2014 UK construction profits by a further £70M. Balfour Beatty announced last September that KPMG would carry out an independent review of the contract portfolio within Construction Services UK (CSUK) because of the continued incon- sistent operational delivery across some parts of that business. The majority of the issues highlighted in the review, said Balfour Beatty, are contained within delivery units previously identified as having issues: Engi- neering Services, and the London (including major projects NEED TO KNOW KPMG reviewed a sample of 127 projects across CSuK The sample covered 74% of engineering Services and 58% of Major Projects The majority of the issues are contained within delivery units previously identified as having issues: engineering Services, and the London and South-west regions Overall the sample comprised 36% of CSuK's august 2014 year to date revenue buildings) and South-west regions of the Regional business. These contracts account for less than 10% of CSUK's August 2014 year to date revenue. The areas identified as being the root causes of poor opera- tional performance were: • Bidding – Tendering at very low margins with optimistic assump- tions around cost, programme and procurement savings, and inadequate provisions for risk • Commercial and contract man- agement – Insufficient local man- agement challenge and review of contract performance, failure to recover genuine contract entitle- ment due to poor contract admin- istration and optimistic assump- tions on contract penalties • Accuracy of cost and pro- gramme forecasting – Insufficient visibility, control and understand- ing on actual versus reported con- tract performance The group said it considered insufficient visibility on project GOOD MONTH BAD MONTH Dŵr Cymru Welsh Water has secured a £230M loan from the eIb to help fund its £1.5bn aMP6 capital investment programme. Joint ventures win again. agility and KCD are to work with Thames Water in a new alliance that will deliver up to £1bn worth of business over the next five years. around 9,000 properties were left without water due to the NI Water pensions dispute. Southwark Council lost its bid to appeal against the use of Chambers Wharf as a Thames Tideway Tunnel project drive site. deterioration was compounded by an overly complex reorganisa- tion programme that led to high levels of employee turnover at a time of extremely challenging market conditions. Recommendations put for- ward by KPMG include more rig- our in tender assessments; improving accountability for pro- ject performance; accuracy and timeliness of forecasting; improv- ing and reinforcing group policies. Leo Quinn, group chief execu- tive, said: "The summary report on UK Construction is an impor- tant step in drawing a line under a period of uncertainty for our customers, and enabling us to focus fully on delivering value. I was never in doubt that there was a great deal of work to be done to restore the Group to strength. "Balfour Beatty is a large organisation which had become too complex and too devolved for adequate line of sight and • environmental groups welcome Labour's call for a proposed clause in the Infrastructure bill aimed at protecting water supply. Banning fracking near aquifers is 'basic common sense' A proposed amendment tabled to the Infrastruc- ture Bill by the Labour Party that would ban fracking near aquifers has been de- scribed as 'basic common sense' by environmental campaigners. The amendment, by Labour MP Tom Greatrex, calls for a new clause to be inserted in the Bill, which is currently making its way through Parliament. The proposed clause states: "The carrying out of hydraulic fracturing in connection with the exploitation of unconventional petroleum in relevant land shall be prohibited. In subsection (5A)— "relevant land" means land which is located within the boundary of a ground- water source protection zone as specified by the Environment Agency from time to time." Greenpeace UK energy cam- paigner Simon Clydesdale said: "The government clings on to the fig leaf of its supposedly world-class fracking regulations, yet there's nothing in the current rules to stop energy firms drilling near our precious sources of drinking water. "Labour's proposal to ban fracking close to aquifers is a mat- ter of such basic common sense that it's hard to see what excuse ministers could come up with to oppose it. "But no party should be under the illusion that we can regulate away all the risks fracking poses to both our environment and our climate." Friends of the Earth climate and energy campaigner Donna Hume added: "Labour's call for a ban on fracking near aquifers and for other safeguards is the right one – it is basic common sense to not risk Britain's drinking water." Hume continued: "While Labour's set of proposals is a wel- come break from the govern- ment's gung-ho pursuit of contro- versial fracking whatever the cost, the truth is that any fracking is highly risky for people's health and the environment and has no place in any community. "The sooner Britain follows the lead of France, Bulgaria and more recently New York State to ban fracking, the safer people will be and the quicker we can get back to the urgent challenge of stopping climate change." More rigour in tender assessments is among the recommendations put forward by KPMG following its review of balfour beatty's CSuK activities financial control. The key is that these issues can be put right and we now have clear action plans in hand. " The group said there was a need to drive greater transparency and accountability and, as a first step to address this, the UK struc- ture will be simplified and de-layered. The Major Projects construction business will report to the group chief executive. Quinn is also launching a wide programme of transformation with an initial phase to drive sig- nificant reduction in overhead costs and substantially improved cash flow generation. REALITY CHECK CSuK's 2014 profits are being reduced by a further £70M The group announced a £75M profit warning last autumn in its CSuK activities balfour beatty rejected Carillion's merger advances back in the summer balfour beatty had warned shareholders that it could breach banking covenants if the £820M sale of Parsons brinckerhoff to WSP Global was not approved CONTRACT WINS • International infrastructure company balfour beatty has been appointed sole contractor to a new uK-wide civil engineering and infrastructure framework for public works. The framework, which runs until february 2019, is worth up to £1.5bn and individual projects are expected to be valued at up to £40M. • Boulting Technology has secured a control and automation services framework with Thames Water covering aMP6. The Lot 1a agreement covers manufacture and related system integration of Motor Control Centres, while a Lot 1b deal includes complex systems integration projects. • Northern Ireland Water has awarded a £10M contract for telemetry equipment to two firms, Schneider electric and eMr Integrated Solutions. The work involves the supply and installation of equipment for around 900 outstations in Northern Ireland. The seven-year contract covers all aspects of the provision of WITS- DNP3 compliant outstation equipment.

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