Wealth and safety: Risk shifting on Terminal 5

I like the cut of this man’s jib. That’s sailor’s slang – salty dog talk. The man’s name is Steven Morgan. He’s in charge of buying building work to the tune of £120m per month – yes, per month. Airport stuff. He is chief cook and bottle washer for construction at BAA. Used to be an admiral in the US navy. Do you fancy doing business with him? The Chartered Institute of Purchasing & Supply voted him procurement manager of the year. That’s when he was buying building work for the nuclear boys at Sellafield. Mind you, that was only £60m a month. If you’re keen to do his airports, recognise this: he wants designers and contractors to give him a damn good price and not to trouble him from start to finish.

Oh, one other thing: he wants you to take all the risks, and he will pay you to do so. Don’t give him all this partnering, risk-sharing, namby-pamby talk. He doesn’t want to know. This chap wants you to be shipshape and Bristol fashion at his airports.

I like this business model. It’s tidy. Neat.

Mr Morgan sits in his customer box. He decides what he wants: new airport, new runway, new outside lavatories on the west wing of Terminal 5. That’s box one.

In box two are you architects, engineers and whatever. You give him a competitive price: first for a pretty sketch, second for the detailed design. In box three sit you builders. You give him a competitive price and promise you can build what is specified, and build it come what may by Tuesday week.

If you are keen to do his airports, recognise this: he wants designers and contractors to give him a damn good price and not to trouble him from start to finish

If there is a design cock-up, box two gets keelhauled. The architect or engineer gave a competitive price to get things right and the price included the rope tied around its waist and the cost of throwing it overboard to get dragged under the keel. The price even pays for repairing the cuts caused by the barnacles.

Similarly, if there is a putter-uppering cock-up, don’t worry; the price includes taking all risks when putter-uppering. Get the idea?

Now let’s see how this model fixes the burdens. Mr Morgan knows full well that he must make up his mind on what he wants. It’s called the design brief. Is that outside lavatory a bloke’s-only affair? Where? How big? How many stalls? The budget? When? If it is a new road instead: where? How big? How many lanes? The budget?

The architect’s competitive fee is to put up ideas, get passed the planners, and compile the specification. Mr Morgan’s burden is to make up his mind before box three.

Now then, I have real confidence in our UK builders. They are very good at building, pricing and hitting the completion date for what they are asked for at the outset. Pause. Read that again: the crucial part is pricing and hitting the date “for what they are asked for at the outset”. And if Mr Morgan and his BAA folk make up their mind what they want and if the specification is written at the outset, he will get his building on price and on budget. The price for putter-uppering can, if he wants, include all risks. Believe me, the contractors will price for everything necessary, even unforeseen weather, terrorists, newts, bats and more.

Mr Morgan You will soon change your mind. It will happen just as the ink dries on the risk- shifting contract

But be warned Mr Morgan you must make up your mind what you want. Now, can you see what’s coming next? Of course you can. You will soon change your mind. It will happen just as the ink dries on the risk-shifting contract.

Look, all I do is decide disputes. And look at the contractual bumf that floats like the flotsam and jetsam Mr Morgan has observed on his sea travels. All those documents allow the customer to change its mind. They allow the customer to delay, disrupt and interfere with the putter-uppering. None of it is a breach of contract; all of that power to mess the builder about is compensated by loss and expense and extension of time. And all of it gets disputed. The industry shrugs. It is par for the course. And lo, all of it gets in the way of the budget and completion.

Mr Morgan’s model is great. The contractors will give you a price for what you want at the outset and price, too, for risks. The real burden is on the admiral; not on the designers; not on the builders. Can you, Mr Customer, get into contract, then keep your mouth shut until the keys get handed over? I guess Mr Morgan thinks he can. Let’s see if we can too …

Credit: Simone Lia

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple