O’Rourke: Government must resist ‘lowest bid mentality’

Ray O’Rourke, chairman and chief executive of Laing O’Rourke, has warned against a return to outdated models of public procurement as pressure mounts on government finances.

Speaking after the company released its results for the year to 31 March, O’Rourke said he was concerned the government could revert to methods such as “economic pricing”, a system that was based on the lowest possible tender price.

He said: “We don’t want a return to the days of Mrs Thatcher and the lowest bid mentality.”

The company won £1.1bn of Building Schools for the Future work last month, but O’Rourke said there were “serious doubts” over public spending in the future.

He added that the worst of the slump was over for construction, despite the lack of liquidity in the private sector.

The company increased turnover by 13% from £3.6bn to £4.1bn and pre-tax profit rose from £81.2m to £85m, despite a £17.1m writedown on residential and mixed-use developments.

The company ended the year with an order book of £10bn and cash of £614.3m, which O’Rourke said was part of a policy of “protecting cash and liquidity”.

He said: “It’s a comfortable position, but as a private company there is no need to grow the business; the shareholders won’t panic and run away.”

Asked about takeovers, he said the company would “look at anything”, but was wary about buying businesses in distress. “Our acquisitions have been for geographical or technical reasons,” he said.

The turnover split was £2.5bn in Europe, £828.7m in the Middle East and south Asia, and £725.6m in Australasia. O’Rourke said there were huge opportunities in Australia thanks to the country’s economic stimulus package. The UAE, on the other hand, was still slow despite “signs of liquidity coming back”.

But he said he would not go into the North American market despite the success of firms such as Balfour Beatty in the region.