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BIRMINGHAM CITY UNIVERSITY / CPE (HONG KONG) 2022

PERIOD 5 PERIOD 6 PERIOD 7


PERIOD 5:  "'Be Water' are the early pacesetters!"

After a period of intensive trialling the Birmingham City University / CPEC (Continuous Professional Education Centre) Hong Kong 2022 Competition is underway, with a competitive field of teams all battling for supremacy against their peers. And so to the action, and all the teams made excellent starts, with the early pacesetters after 36% growth being "Be Water" with 1,360 pts. There is not a lot to choose between the chasing pack, led by the "A Team" in second, and "KW" in 3rd. However, it is early days, and there are sure to be plenty of twists ahead as the journey through the Early Years unfolds.

The early signs are that the competition will be very competitive, with all the teams improving their overall position in period 5. However, this was not unexpected. After being formed at the beginning of period 1, overhead costs were incurred whilst the companies were being established, without any profits being generated. The companies were now in a position to generate profits against a more stable overhead base, and this was reflected in improved operating profits. Of course, growth will be impossible without an effective strategy, and all the management teams have had time to think about this carefully, and come up with a set of objectives to deliver business success for their stakeholders.

After COVID-19 pandemic sent shockwaves through the UK economy in 2020 there was renewed optimism during most of 2021 thanks to the UK-EU trade deal post Brexit, and the successful role out of a COVID-19 vaccine, resulting in GDP growth of around 6.5%. However, towards the end of 2021 dark clouds began to gather with the new Omicron variant causing concern, inflation at 5.1% in November hitting a fresh decade high, and continued global shortages of goods and fuel raising concerns of an inflationary cycle that forced the Bank Of England to increase interest rates by 0.25% in December for the first time in three years. This led to the OECD (Organisation for Economic Co-operation and Development) to lower its UK’s 2022 GDP growth forecast to 4.7%.

Further afield the COVID-19 pandemic delivered a global economic shock of enormous magnitude during 2020 leading to steep recessions in many countries. However, during 2021 the global economy recovered rapidly from the pandemic shock compared to past recessions with global growth of just over 5%, although this is expected to reduce slightly in 2022. Beyond 2022, slower trend growth is expected with many challenges to be faced including the potential of higher financing costs, heightened financial market volatility, inflation risks driven by rebounding growth and supply-chain bottlenecks, ongoing labour shortages and intensifying climate risks.

League table at the end of period 5




PERIOD 6:  "A New Concept comes to the fore, and makes a big impression"

After the impressive growth figures posted in period 5, not unexpectedly period 6 proved to be a much tougher quarter, with only 40% of the teams posting positive growth figures. This was largely driven by the companies being unable to win as much work as they had previously, with the corresponding reduction in forward workload and margin KPIs.

However, amongst the successes one stood out like a beacon as the "New Concept International Construction Company" posted 8% growth that enabled them to climb 2 places up to second, and to within just 3 points of "Be Water", who just held onto top spot with 1,382 pts. Further back the other 3 teams are having their own titanic struggle, seprated by just 17 points, and they will be keen to make up lost ground on the leaders in period 7.

With KPI points hard earned it will become increasingly important that the management teams look very carefully at every aspect of their business for potential improvements, and those that are most successful in doing so should prosper the most. Two areas that the teams need particular attention are Marketing strategy and Procurement (rival bidders), which are discussed in more detail below.

Marketing is possibly the area of the business that requires the most thought, as there are numerous strategies that could be adopted. The market trend can only be gauged for one year ahead, and not always accurately, and as marketing departments are expanded, the choices of where to direct the marketing effort are wide ranging, by sector, country and job size. The task is not an easy one, but has a major impact upon procurement options, and the future work undertaken, and ultimately on the long term prosperity of the company.

Another important consideration is that rival bidders do not necessarily stick with the same bidding strategy, and as time goes by they can change their strategy according to market conditions. This makes it imperative that teams keep a close eye on the margins rival bidders are applying, and how they may be changing. Evaluating these strategies could make the key difference between success in securing work, or not. To complicate matters even further there may be UNKNOWN rival bidders, and the only clues to these may be in the ENGINUITY NEWS NETWORK (ENN) for the period.

League table at the end of period 6
Improvements, or otherwise, during period 6




PERIOD 7:  "'KW' put pressure on the leads after an eye catching round"

Period 7, the mid point of the Competition, proved to be one of mixed results, but for the 2 teams that grew there was one outstanding performance that stood out as "KW" improved by an amazing 15%, helped in no small way by securing a large 17m contract in the UK with National Transport in the UK that raised their forward workload and margin significantly, which moved them up the table one place, and to within 5 points of the "New Concept International Construction Company", who remain second. "Be Water" still lead the way for the third consecutive period, but there is now just 28 points between the leading 3 teams, and all to play for in the remaining 2 rounds.

IEWP = SUCCESS

A leading industry think tank have come up with a simple formula for running a successful construction business.

  1. IDENTIFY new work
  2. EXPAND the infrastructure (capital base) of the company to take on more work
  3. WIN new work through competitive bidding
  4. PROFITABLY PROGRESS of the jobs won
It sounds so simple in theory, but in practice it is much far harder to achieve. Most teams prove to be more than competent in the first two areas, identify new work and expanding the infrastructure, but the bidding and successful job progression proves more challenging. Winning new work is not easy with so many known and unknown rival bidders working in different sectors and locations, and progressing jobs through to successful completion is hindered many things, such as finding suitable project managers, labour scheduling and overcoming the many obstacles that can occur, such as delays caused by risks strking. Steady growth also requires replacing work progressed with at least the same amount of work again, and this is often the hardest factor of all to get right. The teams can take some comfort from knowing that many management teams in the real world also struggle for consistent growth, and at least in the virtual world it is not critical, although it may feel like it at times!

Another essential part of running a successful business is being able to form an effective Risk Management Strategy to keep the business as profitable as possible. This can take a number of forms, firstly by building sensible risk contingencies into the original bids based upon the likelihood and cost of the risks occurring. Secondly, and just as importantly is mitigating the affects of any risks that strike through targeted investment into risk management companies, using a BIM model if available, and employing the most suitable project managers to jobs in progress. However, even when these mitigating actions are taken, risk can still be costly to job and company profits, and during period 7 problems with structural defects affected the construction of a new health spa for the client, Orlando Adventure World, in the United States, with an estimated risk cost of around 280k before mitigation.

League table at the end of period 7
Improvements, or otherwise, during period 7






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