AUC 2020/The story of the Early Years

Period 5
Period 6
Period 7
Period 8
Period 9
Period 10
Period 11
Period 12


PERIOD 5:  "'BNOCS' are the early pacesetters"

The Auckland University Enginuity 2020 competition is underway, with another large field of student teams from the New Zealand's North Island battling for supremacy against their peers. And the top of the first leaderboard reflects the intensive trialling that has preceeded the start as it is extremely close at the top of the table. The early leaders are "BNOCS" with 1,310 pts at the end of period 5 after impressive 31% growth during the quarter. However, the leaders cannot rest easy as their nearest challengers "Zhao's Construction Group", "TRUSSty Solutions" and "Hachi Consulting" are just 4, 6 and 9 points further back respectively, and with so many teams starting well, there are sure to be plenty of twists in the weeks 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.

Looking in more detail at the world economies, 2019 saw some dramatic economic and political changes in the UK. Prime Minister Theresa May's Brexit deal was rejected several times by Parliament, and the UK did not exit the European Union as originally planned at the end of March. Theresa May then resigned, and Boris Johnson became the new PM, and promised to secure Brexit by the end of October, but his minority government's new Brexit deal was also thwarted. However, a majority victory in the General Election on December 12 for the Conservative Party opened the door for the UK to finally leave the European Union at the end of January 2020.
UK economic growth remained modest at 1.4% in 2019, with a projected long-term rate of around 2% providing that there is an orderly exit from the European Union. Consumer spending has continued to drive the economy, but the housing market has cooled and job creation is likely to slow during 2020, and business investment has been on a declining trend as a result of ongoing Brexit-related uncertainty and this is expected to continue until this is resolved. For the UK construction market uncertain times lie ahead, and growth will be hard earned.

Further afield, and unlike the UK, the Global economy grew quicker during 2019, at 3%, with 3.4% expected in 2020, However, the steady pace of expansion in the global economy masks an increase in downside risks that could potentially exacerbate development challenges in many parts of the world, according to the World Economic Situation and Prospects 2019.
The global economy is facing a confluence of risks, which could severely disrupt economic activity and inflict significant damage on longer-term development prospects. These risks include an escalation of trade disputes, an abrupt tightening of global financial conditions, and intensifying climate risks.

League table at the end of period 5




PERIOD 6:  "New leaders you can TRUST in"

After the impressive growth figures posted in period 5, not unexpectedly period 6 proved to be a much tougher quarter. 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. The result was that growth figures were down across the board. However, some of those that were able to post positive growth figures made substantial gains. Most notably "Contingent Unit Node Team" posted the best performance in the quarter, 10% growth that enabled them to storm through the field with an 18-place gain and up to 5th place, their rise up the table only matched by "Hugh Mungus Construction", who moved from 32nd to 14th. At the very top of the table "TRUSSty Solutions" replaced "BNOCS" at the top after moving up 2 places and onto 1,388 pts, with "Zhao's Construction Group" dropping back to 3rd. However, it could not be tighter amongst the leading teams, with the top 5 only separated by 24 points. Business is often a roller coaster ride, learning from both successes and failures, and every management team will be looking closely at the decisions made in period 6 to make effective ones in the next round.

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:  "'Hachi Consulting' turn the formbook on its head"

Period 7 was a mixed quarter, with just over 50% of the teams posting positive growth figures. As previous leaders "TRUSSty Solutions" slipped well down the field after narrowly missing out on some key bids, "Hachi Consulting" made an astonishing 26 place gain, from 29th to 3rd, with 20% growth that was the best in the quarter. However, even that was not enough to prevent "Consulting YM" from becoming the third different leaders as they climbed 3 places and into pole position with 1,545 pts, and they have opened up a 70 point gap to the ever consistent "BNOCS" who remain in second. At the other end of the table those "Fully under-qualified construction kiwi's" are unfortunaely living up to their team name as they are tied together with the "Shear Studs", and both, along with a number of other teams, will need to rethink their bidding strategy to counteract the aggressive bidding of UNKNOWN bidders.

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 stakeholders not working together affected the construction of a new station for the Mass Transit Railway for the client, Hong Kong Developments, in Hong Kong with an estimated risk cost of nearly 240k before mitigation.

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




PERIOD 8:  "A tough quarter as UNKNOWN bidders wreak havoc"

In a tough quarter for many, with only around 45% of the teams improving their position, many were left reeling from the affects of UNKNOWN rival bidders, such as Kiwi Construction and Birket Plc, whose aggressive bids wreaked havoc undercutting many teams' bids, resulting in future workload and margins taking a hit. However, those that were able to ride the storm made significant gains, and none more so than "QuaranTEAM", who proved that isolation was no obstacle as they posted the best performance in period 8, a whopping 24% growth, that catapulted them from 31st to 6th, a 26-place gain. At the top of the table there was finally some stability as "Consulting YM" held onto the lead with 1,552 pts, but their lead was cut in half as "Hachi Consulting" moved up one place to second, with "P4AC" also gaining one place to 3rd. And previous leaders "TRUSSty Solutions" bounced back with 12% growth that saw thm climb 14 places to 4th, and back in the frame. Further down the table "Shear Studs" raised eyebrows after a stunning 22 place gain moved them up to 12th, and it is very clear that as in real life, growing a successful business has many ups and downs.

Running a successful construction business requires effective internal decisions to be made, such as bidding competitively to win new work, and progressing jobs as profitably as possible. However, external economic, political and environmental WORLD EVENTS can also impact upon the business. Clues to some of the events, but not necessarly all of them, are reported in the ENGINUITY NEWS NETWORK (ENN) each period, and close examination of this valuable new source may influence the current and future strategy of the business.
For example, in period 8 an article in the ENN reported that "With so much labour being used for the Qatar 2022 World Cup building programme, particularly in constructing new stadiums, construction companies operating in Qatar, and neighbouring countries, fear a shortage of workers in the next 6 months, and are looking at sourcing the shortfall from elsewhere." Clearly construction companies undertaking work in Qatar may see their build costs driven up due to having to pay additional labour costs in the near future.

League table at the end of period 8
Improvements, or otherwise, during period 8




PERIOD 9:  "Growth almost across the board as the companies rally"

After a previous tough quarter, period 9 saw nearly every team rally, posting positive growth figures, with some significant moves up and down the leaderboard, and two performances shone above all others The best performance in the quarter, a stunning 25% improvement, came from "CPH Consultants" that propelled them a whopping 22 places up the league table, from 26th to 4th, almost matched by "Pai Ting Trading Co", up 20 places to 5th, and both highlighted what can be achieved in one period with effective decisions. "The Warehouse Group Ltd" also continued their impressive rise up the table as they climbed two places to 3rd, and within touching distance of "Hachi Consulting" who stayed second. However, the name in consistency that is "Consulting YM" continued to move away from the chasing pack, opening up a 100+ point lead after 11% growth moved them onto 1,725 pts, and it beginning to look like the battle for second place will be taking centre stage.

Diversifying through Targeted investments can produce benefits to jobs being progressed through reductions in both build costs and risk costs and delays, which can make a real difference to job and company profitability. However, occasionally this can be a risky strategy when the company being invested in is in danger of going bust, and those investing in National Aggregate Plc were warned in period 7 about a 'financial director being put on gardening leave' and then in period 8 of the 'threat of administration next period', and in period 9 National Aggregate Pl did indeed go bust, and only 38% of the investment was recovered for those that had continued to invest in the company.

League table at the end of period 9
Improvements, or otherwise, during period 9




PERIOD 10:  "Further growth with some significant gains"

As in the previous period, period 10 saw growth almost across the board, and once more there was plenty of movement in the league table. One of the most significant moves came from "P4AC", who moved up 12 places from 14th to 2nd after 19% growth, but even they were outshone by "Code Black", who left their rivals in the dark as to how they achieved the best performance in the quarter, an amazing 24% improvement that propelled them 18 places up the table. There were also some encouraging growth figures lower down the table, notably from "Quarantine Inc" and the "YMA Group" with 16% growth figures to stave off any threat of emergency shareholder meetings. However, at the top of the table for the fourth consecutive period "Consulting YM" continue to keep up a 100 point gap to their nearest rivals, with 7% growth that moved them onto 1,838 pts, and they are moving ominously onwards towards claiming this year's Championship.

A recent report in a leading international construction journal posed the question "What makes a successful construction business ?". The author's answer, backed up by some leading industry experts, was that the essential ingredients are an effective marketing strategy, competitive tendering and successful completion of contracts, but there are many other factors that can make the crucial difference between being a 'successful', and an 'outstandingly successful' business. These included targeted investments, employing the most suitable staff and effective overhead management.
Also, increasingly important is the role that an effective risk management policy can play. Take the 16m construction of a demineralization plant the India Water Company in Howrah, West Bengal. The availability of plant had been identified as a medium possibility, and during period 10, the 4th quarter of the job, this caused problems for the contractor, at a reported cost of around 200k. However, it could have been far worse if the chosen contractor had not employed one of the most highly respected project managers in the Water & Sewage field, along with an investment stake in a risk management company, and made use of the BIM model used at the design stage, all of which helped to mitigate the affect of the structural defects, and reduce the final bill.

League table at the end of period 10
Improvements, or otherwise, during period 10




PERIOD 11:  "The battle for second hots up as the finishing line comes into view"

With just one round to go in the Competition it is the battle for second place that is taking centre stage. "P4AC" and "Hachi Consulting" remained 2nd and 3rd respectively after steady growth in period 11, but "The Warehouse Group Ltd" have come right back into the frame after 19% growth, and a 16-place gain propelled them from 20th into 4th place, with "J Medlars Ltd" still in the mix in 4th. Still out in front for 5th consecutive period, and moving ominously towards this year's title are the name in consistency that is "Consulting YM" after 8% growth extended their lead over their rivals, and nearly put them over the Enginuity Holy Grail of 2,000 points as they reached 1,980 pts. Encouragingly nearly 90% of the teams posted positive growth figures, and for many the final round will be all about finishing as high up the table as possible, and continuing to run a sustainable and profitable business.

League table at the end of period 11
Improvements, or otherwise, during period 11




PERIOD 12:  "Veni, vidi, vici!"

"I Came, I Saw, I Conquered". Way back in history, Julius Caesar's sent those famous words in a message back to the Roman Senate in recognition of an overwhelming victory. And so it was for "Consulting YM" who extended their lead at the top of the table in the final round to nearly 180 points to deservedly become the Auckland University Enginuity 2020 Champions with an impressive finishing score of 2,134 pts, and their success owed much to them demonstrating one of the guiding principles in running a successful business, consistency.

Behind the Champions there was no change in position for their three nearest rivals. "P4AC" held onto the Runners Up spot, with "Hachi Consulting" narrowly holding off "The Warehouse Group Ltd" to finish 3rd. Further down the table the outstanding performers in the final round were "Hugh Mungus Construction" who grew by 13%, with "Cunning Stunts and Associates LTD" below them also enjoying 9% growth to raise hopes for their shareholders that improving times were ahead.

In the final analysis every team finished with stronger, more sustainable companies than when they took over in period 5, a testament to the skill and application shown by the management teams in what was a roller coaster of a journey through one and a half simulated years of management.

League table at the end of period 12
Improvements, or otherwise, during period 12