BCU 2019/The story of the Competition

Period 5
Period 6
Period 7
Period 8


PERIOD 5:  "'Elite' live up to their name as the early leaders"

After some effective trialling the Birmingham City University Enginuity 2019 competition is underway, with a field of 7 teams all battling for supremacy against their peers. And so to the early action, and the early pacesetters after 25% growth are "Elite Construction" with 1,250 pts, living up to their name, at least for now. However the early leaders cannot relax as the chasing pack are close behind, with "Greenfield Construction Limited" in second followed by "Progressive construction Ltd" in third, and 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, in the UK during 2018 fears over a no-deal Brexit saw the pound fall against other world currencies, particularly the dollar and the euro, as Theresa May continued to struggle to gain support for her plan for Britain leaving the European Union. The Bank of England raised interest rates during August to the highest level for more than nine years, from 0.5% to 0.75% per cent, signalling that the era of ultra-cheap money is ending, and the BoE governor Mark Carney also made clear further hikes are in the pipeline. Chancellor Phillip Hammond announced in the October 2018 Budget that the Office for Budget Responsibility (OBR) do not expect the economy to grow significantly until 2021, after growth of 1.4% in 2018, with projected growth of 1.6 per cent in 2019. For the Construction Industry this could lead to a continued period of uncertainty in the short term, although from mid 2020 onwards it is hoped there will be a steady rise in the volume of new work, although margins are expected to remain tight, and there is expected to be an increase in competition for work as more companies rejoin the construction sector, and there will be more demand for project managers and skilled labour, with the latter already being in short supply.

Further afield, and unlike the UK, the Global economy grew quicker during 2018, at 3.6%, with 3.9% expected in 2019, but according to the International Monetary Fund the expansion appears to have peaked in some major economies in the euro area and Japan, and among emerging market and developing economies, growth prospects are also becoming more uneven, amid rising oil prices, escalating trade tensions, and market pressures on the currencies of some economies with weaker fundamentals. However, in the United States momentum is strengthening, with President Trump promising to increase economic growth to 4 percent, although many economists feel that is faster than is healthy. For the Construction Industry growth is expected to be strongest in the energy and renewables sector, and the Qatar 2022 FIFA World Cup is also expected to continue to generate new opportunities in the Middle East.

League table at the end of period 5




PERIOD 6:  "Falling growth across the board sees the field close up"

After the impressive growth figures posted in period 5, not unexpectedly period 6 proved to be a much tougher quarter, and all bar one team posted falling growth figures. The exception was "CeCAS Limited", who jumped 2 places up the leaderboard, and amazingly less than 40 points now separate the 6 teams behind the leaders, who are still "Elite Construction" with 1,206 pts. "M3 International" gained ground on the leaders, up from 5th to 2nd as their deterioration was less in relation to their rivals, with "Greenfield Construction Limited" going in the opposite direction, falling 4 places. The challenge for the teams is to now look carefully at every aspect of their business to work out what caused the blip, and if they can solve the riddle they should come bouncing back in the next period. Their shareholders will certainly be hoping so!

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:  "'G2' rise to the summit"

After the slowdown in growth in the previous quarter nearly all the teams rallied in period 7, posting positive growth figures. The only exception was "CeCAS Limited", who slipped back 2 places in contrast to "Progressive construction Ltd" who climbed 4 places as they lived up to their team name. And there was drama at the top of the table as "Elite Construction" were finally knocked off their perch as "G2 Construction" took over the leaders jersey with 1,272 pts after publishing the best results in the quarter, an 8% improvement, with "M3 International" holding ono second place. Incredibly there is still very little between the teams, with positions 1 to 6 separated by just 66 points, and every decision will count with just 2 rounds to go in the Competition.

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 construction defects affected the building of a new bridge over the river Tigris for the client, Irag TranGen2009, near Baghdad, with an estimated risk cost of nearly 250k before mitigation.

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




PERIOD 8:  "'Elite' reassert themselves as G2 fall off their summit"

With just one round to go in the this year's competition, impressive 14% growth from "Elite Construction", by far the best in the quarter, saw them return to top spot with 1,206 pts, as previous leaders "G2 Construction" fell well and truly off the summit as they slipped 5 places. However, the new leaders still have some work to do in the final period after "Greenfield Construction Limited" made a bold statement of intent with a 9% improvement that saw them climb 3 places to second, and "M3 International" are still in contention despite dropping one place. And finally there is some renewed hope for the shareholders of "CeCAS Limited", who posted 5% growth to hopefully get the company back on track, and in doing so averted a proposed emergency shareholder meeting to discuss the company's plight.

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