MEL 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:  "The 'Capitalist Crew' are the early pacesetters"

After some intensive trialling the Melbourne University Enginuity 2020 competition is underway, with another large field of student teams 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, and showing great entrepreneurial spirit, the "Capitalist Crew" with 1,319 pts at the end of period 5 after impressive 32% growth during the quarter. However, the leaders cannot rest easy as their nearest challengers "MDD Falconi" and "ENIGMA" are very close behind, 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:  "A turbulent quarter sees new leaders, and a lot of changes"

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 the "Marvel Group" lived up to their team name as they posted the best performance in the quarter, 11% growth that enabled them to storm through the field with an incredible 35-place gain and up to 2nd place, and their rise up the table was matched by the equally impressive "CHELM Consulting", who moved from 40th to 5th.

At the very top of the table previous leaders the "Capitalist Crew" slipped back into mid table to leave the door open for "MDD Falconi" to replace them at the top after moving up 1 place and onto 1,376 pts, with "Grasping the Nettle" and "Carelessly Ingenious?" also enjoying good quarters as they climbed to 3rd and 4th respectively. However, it is still tight amongst the leading teams, and 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:  "Marvellous 'Marvel' now lead the field, but only just"

After their impressive rise up the table in period 6, all eyes were on the "Marvel Group" to see if they could sustain their momentum, and they did not disappoint as they climbed one place in period 7 to become the third consecutive new leaders with 1,424 pts. However, the new leaders are under in intense pressure from a number of teams in hot pusuit, led by "CHELM Consulting" who also maintained their rise up the table as they moved up three places to 2nd, and within just 3 points of the top, with the "Strike Team" and "Wall Street Winners" well placed only a few points further back in 3rd and 4th respectively.

In a quarter of mixed results, the best performance in the round came from "Alihaha" with 14% growth, which enabled them to move 27 places up the table, but even they could not match the 28 place gain of "COVID Engineering Pty Ltd", with no signs of the pandemic halting their surge from 42nd to 14th.

Many teams who suffered large declines will need to look more carefully at their bidding strategy, and they may need to reduce their margins in order to be more competitive when bidding against rival companies, particularly UNKNOWN ones, who are desperate to secure new work in these uncertain times.

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 for some, but a little bit of magic takes the plaudits"

The Enginuity simulation tries to mimick the real world as closely as possible, and sometimes it is bad decision making that can be a company's undoing, but sometimes it is just bad luck, and this was aptly demonstrated in period 9 for some of the teams. UK based The Crayford Road Group, formed recently when two major privately owned UK contractors joined forces, undercut many of their rivals for medium to large UK jobs in all sectors, and wreaked havoc in the process resulting in future workload and margins taking a hit.

However, there were also lots of success stories in period 8 with over 60% of the teams posting positive growth figures, and incredibly the lead changed hands again, a lead that is beginning to resemble a poison chalice. The latest team to take up the mantle as the new leaders are "Magic Cube", who pulled out all the tricks as 19% growth catapulted them 16 places up the table to takeover top spot with 1,552 pts, and they will need to find the magic touch again in period 9 if they are to become the first team to retain the lead. Behind the leaders there were changes in all top three positions as "EGM" and "Credible Inc" moved up to second and third respectively after equally oustanding quarterly results.

Further down the table the best performance in the round came from "Spark", who were firing on all cylinders with 20% growth, which also enabled them to make the best positional gain with a 23 place rise, and teams who did not fair so well should take heart that one good round can make a significant change to company fortunes.

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:  "'Magic Cube' still lead, but is their puzzle about to be solved ?"

After a previous tough quarter for a number of teams, period 9 saw many of them rallying, with nearly 80% of the teams posting positive growth figures, and finally there is some stability at the top of the table with modest 3% growth from "Magic Cube" enabling them to stay in pole position with 1,602 pts. However the gap to their nearest challengers has been halved to just 13 points, with "Carelessly Ingenious?", up two places, and "UnimelbEng15", the best risers in the quarter with a 17-place gain, both tied in 2nd place. And still well in contention amongst a group of teams are the "Marvel Group" who moved back up to 4th.

Further down the table there were many improving stories, but none more so than "Group 32", whose astonishing 36% growth, easily the best posted in the round, enabled them to make a big move from 46th to 31st. In contrast the small number of teams struggling to recover from a poor set of results in period 9 will now more than ever need to show great resolve, a key trait of successful management, and in particular they will need to review their bidding strategy in order to prepare more competitive bids to secure new work, which is the key to their revival.

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:  "New leaders again, and just 3 points now separate the top 3!"

The improving fortunes for the majority of teams continued in period 10, with over 85% showing positive growth figures. And what a finish is in store in the remaining two rounds with only 3 points now separating the leading three teams. The pressure being exerted on previous leaders "Magic Cube" finally took its toll as they slipped back to joint second with "Carelessly Ingenious?", as "Pyroclastic Construction Ltd" dramatically emerged from the chasing pack with an 8-place gain that saw them takeover top spot with 1,690 pts. And back in 4th the "Marvel Group" are still well in contention lying only 6 points off the lead.

Further down the table "Triple Six" posted the best performance in the quarter with a 20% improvement that lifted them up 11 places, and they were almost matched by "Enginuity 30", whose 19% growth lifted them away from the foot of the table much to the joy of their beleagured shareholders who can now see better times ahead. In terms of the best positional improvements both "COVID Engineering Pty Ltd" (now in recovery), "Grasping the netttle" and "Triple Six" posted impressive 10-place gains.

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:  "'EGM' hold a narrow lead going into the final round"

With just one round to go in this year's Competition, the identity of the 2020 Champions is going right down to the wire, with a number of teams still well in contention, and a dramatic final is in store. Once more the top of the table was turned on its head as a 15% improvement in period 11, the joint best posted, enabled "EGM" to make a stunning move from 10th to become the new leaders with 1,844 pts. However, their lead is still a precarious one with previous leaders "Pyroclastic Construction Ltd" remaining second, and only 23 points behind, and will "Magic Cube" in 3rd have one final trick up their sleeve ? There are also a number of teams in the chasing pack who will feel it could still be their title having seen the lead change hands so many times in this most unpredictable, but high quality competition.
Further down the table "Spark" fired again as they matched the leaders 15% improvement, and they also made the biggest positional gain with a 12-place rise up the table.

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




PERIOD 12:  "Timing is everything as 'Magic Cube' are crowned Champions"

There is an old saying that timing is everything, and so it proved in a tense final round of the Competition as "Magic Cube" pulled one final trick out the hat to jump two places up the table with 12% growth and deservedly become the Melbourne University Enginuity 2020 Champions with an impressive finishing score of 2,026 pts that took them over the 2,000 points barrier, and their success owed much to them demonstrating one of the guiding principles in running a successful business, consistency, having occupied positions 1,1,3,3,1 in the last 5 rounds.

It was a fitting end to a Competition that had seen so many twists and turns, and different leaders, and behind the Champions "Pyroclastic Construction Ltd" held onto the Runners Up spot after a solid final round. The unpredictable "ENIGMA" finishing very strongly in 3rd after climbing 3 places with 9% growth, the best amongst the leading teams, and it was enough to just hold off "Built it brothers" back in 4th. 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 two simulated years of management.

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