January 6th 2011
"It may have taken the railway civil engineering industry by surprise, but..." At this point Andy Milner, Amey's Managing Director - Consulting, pauses for a moment, "...it all turned out exactly as we had planned!"
In 2009, his company was awarded all five of Network Rail's CEFA (Civil Examination Framework Agreement) contracts. And it did indeed raise a few eyebrows in the industry. Had Amey slashed the bottom out of their price? There was no pause this time. "Emphatically not! We aim to make a profit and we do make a profit. But we knew that we could offer the client a sensible joined-up service using all the resources that we had in place in the UK. After all, we were already a major player in the market, with a track record of delivering major projects throughout the network. We were able to put together a bid that released significant efficiencies in the inspection process."
Making the best use of resources was a theme that continued throughout our conversation. But efficiencies of scale only come with, well...scale. Amey is a large company and perhaps it's helpful to see where it sits in the global market. So let's go back to the basics. Who owns whom?
We'll start with Grupo Ferrovial - a multi-national company listed on the Spanish stock exchange primarily owned by one guy, Rafael del Pino. Grupo is the second largest construction group in terms of market capitalisation in Spain. It is active in nearly every branch of the construction business, from civil and public works, engineering to residential construction, with a strong background in large-scale projects such as erecting Chile's tallest office tower and the construction of Bilbao's Guggenheim Museum, along with highway, bridge and road building. Construction continues to account for more than 80% of Ferrovial's annual revenues.
Grupo Ferrovial is split into four divisions. One takes in UK airports of which the main constituent is BAA. The next is construction - Ferrovial Agroman. This is where it all started with Ferrovial as a major contractor, principally in rail. It is responsible for quite a few high speed rail networks in Europe and still retains some expertise in this area. Cintra is a road toll management business and effectively does the financing. It is a client in large projects such as the Chicago skyway.
And finally there's Servicios (i.e. services) - a collection of companies which includes Cespa - a waste company, Ferroser - a highways maintenance business principally in Spain...and Amey as a wholly-owned subsidiary of Servicios. Amey is a UK plc whose chief executive is Mel Ewell. There are four managing directors each running one of the operating businesses: Interurban - strategic roads and rail; Local Government - mainly large highway deals; Built Environment - handling Facilities Management...and Consulting - that's Andy's.
Rapidly scribbling an organisation chart on a pad in front of him, Andy explains, "My business is highways, property services, customer information services (CIS) design and rail. As a Group, Amey delivers in excess of £200 million worth of work for Network Rail each year. Our unique position in rail is that we provide very strong standalone services like track renewals and major enhancement works. We can join all our resources together and offer an end-to-end service for a project right through the GRIP stages."
"We've been working very hard with our clients to emphasise the advantages of this continuity throughout the life cycle of the project", Andy explains. "That's where we've pushed hard. We do everything including the telecoms and CIS work. And it's a business that has grown significantly. Amey has expanded principally through the acquisition of Owen Williams - that's where Sean (Roberts) and I came from. This took place in 2006 when Amey already had about £20 million of consultancy. It consolidated skills that already existed although much smaller in scale and profile. Earlier this year, we acquired the rail business of WYG where there was an obvious synergy between us augmenting those areas where we were strong and supplementing others."
"So we started the consultancy business in 2006 with about £60 million and it's now over £200 million, so it's grown significantly as a result. There were some really quick wins particularly in signalling and power. We were able to bid from concept to delivery so our rail business as a whole has grown...and on top of that we won one of the ‘six-to-four' renewals contracts and were also successful with Colas in providing all the high output renewals."
And this takes us back to the new CEFA contracts which integrate the provision of civil asset examinations and assessments that were traditionally let as separate contracts. Previously Network Rail had around 20 different contracts in place, with more than a dozen different suppliers undertaking its civil examinations, structural and building assessments, and earthworks. These contracts are now amalgamated into one single framework incorporating structural examinations and assessments, operational property inspections, earthworks examinations and rapid response.
The scribbling on the pad pauses briefly as Andy hands over the narrative to Sean Roberts, Business Director - Consulting. "In our bid, we identified the differences in operations over the entire geography and were able to use people across ‘boundaries' and also centralise the assessment capability. We aimed to give Network Rail confidence that if they gave us all the contracts then we would be able to deliver with savings and efficiencies. The numbers involved in the contract are enormous. For example, we are now responsible for maintaining around 90,000 assets, from bridges to tunnels and signal boxes. Part of the subsequent challenge was to deliver it at the same time as migrating people from many employers to Amey. It had an impact on a huge number of people."
"These days many of those doing inspections are more likely to come from a technical background. We're now on the fourth generation of inspection contracts and this is what the client wants as much of the data gathering is done electronically these days. We have also been able to embark on career progression and lower the age profile. The CEFA contract is a passport to a whole range of skills in the railway industry. To some extent we are able to migrate skills from highways and vice versa along with geotechnics and property surveying."
Away from the CEFA contract, Sean is able to draw on a wide range of skills from within the company that complement each other such as structures design, comms design, power and p-way alignment. People don't just work in silos anymore.
"We have our own signalling design team as well as installers and testers, and are one of only a handful of true multi-disciplinary consultants. We don't need to form JVs for many schemes as we do it all ourselves!"
So, what's the next big step? Andy is clear - "We genuinely believe that the Amey model provides a tremendous amount of value and we'd like to take it further up the food chain. Although we already undertake enhancements programmes in the order of £60 million, what I would like to do is take packages of work and join them together into higher value contracts. There's no limit to the size of design work. I want to expand on the comms work and further develop our capability around ERTMS. And then take our expertise and offer it to overseas markets - the Middle East perhaps - and expand by acquisition, taking on companies with niche expertise."
Like the CEFA contract, it won't be the first time Amey has set its sights high and raised eyebrows!