14 March 2008 | Jake Kanter
Procurement played a crucial role in ensuring the new Terminal 5 at Heathrow airport was completed on time and on budget.
During the construction of the terminal, which was officially opened by the Queen today, BAA adopted an innovative approach to risk management. Instead of passing risk on to its supply chain, it took responsibility for it, to help expose waste and manage supplier performance more efficiently.
In return, suppliers collaborated to deliver projects and products. Disputes over performance-related problems and the cost-related consequences were negated because BAA held financial responsibility - a change in the way the construction industry has traditionally operated.
Mathew Riley, supply chain director at Heathrow's owner BAA, told SM: "We removed one of the main commercial levers that UK construction is used to using, and that is making money from managing client risk."
He added that because BAA held the commercial risk it was able to demand complete transparency of supplier plans. This allowed suppliers to focus on identifying risk rather than protecting their commercial position, in the event of a problem.