Savings put BAA procurement back on track

13 May 2010

13 May 2010 | Andy Allen

Recycling of construction materials, an emphasis on off-the-shelf purchases and a review of supplier relations are among the initiatives that have helped procurement save around £260 million at BAA over the past year.

The airport operator’s commercial director, Steve Morgan, said the savings had put the procurement department – which was over budget when he joined in January 2009 – back on track.

As part of the new approach BAA has bought off-the-shelf goods such as seating, building materials and lighting rather than bespoke products. Some concrete used on current construction projects at Heathrow has been recycled from the old Terminal 2 and Queens building, Morgan added.

A major contributing factor to the cost savings was the decision to stop using BAA’s construction framework for major projects in May last year. The company nows puts all projects worth more than £25 million out to competitive tender.

Sharing cost overruns with contractors had also helped reduce overall costs, he said.

“By us shouldering some of the risk we’re getting a better price because contractors don’t have to worry about it,” said Morgan.

The airport operator said it will pay suppliers a margin of between 2 and 4 per cent if they suggest successful ideas on cutting costs. It is also offering bonuses of between 2 and 2.5 per cent to suppliers who exceed expectations on factors other than cost such as safety or responsiveness during the contract.

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