An innovative relationship with a supplier allowed Heathrow to save millions of pounds on a contract.
Ian Ballentine, executive procurement director at Heathrow, said he had agreed a contract extension and profit margin with the company in return for “complete visibility of everything”, which led to savings of £12m.
Speaking at the CIPS Annual Conference in London, he said: “We did £55m of business with this company. The deal was going to run until 2018. They are a really key supplier to the service we provide.”
Ballentine said they reviewed the contract and agreed the supplier could “keep your profit for the length of this contract” and that Heathrow would lock in until 2023, but they would drill down into costs.
“We went through the sub contracts and took £10m out of the contract, and they still made their profit,” said Ballentine. “Last year we shaved £2m off – we took £1m each.
“Their head of business is now one of our directors, yet he still works for them. We trust them as an organisation to work for us.”
Ballentine, who revealed Heathrow had 45 strategic suppliers, said it was critical to use this approach only with the right suppliers, and it could only work if it was supported by the rest of the business.
“It’s a journey you can go on but don’t think it’s a switch you can pull. Partnership is really tough,” he said.
“Make sure the value is there and do it wholeheartedly.”
Ballentine said they were expecting a government decision on a potential third runway at Heathrow on Tuesday, 25 October.
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