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Executive Summary
The aims of this report were informative and analytic. First, this report aimed to inform the directorate of Carillion plc about the current contract negotiations with One North, an ambitious long-term project that sees the importance of interconnecting inter-modal transport in the regions in the North to create a vibrant economy and larger output for the country. Before this concept, a report was made by Chancellor Sir David Higgins known as HS2 Plus which proposed to transform the existing network with a new transport network of roads, railways, and motorways. The proposal stressed the immediate need for a speed rail network because of the increased freight in these regions. Second, accompanying this report is the analysis of the various requirements of One North to ensure a close partnership with our company. This included a critical analysis of the existing business model, theories involved, and many other issues involved in contracting with government projects.
This report recommends that the existing relationship between One Norths Executive Committee and Carillion plc should be further improved by adopting measures for the fulfillment of all the requirements. We have provided a critical analysis of Carillion plcs existing business model, i.e. we have to alter some of our strategies to suit One Norths requirements.
One North: Our Client
This project was conceived to make the North an economic force to match that of London by interconnecting the different routes and providing new routes for transport. One North recognizes the significance of transport to make the city regions affected by it an economic powerhouse. Comparative examples are taken from the economically progressive cities in Germany and the Netherlands which have networks of roads, waterways, and connecting airports, providing a large output for strong economies for those countries.
The North can deliver a bigger output to the government. The strategy aims to connect and make shorter routes to the key cities of the North because the current interconnectivity is not viable for a vibrant economy, which means freight and personal travel do not have enough access to the cities and key areas in the region. It has routes not viable for commerce wherein immediate results are needed. Interconnectivity means connecting the cities and key points by road, railways, waterways, and airports. The greatest change needed is through rail because freight is increasing at tremendous speed.
The concept of One North was proposed by the city regions affected by and will benefit from the project. This will consider a platform for the cities and towns affected, and the rewards for the long sacrifice will be enormous. This project will require a concerted effort and a single northern voice to be successful. When completed, it will make the North a competitive force to reckon with in terms of progress and development and will add more resources and output for the country (One north: a proposition for an interconnected north 2014).
When fully completed, the North of England will not anymore be a slow-moving region but will be a thriving district, full of life through continuous economic activities. This is not a dream but a reality. The goals are starting to be fulfilled, thanks to all the city regions, the communities, the public, and the private sectors which have given their expertise and suggestions. There are still many things undone but many of the risks and uncertainties have been pinpointed.
One Norths philosophy
The objective is to increase the national economy through fueling economic growth in the North and providing high productivity and business activities by connecting the city regions involved. The goal is to involve all forms of transport, i.e. multi-modal. The roads have to be improved, the highways and railways have to be strengthened and extended, and the airports have to be connected with all the other forms of transport. Rail is much needed and must be strong as this will play a very significant role in the network. Carillion plcs capabilities have been heavily put on the test as the project requires more resources and capabilities to meet the high demand for construction services.
According to the team from the Leeds City region, they had been looking forward to the realization of their dream of improved connectivity because this was the backbone of their plan. Lacking in connectivity was the conceived gap and with the realization of the project, the gap could be eliminated and the North would become an economic force (One north: a proposition for an interconnected north 2014).
The regions economic growth relies on focusing on the development of transport and logistics. One Norths strategy is to improve the network of cities within the region and make it accessible to all modes of transport for freight and personal journey. The main priority is connecting the cities, key areas, and choke points, make shorter routes to create rapid economic growth and more outputs for the region and the country (One north: a proposition for an interconnected north 2014, p. 25).
Carillion plc is a part of this endeavor, a wholehearted effort of both the private and the public sector. Carillion plc will not leave any stone unturned in helping the region because we have always been a part of the Northern region, although we have helped in the development of all the other regions in England. Our history and achievements will be a shining example, as we have put them here in our report to the Carillion directorate.
More than fifteen million people will be benefited from the project because it will provide employment and boost economic activities in the region. Our environmental programs are a part of our corporative social responsibility initiatives wherein we plan to employ the communities with their youths, unemployed individuals including women to form groups to help in waste management and disposal units. They will be given necessary compensation and funds will be allocated for this purpose.
In realizing the goals and aims of One North, the population can have many economic benefits, such as motivating business environment through attained economics of scale and modern technology-based work areas; acquiring clusters of businesses brought together by one large goal to achieve economic output for the region and the country through healthy competition; encouraging businesses to attain skilled manpower and giving employment to members of the local communities; providing firms access to global markets; reducing higher business costs and providing effective processes in the supply chain; and showing the competitiveness of the North as a healthy place to do business (One north: a proposition for an interconnected north 2014, p. 7).
The larger goal is to become an economic force through connectivity to match that of London. In a detailed analysis of the project, activities will include:
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the effective functioning of a strategic route for both cargo and travel using expanding roads and highways and making possible alternate routes to and from ports and developing world-class highways for business activities;
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developing a rail network passing through the various cities and key points that may entail the establishment of a Pennine route and a much accessible and quick route to Newcastle to add to the networks capability and access to businesses desiring to be a part of the One North project and the economic activities derived from it. Manchester Airport is a strategic point in the region.
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Providing additional accommodation for economic growth by strengthening HS2 capabilities, with metro parks and entertainment facilities.
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An online information system and ticketing system that will give network flexibility and dependability, with more room for development and interconnectivity among the regions benefited by this large scheme
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The realization of the HS2 concept, i.e. expanding this to HS2 and for the cities involved (One north: a proposition for an interconnected north 2014, pp. 7-8). HS2 Plus is a report by Sir David Higgins, describing the strategy of interconnectivity for the North. This is demonstrated in figure 1
The Procurement Process
A typical procurement process entails formulation and continuous development of distinct plans, development, and assigning of contract and delivery processes in construction (Walker & Hampson 2003, p. 13). These phases are to be treated separately in their application. This is demonstrated in the diagram in figure 2.
Procurement Framework
We are in the process of contract signing with One North project team wherein the stipulations therein are still being negotiated. We have our architect and engineers who will work out with their contract requirements. Before we were invited to submit our proposals, the plans of One North should already have been completed. But in reality, there are still many problems in the project design. We still can submit our proposals and suggestions in the actual work of the project without altering their original design, plans and actions, and the stipulations of the contract. The contract has provided some details but there are some gray areas we need to clarify with the Executive Team should we be able to pursue the project in the long term.
We were allowed to discuss procurement strategies because this is one of the concerns of the client. Because of its significance in construction, procurement processes are constantly changing. Walker and Hampson (2003) argued that procurement has gained a rather holistic approach.
There are two kinds of tendering in this type of project applicable to One North, the open and closed tender. In the open type, we are allowed to give our proposals, whereas, in the closed type, those allowed are the ones who have been pre-qualified and have presented their records of financial capabilities and previous experiences to the evaluating board (Walker & Hampson 2003, p. 13).
Procurement Strategies
Billington and Johnson (2005, p. 166) introduced a procurement strategy known as the structured contract wherein stipulations about prices and quantities are within specified ranges and cannot be changed. The longevity of this kind of contract is flexible but this needs long-term commitment from both parties. Another approach to procurement that is quite the opposite is the spot market purchase which has no fixed prices (Billington & Johnson 2005, p. 166). These approaches are explained further in the following diagram of figure 3.
Procurement strategies include several processes as shown in figure 3. Firms can choose from several options in their procurement strategies. In our contracts with clients, we provide innovations. In the left part of the diagram above, we provide our companys procurement options, while on the right we present the sales alternatives, and in the middle of the diagram, we provide our companys product design and marketing choices (Billington & Johnson 2005, p. 166).
A structured contract in the diagram refers to a contract of those involved in the supply chain, such as the production firm and supplier, who can provide fixed costs and quantities, or can provide a range of those prices. This type of contract can be either immediate or long-term. In the diagram above, we have included the direct sales and branded specials. We also have direct channels in which firms have the option to change depending on market factors (Billington & Johnson 2005).
Green procurement
The issue of green procurement has emerged in construction because of the increasing concern on environmental issues. The construction sector has been aware of the environmental impact in construction, particularly the impact One North will create during its full operations (Shen et al. 2004). Sustainable development must take into consideration environmental preservation. Carillion plc has always prided itself on the promotion of environmentally-friendly construction processes, such as reducing waste in construction and proper disposal of construction and demolition waste (C&DW).
A method of C&DW management is the 3Rs (construction-reduce-reuse) which provide saving on the part of the construction company. Some firms have joined forces or formed green alliances to pursue their environmental goals, although they included some programs associated with marketing. They considered corporate social responsibility (CSR) programs along with their procurement efforts. Green procurement can provide savings and help reduce environmental impact. Carillion plc has used green procurement in many of our projects and will continue to work on this with One North. The application of the Environmental Management System (EMS) is one of our important contributions to reduce climate change. EMS has standards and best-practice in waste management and proper waste disposal (Shen et al. 2004).
Waste management in construction can have several benefits that include saving in the 3Rs practice. However, there might be some additional expenses for the company because this entails additional manpower, technology, and facilities for waste management. This is just in the short term but in the long term, we can control wastes and preserve the environment, at the same time extending life for landfills (Shen et al. 2004). An environmental management system is beneficial for the company in the long term because wastes are managed effectively and this will improve environmental preservation. Our relationship with the communities in the regions affected by the project will improve.
Effective governance
Firms cannot function well if they are not effectively managed, and this refers to effective governance. A team is run by a project manager who must also cooperate with the team members to make the project a success. We will be working with project managers and their teams in pursuing the goals of One North. Effective governance is the key to our success. A project manager (PM) exerts pressure to influence the working of the team, and he has several options in influencing the team (Walker & Hampson 2003, p. 174).
The PM must apply innovations because he/she is working in a dynamic and competitive workplace. Presenting ideas in a reasonable and communicative mood but not in an authoritative manner can allow the team members to also present their ideas and become motivated to participate in working to achieve the goals of the project team. Members enthusiasm to follow the manager and the latters authoritative posture form a framework for an effective relationship in the internal structure of the project team (Lovell 1993 as cited in Walker & Hampson 2003).
The framework states that recognition of authority and forcefulness provides an atmosphere of active agreement among the project team members and managers in a responsible and creative mode. Furthermore, if recognition of authority gets over forcefulness, it results in unreceptive loyalty, and what comes out is a failure to achieve the project goals because of the half-hearted cooperation among the members and the team. On the other hand, when the members do not completely recognize the authority of the PM, but the latter still asserts his authority, it may result in covert resistance. This is tantamount to project goals secretly denied. The last scenario is when both recognition of authority and forcefulness are low, the result will be a rivalry among the members which is unproductive for the whole team (Walker & Hampson 2003).
We have opted for innovations in dealing with One North project teams and our teams, and we have made communications to sit down with them to present our options in the context of effective governance. We will also be working with subcontractors in the course of the different projects. This will involve further governance and although sub-contractors cannot be directly managed, we will work out to have effective communication among the different groups and stakeholders. Our teams have announced to the local communities affected by the project for possible employment opportunities for qualified individuals. We will ensure that unemployed citizens will be given their share of employment in the course of the project.
Business Performance Management (BPM)
Business performance management (BPM) refers to the planning, scheduling, and budgeting processes of a firm or organization. The activities in budgeting and auditing have been affected by the new legislation, the Sarbanes-Oxley, which was formulated after the big scandals involving large corporations in the United States and Europe (Ariyachandra & Frolick 2008). However, BPM can also refer to other activities in management such as corporate performance management and enterprise performance management (Ariyachandra & Frolick 2008, p. 113).
Business performance management is a hot issue in businesses today and affects our business dealings with One North. However, we have to combine traditional BPM with our strategies which might be termed as hybrid BPM. This has tremendously grown to an estimated $2 billion in 2010, but Forrester Research (cited in Ariyachandra & Frolick 2008) argues it is even more. BPM software grew in sales to a staggering $2.7 billion in 2009 (Witing 2006 as cited in Ariyachandra & Frolick, 2008).
Tasks for management in the context of BPM include facilitation of strategic goals and the management of performance to achieve those goals. Improvement of strategic goals includes formulating significant objectives and key performance indicators that are helpful for the organization to achieve its goals (Frolick & Ariyachandra 2006).
A term that is confused with business performance management is a business intelligence (BI). However, BI is different because this is a technological solution that enhances a firms capability to merge and influence a large amount of data and information in organizations and use this to improve the managements decision-making process (Clayton 2005 as cited in Ariyachandra & Frolick, 2008). BI refers to the IT infrastructure that is used to introduce and enhance BPM. BPM is a business process that influences BI (Miranda 2004). Another term involving theories in performance management is called process performance management (Blasini n.d.). This aspect of performance management refers to the collection and controlling of information and data on performance measurement which is used to provide positive effects in processes (Blasini n.d.).
The BPM framework proposes four main activities which are: 1) strategize, 2) plan, 3) keep track and analyze, and 4) make necessary action. This is demonstrated in figure 4.
The BPM framework provides the four basic activities by which organizations can add value to their processes using performance management. Strategise means action taken by the company to provide a business strategy, to find out factors that can give us effective strategy, and to provide measures for business performance (Griffin 2004). But determining performance factors linked with strategic drivers is not an easy job. This is the challenge to our organization, to find metrics that can point to progress in organizational objectives.
Planning is the next step after formulating the strategy. This is setting up activities to implement the business strategy. Managers of the different business units (BUs) join hands to set up goals, plans, and budgets to enforce the corporate strategy (Ariyachandra & Frolick, 2008). Planning is about developing a program of action on how to implement the business strategy. Keep track and analyze means watching the performance and comparing this with some benchmarks or proven standards in the organization (Hartlen 2004). This refers to the evaluation of the performance of employees and business unit performance. Managers should be able to access information so that they can provide solutions in case problems arise. In this step, BI infrastructure can be utilized.
The next step in the framework is taking corrective action or providing an appropriate solution if a problem occurs. After monitoring, there might be performance problems that have arisen so that appropriate action can be undertaken (Ariyachandra & Frolick, 2008).
Carillion plc: A critical review of the current business models
Carillions strategy is no different than One Norths strategy targeting the future through sustainable economic development (Carillion: construction services in the UK 2014). Carillion plc is a leader in UK infrastructure projects. Our organization is a customer-oriented company that answers the calls and requests of customers at any given time. We have effective teams composed of experienced and talented individuals. We pride ourselves on matching our peoples talents and skills to the demands and goals of our clients. This company is a prominent advocate of sustainable development, energy efficiency, sustainable infrastructure, and government projects.
Carillion plc (2014) has acquired several companies and successfully executed mergers and acquisitions (M&A) to enlarge the size and scope of its business. In a study on mergers and acquisitions sponsored by Carillion management, there were success factors that should be noted by corporations planning for M&A, and these are the soft and hard factors. The hard factors are those about the effective evaluation of the M&A, the contractual completeness, and the necessary meticulousness. On the other hand, the soft keys involve communications, an effective management group, and the process of dealing with cultural factors (Herdt 2003, p. 55).
The companys strategy is in line with One Norths strategy for sustainable growth and development and in building infrastructures and interconnectivity among the cities in the region. One big source of pride for our organization is the strength of our team and capabilities (Carillion plc: our strategy 2014). We have built these knowledge-based capabilities, along with our partners and contractors and those involved in the supply chain, for years and decades and we have progressed and not faltered, although we struggled in the trying years of the Great Depression.
CEO Richard Howson has stressed the vision of the company which is to be a reliable collaborator in providing construction services and in building an environment that benefits customers and the community we serve (Carillion plc: our strategy 2014).
In serving our customers, we also look after the health and safety of our people. This is our leverage over the other competitors as we integrate the health and safety of our workers with sustainability principles. We have provided a safe workplace for workers which we stipulate in the contract with our clients, in which many of our clients also would like to be a part of this endeavor. By looking after the health and safety of our workers, we can provide high-quality jobs for our clients because the workers reciprocate this good management through good performance.
Carillions achievements
In the years of our existence, we have built public buildings (a library in Birmingham), hospitals and schools, roads and railways (Carillion plc: construction services in the UK 2014, para. 4). We have presented our portfolio of achievements and past works to One North and they have responded with the utmost interest they have thanked us for our efforts to be a part of this long-term endeavor. Carillion will be a formidable contractor to pursue the aims and vision of One North in providing sustainable development for the region and the communities and stakeholders in this long-term economic boost.
The year 2011 is one of our progressive periods in the annals of construction and the beginning of our partnership with One North. We made roads and railways, an example is the Network Rail which we built out of a £750 million Multi-Asset Framework Agreement (Carillion plc: construction services in the UK 2014, para. 8) with One North. This is already part of One Norths initial projects that connects London and Sheffield, and our job included upgrading the railways to accommodate bigger freight trains, giving way for the interconnecting railways, and providing another highway for Leeds Station (Carillion plc: construction services in the UK 2014, para 8).
Our approach
We provide a different kind of approach in engineering and architecture and delivery of services for the built environment. First, in communication, we do it on a personal basis, by which the One North team is also keen to do it. This means we study the stipulations of the contract and those which are not in the contract, meaning the unwritten codes and practices of construction and contracting. This is what we understand in the initial contact with the evaluating team and management of One North.
The green approach has been part of our strategies in all of our projects. For this, we have been awarded a Gold Leaf Member because of our environmental efforts in environmental preservation and protection in the course of our many projects (Carillion plc: construction services in the UK 2014). Our holistic method has made us a partner with the various sectors in economic development and nation-building.
One of the successful methods of our project teams is listening and adapting to the members ideas and suggestions. Every human being must be given a chance. We value each others suggestions so we can deliver the project just in time (Carillion: our values and culture 2014, para. 4).
Proposal for change
As mentioned above, we have a holistic approach in construction and in providing a built environment for public and private use. But this does not mean our system is not flawed. Any system should be able to adopt change over time, and we will introduce this as we get along with One Norths team.
We should be able to identify strategies and combine this with the traditional BPM using altering some of the framework activities to make a fast but effective strategy (Henderson & Venkatraman 1992). As mentioned somewhere, we are flexible in everything and for the client. For instance, finding a strategy can be difficult and tricky but not impossible. By utilizing our team composed of talented and experienced troubleshooters we can analyze the situation and find the right business strategy. We can immediately implement the strategy, at the same time execute other steps in the framework. By so doing, we shortcut and change the process but do not disregard any of the steps in the framework.
Logistics and supply chain strategy
These are concepts and reality in the business world that are as old as business itself. Managements of companies know these terms very well because businesses would not exist without logistics and supply chain management (Christopher 2012, p. 1). From historic times to the pyramids of Egypt up to the present where computers and the Internet play a significant role in administrative and business functions, customer needs and their product specifications have changed just a little. Conflicts and wars were fought and those with little logistics lost them, but those with plenty of them were triumphant (Christopher 2012, p. 1).
Anyone can fight conflicts and have an edge if they have arms and supplies to depend on. America will win wars because of Blackhawks, carriers, and modern-day armaments. The story and origin of logistics originated from these wars and conflicts. Logistics is an army word. During World War II, logistics became a deciding factor to win the war. This was demonstrated during the Allied invasion wherein United States armed forces, along with the allies of democracy, overpowered Hitlers army and Rommels tanks because of the quartermasters, which is a term for logistics (Christopher 2012).
From this evolution of the term logistics, it has been introduced in the world of business, and any business can have a competitive advantage with the right and effective logistics management. Logistics management is now a significant word in business and management, and the term has evolved into supply chain management. SCM is defined as a significant process in managing supplies and materials to end products, passing to and from manufacturing plants, to warehouses, and the end-users (Christopher 2012, p. 3).
Supply chain management
The term supply chain management is broader than the term logistics (Christopher 2012, p. 3). Logistics is essentially made for the smooth flow of products and the important data of these products to the company, whereas supply chain management is based on this initial step and provides the necessary management for other activities about the product, to include manufacturing and the flow of raw materials from suppliers, after which the product has to go to its purported destination, the customer (Andel 2007).
Supply chain management (SCM) now aims to unite the different processes in the supply chain to address customers needs. Thus, this whole activity includes both upstream and downstream processes, meaning the delivery of supplies to manufacture, warehousing, and delivery of end products to the customers. The new concept in SCM focuses on green supply chain which goes after using the product back to manufacturing for the three Rs (recycling-reduce-reuse). The green supply chain emphasizes environmental preservation and aims for sustainable development, i.e. manufacturing products with environmental concerns, or without disregard for the environment (Arlbjorn et al., 2010).
Supply chain management can be a part
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