Cooperate or stagnate…..?

I recently held an enlightening interview with ACE chief executive Dr Nelson Ogunshakin for NCE magazine. He was passionate about the need for UK firms to start acting in unison when it comes to bidding for major projects in international markets, particularly the Middle East. His view was that other companies particularly those from Asian countries, are already working together with their respective governments to present a united multi-disciplinary team. He said that such groupings bring with them financial and political support – and UK firms need to do the same to remain competitive. “The days are long gone where you can compete fiercely against each other. In a very global market where people are collaborating to get the best and get a share of the projects it may be an opportunity for UK Plc to start thinking how can we bundle the best of the UK companies together?” he said.

There are plenty of examples of companies that are successfully pulling together into consortia, but the tendancy to build these from a single nationality is emergent and growing. Asian firms are doing this with the most high profile success at the moment. In December 2009 the Emirates Nuclear Energy Corporation (ENEC) awarded a huge $20bn contract to a Korean consortia to build four new reactors by 2020. Leader Kepco is in a consortium with fellow Korean companies Hyundai Heavy Industries, Samsung Engineering & Construction, Doosan Heavy Industries & Construction. “The Korean companies go in at the front end and behind them is a series of line by line expertise being pulled together and I think that is one of the things we need to be looking at,” said Ogunshakin. “What the Chinese and Koreans have been doing is taking a leadership strategy whereby they say look we are going to go and talk to government and their promoters and put ourselves forward as a complete entity. Behind us we have a team of consultants, contractors, equipment suppliers and that is the way to go in this competitive world.”

This cooperative strategy is also being successfully and increasingly employed by large multi-disciplinary companies. In June VINCI Construction UK Chief Executive John Stanion told me about his plans to increase collaboration between group companies. French parts of the business are increasingly working with UK divisions to provide the best package of solutions for clients. It is very common to see specialist companies like Freyssinet and Bachy Soletanche working with VINCI Construction Grands Projets and VINCI Construction UK. And it is very common to see joint ventures with sister companies such as Nuvia, VINCI Environnement and Spiecapag.  A major advantage that Stanion pointed to was that the costs can be greatly reduced as working as one organisation means that the costs are not = n x (fees + risks + profit) (where n is the number of firms inolved).  Instead there is only one firm so n=1.

For more on Ogunshakin’s views see this week’s NCE.

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