BAA launches third generation ’VIP’ supplier agreements

11 September 2006 - BAA today announces a new commercial model for engaging suppliers to deliver its £9.5bn ten year capital investment plan for best performance and value. BAA, the construction industry’s biggest private sector client, has consistently been at the forefront of industry improvement initiatives and its new Value in Partnership (VIP) third generation agreements are the next iteration of this. This progression introduces an increased level of segmentation to allow a better ‘fit for purpose’ approach across the diverse range of BAA’s requirements.

The new supplier agreements will come into force over the next 12 months and will see future work split into four areas: 1. Complex, 2. Commodity, 3.Technical and Critical business systems and 4. Consultants - with a roster of preferred suppliers in each segment. The new agreements reinforce BAA’s commitment to long term relationships with its suppliers and also recognise the need for greater commercial tension. An OJEU notice to select suppliers for future work in the complex projects category will be sent out shortly, with OJEU notices being issued as appropriate for the other segments.

Mick Temple, Head of BAA’s Capital Projects team, said: “We are introducing our third generation of supplier agreements for a number of reasons. At a very basic level some of our existing frameworks have come to an end or will do so soon, so now is the time to make changes. We have an opportunity to pick and mix the best of what we have learnt from Terminal 5 and our other projects over the last four to five years, as we look at a new tranche of major project work including the Heathrow East proposal and Stansted Generation 2. This new strategy will enable us to continue our drive to deliver value to our airline customers.

“The new flexible third generation frameworks – appropriately named VIPs – will create an environment for the market to deliver greater value to us. We were at the forefront of industry improvement when we introduced frameworks ten years ago and have developed further improvements through Terminal 5. Now it is time to apply this learning across all our projects.”

Ken Owen, Commercial Director, BAA, added: “Our new strategy is based on six key principles, which are continued commitment to long term relationships with our suppliers; progressive dependence on, and trust in, supplier capability; a pre-agreed commercial model with incentives to beat targets; collaborative working, the active management of risk and opportunity and relationships driven by aligned objectives, behaviours and values.

“This new strategy has not been developed in isolation. We have actively consulted with a number of construction industry representatives, benchmarked other clients and gained learning from other industries, in addition to our Terminal 5 learning. We recognise that many of our projects are complex, with significant risk and so partnering and commercial rigour are both instrumental in driving best long term value for our projects and our customers. Over the last two years we have been applying greater commercial tension into all our non Terminal 5 projects and have achieved good results. Our new strategy provides us with a platform to raise the bar further and ensure that we continue to drive better value across all areas of our capital investment programme.”

The Rt Hon Margaret Hodge, DTI Minister for Industry and the Regions, said: “I have just visited T5 and I was immensely impressed by the way it is being delivered on time and on budget. All major projects in the private and the public sector will find things to learn from the way T5 has been managed, and from the way BAA is now taking their approach further.”

Sir Michael Latham said: “I wish BAA well on this development of their commercial journey. I was very glad to have met with their planners to discuss the way forward. BAA are an outstanding client and the leadership which they give to the construction industry will continue under their new arrangements.”

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Notes to Editors
The future approach: projects will be categorised into one of four areas. See enclosed diagram.(1026KB PDF): www.baa.com/assets/B2CPortal/Static%20Files/HANDOUT_final.pdf

BAA Capital Projects is the team responsible for the design, construction, commercial and supplier management of projects across BAA’s seven UK airports, excluding Terminal 5.

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