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E 15: 2023 Contractor League Table Predictions
46 Plays1 year ago
In this episode, Carlos and Jason predict who they think will top the Contractor League Table in 2023. They discuss Balfour Beatty, Morgan Sindall, Kier, Mace, Keller and a few more contenders.
They also dive into how important the relationship between section engineer / package leads and quantity surveyors are - including answering whether UK engineers can actually do maths...
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Transcript
Introduction to Episode 15
00:00:00
Speaker
Hello, and welcome to episode 15 of the offsite podcast, where we chat all things construction and technology. My name's Carlos Caballo. And I am Jason Lanzini.
Engineer Stereotypes and Wardrobe Reflection
00:00:09
Speaker
Carlos, I need to immediately pull you up on something, uh, my friend earlier in the week or last week, you posted something on LinkedIn, which was a, a, let's say a stereotypical starter kit for an engineer. And, um, it's had me reevaluating my wardrobe. Ah.
00:00:29
Speaker
a little bit too close to home. Luckily for me, I can't grow a beard very well. So I don't quite fit in in the mall. But yeah, it cut a little bit too close to home. You grow one of these little kind of dirty stubbles that if you have a great beard for a 12 year old, yeah.
00:00:50
Speaker
Yeah, I think yeah that that post it came out the woodwork with basically everyone tagging their mate and was like, this is literally you. So yeah, I think it summarizes the engineer pretty well.
00:01:06
Speaker
there was a there was a comment on there which stuck with me which was like I can't remember what exactly it said but it was like the male pale and stale brigade which also cut very close to home because I was like am I that pale yeah yeah yeah you have to get Ollie to sort that out for you yeah okay nice right
Predicting the UK Contractor League Table
00:01:35
Speaker
So today we're going to be chatting about the relationship between engineers and QS's. I'm sure that will be fairly heated based on our backgrounds. But first up, Jason, I asked you to pull together a topic. What have you got in mind? OK, cool. Yeah, so Carlos asked me to do some work to think of a topic that we should be covering. And the first thing that came to mind is
00:02:01
Speaker
is every year in the UK, there's this thing called the Contractor League Table. It used to be something that people looked at a lot. I don't know if most of anyone listening to this would be looking at it. But basically, it ranks the contractors by volume of work performed in the year. And it normally comes out about now. I think last year it came out like we're recording this on the 3rd of August. So it comes out like two days or something from now a year ago. So it's probably imminently due out.
00:02:31
Speaker
And so for my topic, I thought I'd get cast to do a whole bunch of work, which is to put himself out there and essentially make a prediction of who the top five contractors would be in the league tables when they're released, you know, in the near future.
00:02:51
Speaker
So for context, the top five contractors in last year's league table in the UK, so 2022, the top five were Balthabiti with 8.26 billion turnover, Kia Group, which 3.3, so less than half of
00:03:12
Speaker
of Balfour's 3.32. Then Morgan Sindal was about the same 3.2. Then Amy at 2.4 billion. And then number five was ISG at about 2.26. So I guess the question to you, Carlos, is if you had to put money on it, we'll talk about the money bit after, but if you had to put money on it, what would you be saying is likely the top five
Top Contractors: Balfour Beatty and Kia Analysis
00:03:42
Speaker
for this year. So I brought up the league table here just because I wanted to see some of those stats to help me think about the answer. Right, if I had to put money on it, obviously first up, Balfour BT, they're not going anywhere. They're not even leaving the top spot. They're doing about 8.2 billion. They're still winning loads of work. So that's nailed on.
00:04:10
Speaker
They don't like one of the largest projects in the UK being that section of high speed too, don't they? And that is the largest. Yeah. Yeah. I think that's a safe bet. Like that's better than most of your crypto investments and stuff that you were making. That's a good bet for number one, I think. Yeah. Definitely do better than that.
00:04:32
Speaker
So yeah, 100% Balfour BT staying on the top. I'd bet pretty much everything I earned on that happening. Next up, Kia, I can't see them drifting out. They got into a pretty bad spot. What was it? Two, three years ago, they were like seriously losing cash. They had a big reshuffle in terms of management. They've pulled it back into the black. They've won a lot of work. Obviously, I worked with them pretty closely. So I know the volume of new projects sort of popping up, not small stuff.
00:05:02
Speaker
Um, so I, I'd absolutely back them to stay, um, in the second spot. Um, so that's another, do you think they close in on Balfour Beatty or, or the gap remains? If you just track news, I'd say in the last six months,
00:05:22
Speaker
without actually looking back and counting up, you see more Keir News than Balfour Beatty on winning projects. The thing that swings Balfour Beatty is they do loads of maintenance contracts and stuff like network growl, which isn't the glamorous stuff that you would see in the news, but it's obviously hugely revenue generating. So I think if you just look at
00:05:48
Speaker
actual sort of contractor
Morgan Sindal's Market Position
00:05:49
Speaker
jobs. I reckon Keir's pretty close to Balfour, but Balfour had that other side of the business that's just like the revenue is huge. Yeah. And, you know, looking at last year's league table, that side might be where a lot of the profit is as well. Cause like they, they're ranked like number three by profit as well. Whereas like a number of the other ones by turnover have like really, really, really tight or negative margins.
00:06:12
Speaker
Yeah, like a good job is 3%, which is disgusting considering how risky like main contractor contracts are. Yeah, don't get me started on that. Like I wrote a whole like master's thesis about like how tough it is to be a contractor. Yeah, I agreed. Right. Yeah. So yeah, Balfour Beatik here, Morgan Sindel, Morgan, they're winning a lot of jobs. They've got like
00:06:35
Speaker
Yeah, they've got a serious amount of infrastructure jobs alone. They're growing in the building sector, it seems to, but they're quite heavily involved in things like prisons and a lot of their sort of larger frameworks. Last year, it looks like they were on the grow. So you could see on the table
00:06:56
Speaker
Yeah, quite a significant turnaround from the previous year in terms of profit and change. So I've got no information to mind that would sort of signal a downturn or a reverse in direction from the up on last year. So I'd probably stick them in third spot.
00:07:16
Speaker
still, um, based on that. Yeah. It's interesting that, uh, you know, they're at that spot, uh, in number three last year and you're picking them to be the same cost because if I think, you know, the UK market, better than me, you talk to teams that literally all the time and I don't, but I can't think of them on any of the like major, like are they on any of the major sections of high speed to, uh, cars?
00:07:41
Speaker
No, they're not on high speed too, but they're on like Thames Sideway. They're on smart motorways. They're on things like Sellafield. So they do have the big, large contracts, but they're definitely a lots of slightly smaller contracts compared to like, if you look at the infrastructure sector of say, Costane and Skanska, who only do large contracts, small volume. So
00:08:08
Speaker
Yeah, I'd pin those as a top three. Pretty easy top three. It's like predicting the Premier League top three. I won't talk to an Australian about football at any more depth. But yeah, that was as far as I'm concerned, that's really hard because I have to make up the three teams. Yeah, if you like the London Broncos, the dinosaurs versus the sharks.
00:08:30
Speaker
Yeah, very American there. So then I'd say it does get quite interesting.
Keller vs ISG: Contractor League Predictions
00:08:38
Speaker
So ISG, they were on the way up, but there was quite negative news in the last year about some issues within that organization. And I didn't see lots and lots of news around them winning new work. They're probably still doing similar revenue, but
00:08:59
Speaker
Keller are close behind and they've cracked some serious contracts on NEOM, the Groundworks. So I reckon one prediction could be Keller jumping ISG and ISG potentially dropping out of the top five. This is going to make my version of these predictions sound super boring because I predicted the same thing. Okay. Yeah. Yeah. I agree with you.
00:09:24
Speaker
Yeah, so yeah, I think I'm gonna put Keller in fourth. Amy, it's really hard to gauge Amy because they do loads of stuff as like joint venture partners, they do like proper rail, they do lots of consultancy stuff. So it's hard to get a gauge on that. But MACE have been winning a lot of work. MACE are fairly global. They've just won their biggest like UK building job in a
00:09:53
Speaker
in a number of years, I believe. So I reckon Mace on the up, whether they can pull back, how much do they need? Like half a billion pounds to get into the top five. I reckon they're the, they're probably the most likely contender to crack it. So I'm gonna stick Mace in at fifth above Amy and ISG as my wildcard.
00:10:20
Speaker
Okay, so Balfour, Beatty, Kia, Morgan, Sindel, Keller, and then Mace. Yeah, that's what I put a lot of money on the first three. I put a little bit of money if you give me the decent odds on the top five. But yeah, that would be my five. The other one, who I was thinking about against Mace, was Langa Rourke. They're pretty close too. They are...
00:10:48
Speaker
Like, we know they're a super innovative company. They do manage their projects well. They're winning decent-sized jobs. They're on a load of major schemes. So if there was one that I'd put in the same sort of potential wild card as Mace, it would be Lang. But they're already a couple of hundred million behind Mace. So I think it would be a serious leapfrog to get into top five, albeit I reckon they're on the upward trend.
00:11:14
Speaker
So I had a similar list in my head, although now I'm questioning cause I had done Balfour Beatty, Kia Morgan, Sindal, uh, Keller, and then I put like a raw, uh, okay. And like when you rock super innovative, they've got a lot of business outside of the UK as well. They've got a lot of projects down here in Australia, um, big value projects. But the thing that I'm now questioning is whether like, uh, Keller.
00:11:41
Speaker
I don't know that they've delivered that work this year. Like they've won the contract, but it's probably next year's work. They definitely started it this year. There may be like six months worth of work or something like that that would be like contributing. So I don't know if we'll end up eating our words with Keller, but yeah. So we've got a very similar list, which is kind of a boring topic, but you know, maybe we're both right. Yeah. Yeah. Actually, I didn't even think about the volume of projects that Lang have won in Australia.
00:12:11
Speaker
They can't change your bet now. You've already bought Dogecoin or whatever it was. Yeah. That's going back a few years, like Elon Musk. Right. Yeah, no, that's really interesting. I like that. So you say the report's out in a few days, so next week you can actually call me out on any predictions. Well, there's total speculation just by the fact that it was out on the similar time a year ago.
00:12:37
Speaker
I think they do. They did the cutoff at companies house 29th of July, 2022, which means 29th of July, 2023 ish somewhere around there, which means someone's probably compiling the list as we speak is my guess. Yeah. So next up.
Engineer and QS Relationship in the UK vs Australia
00:12:57
Speaker
I want to have a chat with you about the relationship between engineers, specifically the package lead, so like a section engineer and agent typically, and the QS. In my experience, the best or the most successful packages I've worked on is where you have a tight relationship with your engineer, and
00:13:23
Speaker
I've got a lot of experience of some engineers who aren't so keen on that being such a tight relationship. So to kick off, I'm keen to have your view on this, particularly as
00:13:37
Speaker
You're obviously from Australia. Australia don't really have QS's in the same form or capacity as here. So you are probably more used to working without one and therefore are more aware of the commercial side of things. Yeah, engineers in Australia can do math on their own. Yeah, but you have worked in the UK. So yeah, what's your experience of that and your view on the relationship?
00:14:06
Speaker
Yeah, without doing the cliched thing of just slamming that we don't need QS's. Obviously in Australia, we don't really have them on most projects. There are some schemes more recently, projects more recently that are using QS's.
00:14:26
Speaker
But I guess fundamentally, and this would probably be a view that has been reflected from a lot of people that I know that have worked in both places and specifically the ones that came from Australia is like, as you progress through the roles of like a site engineer to a project engineer or an agent or a sub agent or whatever the different, whether you're in Australia or the UK, like ultimately your job is to deliver a project, but also your job is to deliver a project for a profit.
00:14:54
Speaker
And so if you're not earning the, the profit and what the numbers are at your head contract or your subcontracts, I don't know really how you can deliver the job. I kind of think of it. I don't know if you watch like, um, if you watch like dragons, Dan or shark tank colors. Yep.
00:15:14
Speaker
But like occasionally you'll get, you'll get someone come in and pitch some business. That'd be like, uh, they'll do this pitch. And then as soon as I get any questions, they're like, well, I'm not the numbers guy. Yeah. It's like, can you, can you run a business and not be the numbers guy? Like, uh, it's kind of like I'm the engineer, but like, if you want to know about whether we're making money, talk to my QS it's like, I don't, it's kind of like that is your job. Uh, so, so I just don't know. I don't know any other way to operate.
00:15:43
Speaker
other than doing that job as the engineer. I'd be interested, you mentioned that some of the more successful packages that you've worked on had that good relationship. So it's probably more instructive to start from your perspective and go, how does it actually work when it works well?
00:16:03
Speaker
For anyone listening to the UK, Jason just did a very famous line that Roy Keane says about every football player and the fact that it's your job. But I won't reference that now because I won't make sense to you. Roy who? I wasn't quoting Roy Bean. Okay, Roy Keane. Don't worry about it.
00:16:24
Speaker
I 100% agree that engineers need to be aware and conscious and care about commercial. So I definitely don't see this thing as being like, the QS does all of that, and the engineer just crack on with their job. But it's both ways too. So the QS also needs to have a good understanding, needs to shadow, sit on the meetings, understand the gossip. Because if we think about NEC,
00:16:48
Speaker
There's no way engineers can do that themselves unless they have 20 hours a day to do work because it's like admin heavy. There's so many sort of contractual requirements that you have to go through and an engineer's time is not best place doing that. So I would say you would want a quick us to do that anyway, just to administer the contract.
00:17:07
Speaker
But then I'd also argue that I've never come across an engineer who has an understanding of cost to the end of the project and think about the factors that could be at play and actually have a good understanding of that. And I don't know if that's because I've only worked for the UK and because it's not their job, they don't think about it. And I have no
00:17:29
Speaker
I'm not implying that they don't know how to do that, or could work it out, because like a civil engineer is a pretty clever person. And I'm not saying like, us are like, super special. But the time if you if you want, if you're a cider cider, like, cut you off and jump in. But like, if you're a project engineer, on on an infrastructure project in Australia, you have a job every month, which is to do forecasting.
00:17:55
Speaker
which forecasts your cost of completion of the job. Everything.
NEC Contract Management Debate
00:18:01
Speaker
Yep.
00:18:03
Speaker
So if you walk into that meeting and you don't know those numbers, you're getting like torn to shreds. Um, it's just a ritual that happens every month on projects. Uh, so you, you, you definitely have to know cost of completion and where you're tracking over and under by cost of education. Peter Jones died. Dragon's dad and tells you apart for not knowing. Um, question then. So you were all over the numbers in Australia.
00:18:31
Speaker
And is that why did you lose money in the UK? No, sorry. You can ask that to anyone across now. You did that over there. So it was your job. But did you actually have a genuine care and interest for it? And I guess the real gauge of that is, did you still do that in the UK even though it wasn't the job?
00:18:52
Speaker
I had a slightly different job in the UK, so it was probably not like a fair comparison. And the job that I went on to had more QS's than I'd ever seen in my life on a single project, so it probably wasn't like a fair. Like there was enough people doing it already.
00:19:10
Speaker
But I thoroughly, I thoroughly enjoyed it in the role in Oz. It made, it made the process of, it gave you a bigger understanding of what or how construction happens. And it made it into, I guess more of a, there's just another layer to the game, if you know what I mean? So it's like you, it's like you start learning like a deeper moves in chess or something, you know?
00:19:36
Speaker
There's like the technical aspect. There's like the managing people and getting the information they need. But then there's also like the, how do we make money piece? How do we manage contracts? Yeah. So managing contracts side. So the money piece, like you can see why anyone is interested in that because it is interesting. Like it contextualizes everything that you're doing. And ultimately everyone wants to make money or a margin.
00:19:57
Speaker
If you look at the administering the contract side, do you think engineers should be firing out early warnings, writing site instructions, assessing payment applications?
00:20:07
Speaker
Yeah. This is like, obviously you said something before, which is like under NEC, uh, you would want like, yeah. Yeah. I think there's a whole topic for another discussion in the future, which is like, is that good? Because yeah, definitely the amount of paperwork generated on NEC is, is like a, you can't also run the project as an engineer. If you're trying to do that and keep up with it.
00:20:32
Speaker
But then that asks the question, like, is that just like an enormously inefficient process? And like, if I pull the numbers on how, and like, that's just on the administering of it, but the argument for it, again, this is probably for another podcast, the argument for it is that.
00:20:47
Speaker
Okay. Well, NEC is a more like, uh, I guess collaborative or early ones. So you saw our issue. So the projects don't end in dispute, but if you pull the numbers from a pince at Mason study in 2021, 15% of the projects in Australia, infrastructure projects in Australia end in dispute, while 20% in the UK and dispute. So like.
00:21:08
Speaker
It's costing more to administer is my theory under NEC and more of the projects end in dispute. So what is the return on investment? Anyway, that's definitely a topic we're going to cover in another another time.
00:21:20
Speaker
I love how you had to, in preparation for this debate, actually have to go to Pizzas Basins to pull some steps out to try and win the argument, but yeah, no. It's definitely NEC's super admin heavy. There's loads of arguments to say it's wildly inefficient. Yes, you might reduce the chance of disputes later, but the volume of staff you need is insane. I think at one, I had one project, there was 45 QS's on a 400 million pound job, which is like, that can't make sense to anyone.
00:21:49
Speaker
But anyway, that is all we have time for today. So as always, thank you very much for listening.