Balfour Beatty Construction

Changing constructionAl Petrangeli, president of the Florida division of Balfour Beatty Construction, told Martin Ashcroft about the companyÔÇÖs plans to change the industry by changing behavior. The UK-based construction giant Balfour Beatty made a big play for international expansion last year when it acquired Centex Construction, the commercial construction division of Centex Corporation. Now established as Balfour Beatty Construction, the US division is making another big playÔÇöto change the construction industry.I asked Al Petrangeli, president of the Florida division based in Fort Lauderdale, what needs changing, and how they intend to go about it. ÔÇ£The industry is not seen as a service industry, itÔÇÖs seen more as a commodity,ÔÇØ he said. ÔÇ£So price is the only factor that comes into play. When itÔÇÖs viewed as a service, the journey becomes more of a factor, rather than the destination.ÔÇØPrice will always be a factor, he admitted, ÔÇ£but when itÔÇÖs the governing factor you remain in the commodity position. When itÔÇÖs one of many factors the service provided becomes more of a weight in the selection process. That, to us, is changing the industry.ÔÇØ He spoke of a vision in which clients have an enjoyable experience, because the contractor understands the clientÔÇÖs needs, challenges are faced together, as a team, and adjustments are made for the benefit of the project. ÔÇ£That is changing the mindset of the industry around the construction delivery process.ÔÇØAll the major construction contractors are good with budgets, schedules and quality control. These are prerequisites now. ÔÇ£ItÔÇÖs what you do after that, that counts,ÔÇØ said Petrangeli, ÔÇ£so we see the opportunity for differentiation in our behavior.ÔÇØBalfour Beatty has created a mission alignment process (MAP), as one way to differentiate. Customer satisfaction surveys are commonplace in many industries, but their drawback is that they are completed after the event. ÔÇ£You donÔÇÖt have any time to react,ÔÇØ said Petrangeli. ÔÇ£ItÔÇÖs just a score, and you look at it.ÔÇØ The difference with the MAP is that it takes place throughout the life of the project. ÔÇ£We talk to clients every day,ÔÇØ said Petrangeli, ÔÇ£but if you donÔÇÖt pause to let them reflect on whatÔÇÖs happening at the job, you donÔÇÖt always draw out the information you need to adjust behavior.ÔÇØ So Balfour Beatty identifies points that occur during the project, and that are specifically important to the client, where a brief survey can be conducted by a dedicated officer based at headquarters in Dallas. The formality of this process avoids any embarrassment the client may feel in giving feedback to a project manager he works with every day on the job site. ÔÇ£The whole idea is about adjusting behavior through the life of the job to provide the client with the best experience.ÔÇØBeing part of Balfour Beatty has already proved an advantage to the former Centex commercial contracting division. ÔÇ£We have a company that fully understands our business,ÔÇØ said Petrangeli. ÔÇ£Centex┬á is┬á a homebuilder, so the leadership of Centex understands homebuilding more than commercial contracting. Balfour BeattyÔÇÖs big play right now is the US, and weÔÇÖre fortunate that they chose us to be their growth potential here.ÔÇØ Growth in commercial contracting is a challenge in the current climate, however. There are 67 counties in the state of Florida, Petrangeli said, but half the population lives in about nine or ten counties, so thatÔÇÖs where the company has focused its attention. ÔÇ£We are a Florida based company, we were founded in 1933 in Florida, so the company has grown as Florida has grown. But the coming years provide some challenges because of whatÔÇÖs happening with real estate and the economy.ÔÇØBalfour Beatty is not in the residential market, but trends that occur in residential soon make themselves felt in the commercial contracting business. ÔÇ£Typically and historically, the commercial contracting business trails whatever happens in the residential market by about 14-18 months,ÔÇØ said Petrangeli, ÔÇ£so if the residential market slows down our workload will start to be affected 14-18 months later; and weÔÇÖre seeing that throughout the state of Florida. For the first time since 1986 the enrolment in schools is declining. So our school work is starting to wane, and itÔÇÖs magnified by the fact that the state is modifying the property tax program. The governor and the legislature are trying to fix the issue with property taxes and insurance because people are leaving the state of Florida.ÔÇØ A declining population will have an adverse effect on demand for retail and office properties, too, so where is growth to be found? ÔÇ£A market sector weÔÇÖre seeing a lot of activity in right now is hospitality. The hotel industry is still bullish on tourism for Florida,ÔÇØ said Petrangeli. ÔÇ£With the dollar being low against the pound and other currencies, itÔÇÖs good value for people to come from abroad.ÔÇØFrom a strategy standpoint, the company is also fortunate to have a well diversified portfolio. In the mix with schools and hotels is correction work (jails and courthouses), infrastructure (mainly airport and road work), and offices. ÔÇ£We play in a lot of different sectors of vertical markets and usually when one is down one or two of the others will be up. Right now for us, corrections is up and hospitality is up. But the education market is way down.ÔÇØ PetrangeliÔÇÖs division is also increasingly looking at out of state work. Of six major project opportunities, he said, only two are in Florida. Spotting trends and planning for growth in this market is notoriously difficult. ÔÇ£Probably the best view you can get is two years out,ÔÇØ said Petrangeli. ÔÇ£If you look further than two years out thereÔÇÖs a lot of speculation involved, because we donÔÇÖt create our business, we react to the market. WeÔÇÖre not developers, so we donÔÇÖt buy land and put up a shopping plaza in an area thatÔÇÖs got high growth. WeÔÇÖve got to wait for a developer to make a decision on the shopping plaza or an office building, or for the state to put more money into jails. Then we react to it.ÔÇØ┬á Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *   ┬áFirst published April 2008