Erik Brown reports on how a government agency, tainted by corruption scandals and slammed for inefficiency in the late 1980s, gave birth to a new organisation with £300 million worth of new contracts.
Trevor Osborne, one of the more charismatic developers of the '80s property boom, tells a nice story - a vignette, he calls it - to illustrate the impact of privatisation on the ex-government employees in his new organisation.
On the day a £10.4 million deal to buy two divisions of the former Property Services Agency finally went through, Osborne sent for one of his managers, who turned up in his office grinning broadly and swinging his umbrella. What's up, asked Osborne. 'Well,' the manager replied, 'I got on the train this morning - and I was reading the paper. Then I put the paper down and I thought: "This is it; it has happened. I'm not a civil servant any more, and I don't have to be bound by all of that bureaucracy".' The clouds didn't open at that point, says Osborne, the sun didn't come shining through, but it was a significant point of change in the man's life. And the impression that the shackles have now been thrown off by an entire community of craftsmen and professionals is a recurring theme in all conversations at what is now known as Building and Property Management Services. The counterpoint to that theme is the rapid development of an assertive, client-driven 'can do' culture. This is not simply a matter of management philosophy. Despite its name (but because of its history) Building and Property handles a dizzying range of tasks - from cleaning Nelson's Column and putting up the Christmas tree in Trafalgar Square, to managing the State visits of Zimbabwe's Robert Mugabe and the King and Queen of Norway.
In an interview just a few days earlier, Brian Taylor, managing director of Building and Property Facilities Management - one of the two divisions in the group, had said: 'I suppose, if I am honest, there is not a lot we can't do. If someone said to us, "We want you to operate and maintain a nuclear power station", I think we'd agree to do it. We may not have all of the necessary skills in-house to do it: but if those skills are available we can put them together, manage the operation and deliver the service.' This is the other side of the outsourcing equation: the 'can do' task manager backed by an army capable of doing almost anything, anywhere, anytime. But first, a question: how did a government agency tainted by a corruption scandal in the late '80s and rocked by a damning civil service inquiry into efficiency, give birth to a brand new organisation that emerged on Day One with 3,300 employees, £300 million worth of secured contracts and a bank facility of £20 million? ('The bank facility was never used,' says Osborne. 'We seem to be running the cash balances in excess of £30 million all of the time. Sometimes, it's substantially more than that.') The story starts more than 600 years ago with the opening of the Office of the Clerk of Works and moves down the generations through many name changes until it becomes the Property Services Agency - which, in the 1980s managed a government estate worth more than £20 billion. In the case of the PSA, 'management' meant something more than a little repair and maintenance: it handled £2.8 billion worth of construction work a year; it was responsible for the upkeep of 8,000 government buildings; it looked after miles of Whitehall corridors as well as prisons, courts, custom houses, nuclear bunkers and 2,000 listed buildings - including Buckingham Palace and the Tower of London. When the IRA dropped a mortar bomb into the garden of 10 Downing Street, security-screened professionals and craftsmen from the PSA were among the first on the scene.
The PSA was the 'do-anything' department that seemed always to have had a hard life. For a long time, it was not only charged with the management of the Government's estate, it had to fight for a share of the Treasury budget with which to manage it. As a result, the PSA was cast in the role of impoverished landlord and was often blamed for the grim condition of many government buildings. The PSA in its turn pleaded that it wasn't given the resources to do its job - but its cries of protest were usually lost in the clamour.
Life was a little better, former PSA people say, when responsibility for raising property-management money switched to the individual government departments, such as the Ministry of Defence. Suddenly, the PSA wasn't so bad after all. And when the Government introduced competitive tendering, the PSA was actually in demand - called back to service contracts that had been put out to the private sector with what turned out to be unsatisfactory results. The PSA's new 'clients' came to realise that the agency knew more than anyone else about the management of government property, and had been doing it for years on a fraction of the budgets it had asked for.
The story of the PSA's rise and fall reads like a novel. Inigo Jones, Sir Christopher Wren and Hawksmoor had all been associated with the original Office of the Clerk of Works, but times had changed. By the 1980s, open criticism of the agency's work, by politicians and other departments, overlapped allegations of corruption, which in turn led to a series of court cases involving individual civil servants and contractors. One man admitted being bribed 185 times, another to receiving £20,000 in bribes. Yet another completely furnished his home with 'gifts' from external contractors. The newspaper cuttings tell a dismal enough story: The Times in September 1987 reported that the Old Bailey had heard how bribery, fraud and corruption were so common in departments of the PSA that it was considered normal; and in June 1988, the same newspaper told of six builders and a civil servant, jailed for participating in a £4 million swindle involving building contracts with the PSA.
Corruption was washed out of the PSA by the process of law and, as a result, it became corruption-conscious to the point of obsession. At that point, even the offer of a cup of tea was occasionally regarded with suspicion (and, some wags say, carefully recorded in books kept for the purpose). But the agency was reorganised, nevertheless: broken into five regions - the largest of which were the South East and the South West - and 'corporate' structures were put into place to prepare them for sale.
Enter Osborne and Co.
Consulting engineer Pell Frischmann and the engineering, construction and development group AMEC joined forces to bid for part of the operation in May last year. Osborne was invited to be the third member of the team. 'I was available at that time,' he says drily.
(In fact, his own property development company, Speyhawk, had just fallen victim to the worst property crash in British history, collapsing with debts of £360 million.
Osborne was a sound choice as partner. A former president of the British Property Federation, an ex Tory-council leader and a chartered surveyor, he was also chairman of the HRH Prince of Wales Urban Villages group and a trustee of HRH the Prince of Wales Institute of Architecture: a highly rated, well-connected and affable man. The banks' decision to pull the plug on Speyhawk, just as the property market had begun to show signs of life, had scandalised the development industry.
AMEC, Frischmann and Osborne bid for the two biggest regions, insisting that the purchase of one was conditional on the purchase of the other. 'The two businesses were bigger than the other three put together: we needed to buy them to give us the profile in the market,' Osborne says. Despite strong competition from some of the biggest names in the construction business the deal went through on 1 October, and was formally announced at the Natural History Museum on 1 December 1993.
Building and Property was up and running with 3,300 employees, including 900 agency staff; a large body of 'secondees' who would return to government or take redundancy within two years; and a number of staff who had transferred with the organisation under the terms and conditions available to civil servants. The new business's biggest client was still the Ministry of Defence, although it was also responsible for the Royal Parks and - among many other things - 80 statues in and around London, the Cenotaph, and a huge number of government buildings in the capital and throughout the south of England.
Osborne was appointed chairman and, after a fruitless head-hunting exercise and much negotiation, wooed Clive Groom from the managing director's chair at Matthew Hall (an AMEC group company) and made him chief executive of the Building and Property holding company. Groom had led the AMEC part of the bid for the two PSA regions. A small management team was formed, and the process of transformation began.
'In common with most people,' says Groom, 'I held the view that civil servants were probably very nine-to-five in their attitude, unimaginative and probably mediocre in terms of their competence. I think that is a widely held view of civil servants in the outside world. But one of the things that became apparent to us very quickly - even before the sale was completed - was, first, that the professional and technical competence of the people in this organisation was superb and, second, that they were willing really to stretch themselves.' Groom and Osborne were impressed by the willingness of former government employees to work through the night on tender submissions; startled, even, by their enthusiasm for the next stage of the transition, which was to reorganise the two former regions into a consultancy division based in Bristol - Unicorn Consultancy Services - and a London-based facilities management company.
'We started off by saying to the management: "Well, shall we say reorganisation within 12 months",' says Osborne. 'But they persuaded us that that was not nearly ambitious enough, that we should do it in six. In the end, we did it in three: and that's pretty quick going.' Groom's conclusion is that the willingness to perform was always there: what was missing in the old civil service days was the management expectation. It's a telling point.
Osborne adds that the PSA had been burdened with endless layers of staff operating within clearly defined organisational structures. 'You were a Grade 10, a Grade 9 and so on, all the way up through the chain of command. And the decision-making process went through all those grades as well. Now we are saying that the senior man on the site, interacting with the client, has to be the man who makes the decisions. We are giving them responsibility and authority ... and they are responding to it. We are very favourably impressed with what we have inherited.' Staffing levels have been cut from the original 3,300 to 2,650. There were, Osborne says, very high levels of personnel management staff - a civil service tradition - which have been cut back dramatically. There were also 48 people in the information technology section of the accounts department, now cut to around 15, and finance functions have been simplified. The result, interestingly, is a more even flow of information. Employment is expected to stabilise at around 2,500 across the group.
Under Osborne's influence the corporate culture is already changing: becoming much more client-oriented, for instance. What is more, Building and Property is winning business in open competition, and under the Government's stringent new 'market testing' rules. (The competition, incidentally, is vast: it includes major construction companies, chartered surveying firms, architects and rival facilities management companies, among others.) Even so, there is still a great deal more to play for. The Ministry of Defence, for example, has been told to outsource £1.5 billion worth of business. Building and Property - with staff who have already been positively vetted by security - is in a prime position to win even more work from its biggest customer.
Beyond that, there are few limits. Facilities management is not just about buildings and estate management, says Groom. 'The potential is about something vastly bigger than that.' Groom uses an example from his old company, Matthew Hall, to illustrate the potential of an inspired, creative, 'can do' culture. The company won a hospital contract that put it in charge of the grounds, buildings and maintenance. But it is also managing the operating theatre staff supplies unit.
'It has to collect the dirty, bloody tools and instruments,' Groom says, 'and to find out what operations are planned for the following day and deliver the tools and bandages and everything else that is needed in time for those operations. That has nothing to do with property: it's task management.' He intends to make sure there is a similarly flexible approach at Building and Property.
In terms of Ministry of Defence contracts, task management could involve anything, any service that doesn't currently demand the personal attention of a man or woman in uniform. And if the task manager can guarantee the performance of runway lights on a vital airstrip, he can also guarantee the performance of the lights in the underground car park of a headquarters office building. These are the non-core operations that cost businesses time and money: look down the list of direct costs in your management accounts, says Groom, that's where you will find them.
Sometimes, the determination of what is core and non-core throws up real surprises. A large bakery, for example, could easily determine that baking bread was not its core business, especially if all of the real knowledge-based skill was in market research, product development, advertising and sales. Could it outsource the baking? Groom thinks so: in which case, the task of baking has to be handled by an outfit that is sufficiently well organised to be able to guarantee quality, delivery and cost without representing a competitive threat to its client.
And that, says Groom, is what is going to happen next. If Building and Property had a motto it would probably be based on the advice that a former chairman of United Biscuits once gave to Osborne: 'Only do what only you can do,' he had said. Groom would probably now add, 'And we'll do the rest.'
The private empire
Background: The Building and Property group was launched on 1 October 1993 - evolved from the acquisition and restructuring of two former Property Services Agency businesses.
Shareholders: AMEC (50%); Pell Frischmann (50%).
Building and Property Facilities Management Ltd (BPFM): Head Office: London.
Regional Offices: Aldershot, Salisbury, Portsmouth and Plymouth.
Divisions: Operations - MoD; Facility Management Services - ground and plant management and maintenance, refurbishment, alterations and new works; Contracting - repair and routine maintenance of commercial property.
No. of employees: 1,700.
Unicorn Consultancy Services Ltd: Head Office: Bristol Regional Offices: London, Portsmouth, Plymouth and Reading.
Divisions: Design and Project Management; Estates Management; Building Consultancy and Specialist Services.
No. of employees: 1,000.