Wednesday, 21 February 2018

Councillor Quinn on the Carillion connection

 'Changing Dynamic[s]' in build trade!
NV Editor: The story below shows an interview last September between the leader of Tameside Council / chairman of Greater Manchester Pension Fund, and the Construction News journalist Charlie Schouten, in which Councillor Quinn argued for closer association between 'London-based businesses.....they like talking to people like us; they see an opportunity here,' and people like him.  And then tellingly he adds:  
'If they [companies like Carillion] can come into partnership with us, it de-risks it for them.'

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LAST September Kieran Quinn, who died on Xmas Day, gave an interview to Construction News in which he related his ideas on the strategies of the Greater Manchester Pension Fund [GMPF] to the journalist Charles Schouten over lunch in the 19th century Midland Hotel. 

A former postal worker Mr Quinn, who holds down the job as GMPF chair with other tasks including the executive leader of Tameside Council and a place on the Greater Manchester Combined Authority, the scheme sums up his ambitions to make the fund a much more active player in not just in the local economy, but nationally, too.

Part of that, he said, is the shift in relationships between funders and contractors.
'We’ve started to have much more of a conversation with contractors because we want to take more direct holdings in projects,' he says.
'It also means that the relationship between contractor and funder becomes much more powerful.'

The GMPF fund, chaired last September by Quinn represents all 10 local authorities in the Greater Manchester area, has assets of over £21bn and includes more than 500 employers and over 350,000 members.   It was one of the key funders behind One St Peter’s Square after investing £10m in the scheme, which was completed by Carillion in 2014.  The scheme is typical of the office developments that have made Manchester so successful, not to mention so attractive to investors – although Mr Quinn declined to reveal what the fund’s return on the development is.


As Construction News sits down to talk to Mr Quinn in Manchester’s grand 19th century Midland Hotel, the venue seems slightly out-of-kilter with our discussion, particularly as the GMPF has helped to fund some of the projects in the last decade that have made the city one of the UK’s fastest growing.

The fund, which represents all 10 local authorities in the region, has assets of over £21bn and includes more than 500 employers and over 350,000 members

The Farmer Review – Modernise or Die – published roughly a year ago, argued for radical changes in the construction industry.

Among the most controversial of these – and one that has since been rejected by the government – was the introduction of a client charge to help fund areas like innovation and skills.
The idea that clients should help take the lead on areas such as training, innovation and skills alongside main contractors is hardly a new one, but the calls for closer collaboration are continuing; perhaps a reflection of the relatively slow progress being made.
But what if collaboration and best practise could start at an even earlier stage?
That’s precisely the argument that Kieran Quinn, chair of the Greater Manchester Pension Fund, is trying to make.
Funders and financers typically take a back seat in projects; particularly when it comes to conversations with main contractors.
But as Mr Quinn argues – should that now be ripe for a change?

Changing the dynamic

As the journalist Charles Schouten of Construction News sat down, last September, to talk to Mr Quinn in Manchester’s grand 19th century Midland Hotel, he writes that the venue seems slightly out-of-kilter with our discussion, particularly as the GMPF has helped to fund some of the projects in the last decade that have made the city one of the UK’s fastest growing.
The fund, which represents all 10 local authorities in the region, has assets of over £21bn and includes more than 500 employers and over 350,000 members.
It was one of the key funders behind One St Peter’s Square (pictured, below) after investing £10m in the scheme, which was completed by Carillion in 2014. The scheme is typical of the office developments that have made Manchester so successful, not to mention so attractive to investors – although Mr Quinn declines to reveal what the fund’s return on the development is.
But for former postal worker Mr Quinn, who juggles his role as GMPF chair with others including the executive leader of Tameside Council and a place on the Greater Manchester Combined Authority, the scheme sums up his ambitions to make the fund a much more active player in not just the local economy, but nationally, too.
Part of that, he says, is changing the relationship between funders and contractors.
'We’ve started to have much more of a conversation with contractors because we want to take more direct holdings in projects,' he says.
“It also means that the relationship between contractor and funder becomes much more powerful.”
He uses the Airport City scheme – in which GMPF holds a 10 per cent stake alongside Manchester Airports Group and construction partners Carillion and Chinese firm BCEGI – as an example of the more traditional one-step-removed relationship between funders/contractors.
In that instance, he says, the fund has had “few direct conversations” with either Carillion or BCEGI due to its small holding in the project.
But that is now changing, and the new view is one of Mr Quinn’s fundamental aims for the pension fund.
'Our expectation now is to have a much more direct relationship with the contractor, or whoever is managing, overseeing and delivering the project,' he says.
'That’s not normally how pension funds would take things forward, but we’re now starting to change that; for example on two of our schemes, we have someone on the board, so we’re starting to change the dynamic.'

Fair contracts, fair payment

He adds that part of that approach is getting involved at a much earlier stage – so not just by having an influence over project funding, but also its tender documents.
“Pension funds like to have a stake when a project is completed, but they prefer not to have a stake when something is still in the ground. Again, we want to change that,” he says.
It’s not much of a surprise that social value and fair payment are two of Mr Quinn’s areas of interest here – after all, he has been active in the Communications Workers’ Union for more than 30 years. But he wants to make it a core part of the pension fund’s activities on future projects.
'A lot of councils have been focusing on social value for a while; as a pension fund we make significant investments, so why do we not say, as part of that relationship with contractors, that we expect the same sort of social value?' he says.
The fund is already putting this into practise, starting with One St Peter’s.
“As part of our discussions around One St Peter’s Square, we put social value [in the tender]; the number of apprentices, the number of local businesses, the geographic links to the centre,” he explains.
'All the things that you think would be commonplace in a council tender are now becoming commonplace in the pensions world, and we’re at the forefront of that.'
When CN points out that it’s not always easy to keep a lid on main contractors’ and subcontractors’ payment terms, he agrees that there is 'no magic wand', but argues that fair payment has to start at the top.
'It starts with strong auditing of our contracts,' he says.
'We shouldn’t hide away because ‘that’s just how [main contractors] work’; a lot of these financial mechanisms are a way to abuse the system.'
Part of this approach has now led to the fund exploring 28-day payment terms for all its projects, although Mr Quinn again admits that it may prove difficult to enforce – making the issue of contract auditing “all the more fundamental'.
'We know that we’ll sign [28-day payment] as part of our contract, but [main contractors] will subcontract out parts of the project and that’s where [those payment terms] start to get filtered out.
'Conversations on fair payment are absolutely relevant and we’re prepared to have them; it’s also exactly the right thing for the pension fund to get involved with.'
Again, he admits it may be 'beyond the reach and authority of a pension fund' to stop poor payment practices – that, he argues, should start at the very top with central government – but ensuring it is stamped out from any GMPF contract is his first step.
So what about the GMPF’s future pipeline?
On this, Mr Quinn gets straight to the point:  'There’s no conversation we’re not prepared to have'.
The fund has already restarted its stalled office scheme in the centre of Manchester, which it is aiming to get underway in 2019.
The GMPF is now looking to form a joint venture with a developer to bring forward the 55,025 sq ft Island Site development on John Dalton Street in Manchester city centre, after having purchased the three buildings on the site – Ridgefield, Old Colony House and Grange House – for an undisclosed sum in 2011.
He says that this scheme will be on a similar scale to One St Peter’s Square once complete, giving the city a major new landmark office development in the process.
On top of that, the Fund is 'actively seeking' more similar projects to invest in, particularly in Manchester, with more and more firms casting their eyes north for office space and investment.
'I’m having a lot of conversations with plenty of London-based businesses that want to come to Greater Manchester because they like talking to people like us; they see an opportunity here,' says Mr Quinn.
'If they can come into partnership with us, it de-risks it for them.'
And Mr Quinn doesn’t want to just limit the fund’s activities to the commercial world; its ambitions stretch into both infrastructure and housing.
For infrastructure investments, Mr Quinn again wants the fund to take a more active role, particularly with a £500m war chest to play with.
It has partnered with other institutions, including the London Pension Fund Authority (LPFA), to back a number of schemes. These include rail schemes in Norfolk, and large-scale wind farm project in Strathclyde where it is a 45 per cent equity holder, in a joint venture with the LPFA.
Alongside the LPFA, the GMPF has taken a £150m stake in SSE’s Clyde windfarm, which is one of the largest onshore ones in Europe.
Mr Quinn says that this high-profile investment is exactly what the GMPF should be aiming for.
'The UK pension world doesn’t need to play second fiddle to Canadian funds; we should have the ambition and drive ourselves to have direct conversations on investment,' he argues.
While he says infrastructure can be a 'marmite' subject for funds –  'either you love it and want it as an active part of your portfolio; or you hate it and don’t want anything to do with it, because it’s too complex, too costly, and the returns are unclear' – it forms a core part of GMPF’s ambitions.
That could even stretch to one of the largest infrastructure projects in the country: the TransPennine Tunnel.

Investing in infrastructure

Sealing the business case and getting the tunnel under way is one of Mr Quinn’s key ambitions, particularly with one of the proposed routes for the £6bn tunnel passing through his home territory of Tameside.
'You’re looking at linking six to eight million people together, so if anything, the argument for the tunnel has been under-played,' he says.
'If we’re really talking about releasing the potential of the North, and creating a link between Liverpool, Manchester, Leeds, and beyond, then the tunnel has to play a part.
'Every economic assessment I’ve seen – admittedly drafts and guesstimates – have said that the economic benefits that will be released from that connectivity are huge, so we’ll continue to press its case.'
It’s here that Mr Quinn outlines the scale of GMPF’s ambition: 'if the circumstances were right, we could be an equity holder in the tunnel', he says.
'Even if we commit £500m, that’s under 1 per cent of our holdings – it’s not as if we’re raiding the piggy bank to get those funds.
'We’re keeping it well within the normal risk parameters of a pension fund, but it gives us a brand new opportunity to do things much more large scale, and much more direct.'
And while he admits investing in the tunnel in the near future might be unlikely, it shows that shifts in the way pension funds work is one of the changes that contractors will need to be aware – and take advantage of – when opportunities arise.
For Mr Quinn, it’s about not only helping Greater Manchester grow, but grow in the right way.
'One of my pleasures of acting as GMPF chairman is using workers’ money to invest in the city they work in,' he says, 'and there will be plenty more investment to come'

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