'Changing Dynamic[s]' in building 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.'
******
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'
******
Posts
