Scourge of contractors to kick-start big projects: Morton in to bat for builders

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The Independent Online
'WE WILL BE the Dyno-Rod of project finance,' declared Sir Alastair Morton, 'unblocking blockages of communication, dogma and precedent.'

He was talking about the new working group he is to chair on public sector projects. It was announced at the CBI conference last week by the Chancellor, Kenneth Clarke.

The working group could also give birth to new investment vehicles, perhaps a new type of unit trust that would own a cocktail of public building projects - such as a hospital wing, a multi-storey car park and a prison.

The main aim of the group is 'to promote the introduction of private management and finance into areas of capital investment and services traditionally undertaken by the public sector'. Or, to put it more bluntly, to shred the jungle of red tape that stops projects getting off the ground.

But one member of the group, Neville Simms, Tarmac's chief executive, wants to explore fresh sources of finance to oil the wheels when both government and builders are cash- starved, as they are now.

Mr Simms suggested that these could include a new type of stock market vehicle, which would own the rights to income from one or several projects.

Apart from the enthusiastic Mr Simms, the construction industry did not know whether to laugh or cry last week. The good news was that the working party might at last get public- sector projects moving. The bad news was that it would be headed by Sir Alastair, who has been the industry's arch enemy.

For the past six years, he has run some of the big builders ragged in his role as joint chairman of Eurotunnel.

As Mr Simms is currently chairman of TML, the Transmanche Link consortium building the Channel tunnel, he might have been expected to be the one least enamoured of Sir Alastair. But Mr Simms was supportive, insisting that 'he can make things happen.'

Maybe, but the task is still formidable. For no money - but with the prospect of etching another line under the case for his eventual peerage - Sir Alastair is being asked to indulge his favourite sport: bashing heads together.

He explained: 'We will be asking, 'How the hell can we make this project happen?' As blockages are cleared, new precedents will be established - and things should begin to flow. Everyone has got to come to the party.'

That is what Mr Clarke wants in order to kick the economy into action.

The hope is that Sir Alastair and his team will also act as a forum to exchange information and ideas, co-ordinating the buyers and sellers of construction work. But these bright ideas may hit a brick wall of 'not invented here' inertia from the main commissioning departments - Environment, Health and Transport.

The achingly slow pounds 3bn Channel tunnel rail link is only the most spectacular of a list of more than 80 uncompleted projects that the Treasury pointedly published last week.

'The Catch 22 that Morton is going to face,' said a merchant banker, 'is that you will get nowhere unless you win the hearts and minds of the civil servants. But as soon as you do that, you lose credibility with the ministers.'

Sir Alastair's team, meeting monthly, will take flak from all sides and must take care to favour none - particularly where money is concerned.

'We know where we get our finance from,' said a source in the Treasury, 'and it is up to the private sector where they get theirs.'

All very well where there is a clear-cut distinction.

Eurotunnel, despite its headaches, has been entirely financed by equity investors and bank lenders. But many projects require a mixture of public and private backing, which call for profit-sharing or leasing packages.

The constant gripe of builders is that civil servants, concerned about their financial allocations from the Treasury, are often too tight-fisted to agree a workable deal.

Conversely, Whitehall suspects, with some justification, that company managements err on the side of greed. As Mr Simms remarked: 'It was an open secret that the Treasury was always standing on anything that looked like getting off the ground.

'But I have high expectations that things might actually happen this time, because the Treasury is the department behind this initiative.'

That analysis could prove a touch simplistic, particularly if there is any question of taxpayers' money being committed to new projects in the present condition of the public coffers.

One of the knottiest problems has been the whole tendering process, and the value of the intellectual property rights that it generates.

Until recently, those putting in tenders took the risk that their ideas might later be given to the successful bidder - for nothing. 'The trouble is,' a Whitehall mandarin complained, 'that some construction companies simultaneously want to be given compensation if they don't get the contract, but not for the losers if they themselves win.' With logic like that, this promises to be a severe test of Sir Alastair's almost legendary powers of persuasion.

Even he admitted: 'Knowing what to do is one thing, getting it done is another.'

(Photographs omitted)