Review strategic plan 2016-2020
In early 2016, BAM launched the strategy ‘Building the present, creating the future’. This strategy was based on three pillars (focus the project portfolio, shape the business portfolio and create the future portfolio ) supported by a foundation of differentiating capabilities and BAM’s unique culture. Based on this strategy, BAM set specific targets for financial (profit) and non-financial (people and planet) performance in the period 2016-2020.
Although the Group delivered improvements in each of these areas, progress has been mixed across the different operating companies. In addition, there were operational challenges on some larger projects in the portfolio, mainly related to tenders awarded before the strategic period 2016-2020. Furthermore, the Group has faced some severe external headwinds during this period, most notably Covid-19 and new regulations in the Netherlands regarding nitrogen and PFAS.
As a result, the financial performance of the Group in 2016-2020 has been disappointing and mainly below the goals set in 2016. For 2020, BAM did not achieve its targets for three of the four key financial indicators: adjusted result before tax margin, investment in land bank and property development and the capital ratio. The target of the fourth indicator, trade working capital efficiency, was met in 2020 and in four out of the five years altogether.
Progress in the areas of people and planet over the past five years has generally been more steady. BAM has worked hard to foster a strong safety leadership culture through continuous ‘Your Safety is My Safety’ campaigning. However, after two fatalities on BAM projects in 2019, regrettably BAM had to report one fatality in 2020. BAM did not meet its general targets on the incident frequency (see page 27 - Incident frequency in 2020). Therefore, Your Safety is My Safety remains top priority for BAM. There is positive momentum on other important indicators such as investment in training, gender diversity, carbon emissions and resource efficiency and BAM managed to remain on the A-list of CDP (Carbon Disclosure Project).
Focus the project portfolio
As the first pillar of the strategy (‘Doing things better’), BAM developed a structural approach on tenders and projects under construction. For winning projects, the main drivers for performance improvement are either scale (cost leadership) or differentiation through specialisation (knowledge partnership). For complex projects, BAM uses its know-how, digital leadership, innovative drive and quality assurance as differentiating factors.
The tender stage gate process has been implemented with a selective tendering policy and a start has been made on the implementation of the Uniform Project Approach. Unfortunately, the improvement seen in the vast majority of tenders and projects over the past five years was partly undermined by significant operational challenges at a limited number of projects, most of which had been awarded prior to the existing strategic period. In 2020, there was a small number of underperforming projects, mainly within BAM International. This was one of the factors that led to the decision, announced in July 2020, to wind down BAM International.
Shape the business portfolio
The second pillar of the strategy has been to shape the business portfolio (‘Doing better things’) by supporting the operating companies in developing new propositions in the home markets as extensions of projects along the lifecycle and leveraging specialisms in international markets. At the same time, BAM looked to improve or exit from operational activities not offering enough opportunities to use scale or distinctiveness as critical success factors.
In 2020, BAM undertook a comprehensive analysis of productmarket combinations for its Construction and Property and Civil engineering business lines. This revealed several strategic choices to be made regarding in which home markets BAM can differentiate itself, which are the key differentiators and how to create more synergy in the portfolio. This analysis is a key component in formulating the new strategy for 2021-2023.
Also in 2020, BAM extended its long-term successful PPP partnership with Dutch pension provider PGGM when PGGM Infrastructure Fund acquired a 50 per cent interest in BAM PPP. This will generate significant potential for BAM PPP to accelerate growth in existing European and new global markets by providing BAM PPP with a broader remit and greater flexibility to expand its portfolio. At the same time, BAM PPP will continue to provide firstclass services for its clients along the entire lifetime of the concession.
Create the future portfolio
In the third pillar of the strategy, BAM aimed to create its future portfolio (‘Doing new things’) by integrating digital construction solutions in its construction process and by accelerating innovative solutions for its clients. In the area of digital construction, BAM has invested in training with a strong focus on technology, processes and people and in digital tooling. All operating companies have advanced with the adoption of new digital construction techniques, and all BAM’s operating companies have been BIM level 2-certified. BAM has been nominated in the categorie ‘Digitale Bouwbedrijf 2020’ by Real Estate & Building Futureproof. The Digital Construction team in Ireland won the Irish Construction Excellence Award in 2020.
In 2016, BAM set up a new funnel for innovations. In total, 69 innovations have been considered as part of the process. Of these 69, approximately one third were terminated and two thirds are being followed up. The latter group includes 3D printing, Hardt Hyperloop, XBlocPlus, Dynamic Infrastructure & Mobility, Dutch Analytics and bio-based asphalt cleaning.
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