Steve Menary tells us why Australian constructors Multiplex may be cursing the name Ken Bates for years to come
So, Ken Bates, why is one of Australia’s biggest construction companies rebuilding Wembley Stadium? Leeds’ saviour knows only too well as he was the Football Association’s choice to find a contractor for the job. With strike ballots, delays, pollution fines and a High Court battle, Multiplex could be forgiven for wishing they had stayed in New South Wales.
In the late 1990s, when Bates was looking for a builder, no one in the UK had heard of Multiplex despite the firm having built the Sydney Olympic Stadium on time and to budget. In 1998, Multiplex set out to change that and dispatched an expeditionary force to the UK led by Sydney project manager Ed Obiala. With no contacts in the UK construction industry, Multiplex should have been rank outsiders for the job. Yet the firm, which set up shop in west London, received a huge helping hand when Wembley National Stadium, the Bates-led quango organising the project, put forward a contract placing all the risk on the firm doing the work.
Contrary to popular myth, most building contractors work to thin margins – on a £100 million job, they would only make £1m profit. On bigger jobs, there are more chances of a problem and those problems cost a lot more money. With a Labour government ploughing cash into hospitals and schools, firms such as Sir Robert McAlpine, which built Wembley in 1925, did not need such risky work. For a company from the other side of the world looking to move to the UK, it was a very different story. Multiplex had two options: buy a local firm or take a job that could lose money but would give the company a profile.
If Multiplex got the Wembley job right, they could turn a profit. Even if it went wrong – and it is starting to – the losses would, with luck, be no more than the cost of buying a UK company. With UK firms frightened off, Multiplex was the only company to submit a bid for Wembley. With so much public cash being ploughed into the project, Bates appeared to be doing the taxpayer a favour, yet Multiplex’s presence also worked out well for Chelsea, the club he then chaired.
With Multiplex keeping a team of engineers on the other side of the world, the firm faced considerable expenses and needed some work to tide the company over. In early 2000, the firm managed just that with a job to complete the rebuilding of Stamford Bridge. Bates was so confident that there was no conflict of interest that he confirmed Multiplex as the winner of the Wembley contract in late 2000 with a press conference held at his club’s ground.
Most people looking for a builder get more than one quotation and public bodies are expected to get a number. Apart from a mild ticking off from the National Audit Office, Bates and WNS have never been censured for how the contract was awarded.
Bates left the chair of WNS long ago, but Multiplex’s business practices will still come under legal scrutiny. Multiplex has to face off against Cleveland Bridge, a Darlington-based steelwork firm awarded a £60m sub-contract by the Australians to erect Wembley’s signature arch, only to be sacked last June.
The UK firm is already 3-0 up in the dispute, having triumphed in a trio of separate adjudications against Multiplex to net £5m. Multiplex pleaded guilty in Brent Magistrates Court to silting up Wembley’s Wealdstone brook, but that £10,000 fine does not compare to the millions in dispute in the High Court.
Costs alone for the month-long trial will be around £4m and the case, later this year or early next, will be a huge embarrassment for Wembley. The stadium is due to open in January 2006, though a projected crane drivers’ strike may change that. Nevertheless, Multiplex will be keen to avoid the fate of another contractor recruited by Bates to work on a stadium. In 1996, the then Chelsea chairman awarded James Longley, a 150-year-old family-owned firm from Kent, a £20m-plus contract to revamp part of Stamford Bridge. This was Longley’s biggest ever job, but after two years and regular savagings in his programme notes, Bates sacked the firm. By 2000, Longley had collapsed and was eventually sold for £1 – the amount Bates famously paid for Chelsea back in 1982.
Since starting on Wembley, Multiplex has floated on Australia’s stock exchange and is considering making some shares available on the London stock market. Maybe Ken Bates should buy some – or maybe not.
From WSC 217 March 2005. What was happening this month