Subject category:
Strategy and General Management
Published in:
2008
Length: 4 pages
Data source: Published sources
Abstract
This is the second of a two-case series (308-308-1 and 308-309-1). Part (A) of this case introduces the T5 agreement, the pioneering relational form of contract employed by the British Airport Authority (BAA) to commercially frame the temporary relationships with all the first-tier suppliers (designers, contractors, and manufacturers) to the £4.3 billion Terminal 5 project to expand Heathrow airport. The case describes in detail the relational ethos of the T5 agreement based on principles of trust, collaborative work, and problem solving. It also describes salient details designed into the commercial policy, namely in relation to managing design change, paying suppliers for their work, and rewarding exceptional performance. Furthermore, the case frames the problem of whether to apply the T5 agreement to the fit-out suppliers who will be involved in the last phase of the T5 project. This problem lends itself to a discussion about whether a relational contracting strategy can be a one-size-fits-all in large-scale projects, or whether project clients should use alternative commercial arrangements as a function of the way they segment project suppliers. Part (B) of the case sheds light on other major projects that BAA plans to develop, namely the Satellite C of Terminal 5 (T5C) and the Heathrow East Terminal. It explains that BAA decided not to use the T5 agreement for the Terminal C building, and invites the reader to conjecture about the most appropriate strategy for the Heathrow East Terminal. The 2 cases suit MSc, MBA, and MPA students interested in the management of large-scale projects, transaction cost economics, supplier segmentation, and the infrastructure sector in general.
About
Abstract
This is the second of a two-case series (308-308-1 and 308-309-1). Part (A) of this case introduces the T5 agreement, the pioneering relational form of contract employed by the British Airport Authority (BAA) to commercially frame the temporary relationships with all the first-tier suppliers (designers, contractors, and manufacturers) to the £4.3 billion Terminal 5 project to expand Heathrow airport. The case describes in detail the relational ethos of the T5 agreement based on principles of trust, collaborative work, and problem solving. It also describes salient details designed into the commercial policy, namely in relation to managing design change, paying suppliers for their work, and rewarding exceptional performance. Furthermore, the case frames the problem of whether to apply the T5 agreement to the fit-out suppliers who will be involved in the last phase of the T5 project. This problem lends itself to a discussion about whether a relational contracting strategy can be a one-size-fits-all in large-scale projects, or whether project clients should use alternative commercial arrangements as a function of the way they segment project suppliers. Part (B) of the case sheds light on other major projects that BAA plans to develop, namely the Satellite C of Terminal 5 (T5C) and the Heathrow East Terminal. It explains that BAA decided not to use the T5 agreement for the Terminal C building, and invites the reader to conjecture about the most appropriate strategy for the Heathrow East Terminal. The 2 cases suit MSc, MBA, and MPA students interested in the management of large-scale projects, transaction cost economics, supplier segmentation, and the infrastructure sector in general.