The main operational risks Heijmans faced in 2022 were those resulting from the nitrogen emissions issue, higher mortgage interest rates, the government’s limited execution capacity and budgets and the scarcity of materials, products and labour, as well as significantly higher procurement costs (especially for energy-driven products).
The nitrogen emissions issue has led to delays in permit processes, delays in projects under construction and a freeze in the Ministry of Public Works and Waterways’ tender calendar, especially for line-infrastructure projects. This covers all traffic infrastructure and related areas for traffic and the transport of people, goods and communications. This includes roads, waterways, pipelines, power lines and infrastructure for telecommunications. The shortfall in government budgets for infrastructure projects has also led to the postponement and cancellation of tenders. This was mainly due to the decentralisation of responsibilities, combined with unexpected extra government spending. Heijmans mitigated this by shifting its project portfolio to focus more on the government’s High Water Protection Programme and the energy transition, in addition to line infrastructure. There is also a capacity issue: we are dealing with extensive spatial planning procedures that are causing delays. Also, the nitrogen exemption for construction has now expired, and we need to provide and check Aerius calculations for many projects.
Furthermore, in 2022 we faced significant materials and energy price increases, especially for steel, copper, timber and plastic-related products. In particular, energy and semi-finished products produced using energy were substantially more expensive than the previous year. Heijmans closely monitors developments and ensures, among other things, that the organisation is provided with the right information to take into account the price risk in tenders (including advice on the indexation to be applied). Price increases are mainly the result of an imbalance between supply and demand. This imbalance in turn leads to scarcity, which is ultimately more challenging. We try to mitigate this risk by working with fixed partners and securing purchases at an early stage. In addition, Heijmans has so far succeeded in passing on part of the higher procurement costs in the selling prices of our products and services through indexation agreements. We do this by including an assessment of how clients deal with price risk and indexation agreements as an assessment criterion when selecting projects for tendering. The commitment, risk awareness and adaptability of our people play an important role on this front.
By monitoring our main projects on a monthly basis, we try to identify undesirable developments in good time, so we can take appropriate management measures at the earliest possible stage. On this point, we noted last year that monthly monitoring of long-term projects and then acting on (weak) signals at an earlier stage are important for timely intervention. We will therefore devote extra attention to the monitoring of our long-term contracts and address this in our project reviews.
It is important that the operational risk management team is and remains independent of the tender team in order to ensure and maintain sufficient focus in the considerations we make during the tender process.
The Covid-19 crisis demonstrated that Heijmans is agile and can respond adequately to changing circumstances. We were able to mitigate the effects of this pandemic partly thanks to the ‘Let’s keep working, safely’ protocol. The flip side of this is that if the organisation is doing well, people might become less vigilant. Should the market deteriorate or change substantially in the future, the pressure on the order book may increase. We are very vigilant about avoiding any increase in our risk acceptance, as well as our general cost levels, creating potential problems for the future. We therefore also continue to target a ‘margin over volume’ approach to our markets.
Green with a yellow rim
Bakir Selliah (35) is a circularity business developer at the Non-residential building business unit, and for the past five years, has been building expertise in circular construction.
“After studying architecture, I didn’t know exactly what I wanted to do. After trying out a few different things, I did a traineeship at Heijmans, and that’s when I came across the field of circularity. I found that really exciting. That was five years ago, and circularity was still in its infancy in the construction world. I’m really happy that Heijmans understood just how important it would become and created a position for me. With a small team, I built up our expertise in circularity. That wasn’t always easy, because how do you develop something that clients don’t ask for in tenders?”
"Of course, these days circularity is part of almost every tender, and projects use the lead we have built on this front. Right now, I advise tender teams in the service regions and sit at the table with colleagues at Schiphol to drive sustainability and circularity. We also developed the Circular Management & Maintenance proposition, which we deploy in various maintenance tenders. While I used to have to approach the regional teams to offer my help, now I’m flooded with phone calls from them. It makes you feel appreciated, and I get a lot of energy from that.”
“My ambition is to leave the world better for the next generation, especially now that I have an eighteen-month-old son. That’s why I want to take sustainability to the next level. Heijmans is a great place for that, because sustainability is high on the agenda here. I have a green heart, with a thick yellow rim around it.”
I used to have to approach the regional teams to offer my help, now I’m flooded with phone calls from them