...for most of the last decade. With huge investment plans in the mid-1990s, BAA ditched traditionally adversarial owner-contractor relationships in favor of integrated, long-term partnerships.

BAA’s experience influenced the government’s wide-ranging review of construction, a program chaired by Egan, which culminated in 1998 with his influential “Rethinking Construction” report. The word “Egan” has since become shorthand for an improvement strategy that has not lived up to Egan’s hopes.

“Since 1998, we could have had a revolution, and what we’ve achieved so far is a bit of improvement,” he writes in an industry analysis published in October by CEBE. “Egan had a big impact...but the transformation remains incomplete,” adds Andrew Wolstenholme, the senior executive at Balfour Beatty Construction who chaired that review.

Five years ago, Wolstenholme was at BAA running one of the U.K.’s biggest projects organized along some of principles espoused by Egan. As project director for Heathrow’s $9-billion Terminal 5 program, he ran fully integrated teams, with ring-fenced contractors’ profits and BAA bearing the risk of supplier failures.

For Terminal 5, BAA established framework agreements with contractors and suppliers covering classes of work rather than specific contracts. The owner and contractors worked collaboratively, on an open-book basis. Lasting five to 10 years, the agreements were subject to periodic evaluation, with BAA able to terminate unsatisfactory performers.

Now, Morgan rejects the notion of the owner being “some part of a joint venture.” He adds, “I want my contractors to behave appropriately. The behavior is what I’m going to incentivize. And that’s working right now here at BAA very well.

I agree with John Egan in terms of the problems he defined,” says Morgan. “What I’m really doing is bringing a new level of sharpness and precision to what Egan was trying to do.”

Morgan is now using framework agreements for work worth under $16 million. “We are putting in detailed cost rates in the frameworks which we didn’t have before,” he says. He is introducing competition between framework suppliers for jobs bigger than the $16-million threshhold and running full open bids for contracts worth over $40 million.

The form of contract Morgan favors is the U.K.’s NEC 3, option C, the equivalent of U.S. cost-plus-incentives agreements. “Cost is only one dimension. I want to incentivize other factors and behaviors,” he says.

On top of normal contractural gain sharing, Morgan has established an award fee of 2% to 3% of a contract’s target...