Laying the foundations right

Source : Business Times - 14 Apr 2009

AFTER five years of rapid growth, Teambuild Construction is in consolidation mode - it’s going back to the basics to ride out the downturn. But it’s also laying the foundations for the next growth wave when the industry rebounds, by its reckoning, in one or two years.

Managing director Seow Seng Wei expects a host of challenges in the coming year, including a drop in order book size and greater competition for new projects in the pipeline.

With the bulk of its order book lasting till end-2010 and a small proportion till 2011, Teambuild’s approach will be to increase productivity while cutting cost.

Mr Seow expects the construction and development industry to recover at end-2010 or 2011, and sees recovery earlier for the construction side.

Although he expects vertical integration both upstream in development and downstream in labour-intensive support to give Teambuild an added advantage, he has in mind another growth path.

‘While we continue to build on vertical integration, we recognise that we have to venture into merger and acquisitions or an alliance to have growth that we want,’ he tells BT.

Teambuild has come a long way from its early days as a sub-contractor in 1992, with a finger now in several pies - construction and development, renovation, design and building, and upgrading of mechanical and electrical works.

It was formed by four friends and ex-colleagues, including Mr Seow. Even his former boss was supportive of the sub-contracting venture, going as far as farming out some jobs and becoming one of the shareholders of the company.

‘He probably recognised that there was enough pie to be shared’, Mr Seow says, referring to the small upgrading projects given to Teambuild.

The company was also well located, with a bank just downstairs, which Mr Seow capitalised on to build relationships. ‘Knowing the bank’s people right from the start, it helped.’

Thus, it was less of a hurdle obtaining loans. Having a bigger contractor backing them was a contributing reason too, he adds.

Not everything was smooth sailing though, as Teambuild faced the challenge of securing additional and bigger jobs. As a result, the company focused on starting out small. It took on a few upgrading projects on private houses to build up a track record, before going into the public sector.

‘We actually focused on building our foundation rather than rushing into getting a very big contract,’ Mr Seow says. ‘In that sense, we faced less hurdles that were insurmountable.’

Today, the company, which generated a turnover of about $150 million last year, has a staff strength of 240, and taps 800 skilled workers.

It concentrates mainly on construction, with works for the Housing Development Board and institutions such as hospitals and schools in its line-up of projects.

Sourcing for workers skilled in the construction industry and quality staff remains a challenge, so many are trained in-house, or gain experience on the job.

‘A large pool of our staff was from our initial years,’ says Mr Seow. Although the company does recruit experienced staff, ‘it has become a rare commodity to find people with construction experience; back then, it was already a problem, now it is worse’.

He adds that Teambuild is trying to adapt to the younger generation, as they have a different mindset. For example, most construction companies used to be open seven days a week. But now, it’s only 51/2 days - because the younger generation want weekends off.

As part of its growth then, Teambuild set up downstream divisions some 2-3 years after its formation. With affiliates in construction, metal and electrical engineering and designing, these ‘related services we have built to complement, contribute as intangible services to enhance Teambuild’s capability and turnover’, Mr Seow says.

These activities account for about 15 per cent of turnover now.

According to Mr Seow, the vertical integration allowed Teambuild to act quickly, especially in mobilising resources in a short period of time.

This was especially helpful during 2000-2005, a time which Mr Seow says was extra tough, competition-wise. There was a slowdown in the economy, with few projects to go around.

To survive, Teambuild carved out a niche - finishing abandoned projects as a contingency contractor.

To do this, it worked with insurance companies, and made effort to talk to people with inside information. After successful completion of a number of projects, its track record opened the door wider to other unfinished projects that needed to be completed.

‘The breakthrough was unexpected. We earned a name, and people came to find us,’ recalls Mr Seow.

As Teambuild already had ongoing projects at the time, the influx of these additional jobs actually helped the company expand in those tough times.

So taking a leaf from its past, the company is going back to basics for now and laying fresh foundations for the future.

‘We will do what we do best - focus,’ quips Mr Seow.