The Generation Game

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-By John Boley

Established in 1914, Kennett Pty Ltd is a fourth generation commercial and industrial builder with offices in Adelaide and Mount Gambier. Founding brothers Clifford and Charles Kennett began trading from their family home in West Croydon as “Kennett Brothers” until the current trading name was adopted in the 1970s.

Focusing on projects up to $30 million in value, Kennett Pty Ltd sources work through the tender market and also undertakes construction managed contracts. Clients include state and local governments, multinational companies, institutional providers, private businesses and not-for-profit organisations.

Managing director John Kennett acknowledges that the company’s reputation certainly helps, but recommendation and word of mouth can only go so far. Into the fourth generation, is tendering unnecessary? “I wish! No, there is still a lot of tendering to be done. A lot of clients give us the opportunity, but this is South Australia and they judge on price at the end of the day. Particularly when times get tough as they are again now.”

There is a “reasonable amount of competition.” Mr Kennett says that a lot of builders have been very busy over the last 18 months doing schools under the BER programme, which has meant that the private sector has not been as busy. “So prices went up due to the manner in which that volume of work came out from the federal government and private clients made the decision not to proceed with their projects at those prices. So we now have a situation where the [work on] schools [has] reduced and a lot of the private clients have not returned to the market. So the competition is pretty fierce among the traditional builders and the new ones that have sprung up, including some from interstate.”

Because of its long-established reputation, Kennett does manage to keep ahead of the chasing pack. “We have always tried to maintain our position with the traditional clients.” These to a large extent comprise “some retail, quite a lot of aged care and a number of the private schools, and by maintaining that profile with those clients we have managed to stay a little bit ahead. We picked up some good work during the latter half of last year and a lot of that work will go through for another 12-15 months or so. It’s not enough to satisfy us completely but it’s a very good base from which to work.”

Kennett does some public works – always tendered very competitively because Government have an open Tender Policy. In a less-than-buoyant market, “currently you’ll find tender fields for substantial jobs will have anything up to 18-19 tenderers. It doesn’t make a lot of sense to us to be trying to tender in such a market so our tendering into the public sector is a bit selective.” At that level of competition it becomes unprofitable. This, he reflected, is good business sense. “I’m sure there are lots of others who see it the same way.”

Mr Kennett said he could not be sure when this situation will end. “Not before the end of this calendar year at least, but that’s very much a guess.” The state government is embarking on some large projects including the new Royal Adelaide hospital – “somewhere above 1.5 billion dollars” – and there is something of a question mark over the Government’s forward works budget for building work through the rest of the financial year. It may be somewhat reduced.

Kennetts is a family run business. “I’m third generation, my two sons are fourth and the plan is that they will go on to run the business when I retire. I bought out my relations in 1992 and we restructured the business at that point.

“We turn over a shade under $50 million now and we will continue to grow that, depending on the market conditions – in a considered way. We have 45 staff, including about eight labourers, carpenters, safety staff, a bricklayer; the rest are site managers, project managers, estimators and support staff. Our work is primarily in Adelaide, with a branch in Mt Gambier from which we work in Western Victoria when opportunities arise.”

Mr Kennett underlines that ‘if you’re going to do a job, do it properly’ is very much the philosophy of the company. “It’s what we have in mind in every job and there are times we don’t tender for a job if we don’t think we can do it to our standards for reasons that are relevant at that point in time.”

The company does occasional design and construct (although of course there have been many such projects through the BER projects) “but we do more of what we term managing contractor – some call it construction managed – projects. This is a fee-based tender system and then you join the design team and call the prices, for the subcontract packages after the documentation is complete, and table them. Then the client or their representative selects which one they want – we make recommendations but they have the right to change that if they want to.

“It’s a process that gives a client more control – and a share of the risk.” This, says Mr Kennett, is particularly relevant in the field of aged care where they have to maintain ability to move with changes in government funding or criteria which may involve what is being put into the building in the way of the accommodation, sizes of rooms or facilities that might need to be included to meet changing standards.

Individual operators tend to make changes quite quickly or often in this area “in anticipation of where they think or know it’s going. At other times they will do it because they will see a demand in the market, depending on the market sector they are providing for. Sometimes these facilities are owned by major operators; sometimes they are community-based groups that are the client, particularly in country areas. “Clients want that flexibility – even if it’s only being able to change the style of their joinery, or the type of fittings they want to use, or floor-covering types that might become more fashionable or more durable.”

It goes back to the tendering process, explained Mr Kennett. “They have funds available. If it was a hard tender then what is drawn is what will be priced and they have the issue, if it’s over-priced, of trying to work out how to bring it back, whereas in the managing-contractor system they are watching those prices coming in and if there is a tendency for the prices to be above where they think their budgets are, then they have the ability to make alternative selections to reduce their capital expenditure or conversely they may want to spend more – adding area or putting extra facilities in if there is a budget allocation for it.”

Mr Kennett named the Helping Hand (United Church) 106-bed aged care facility in Northgate, Adelaide, as “the biggest job we have done, at approximately $25 million. “The project is on time and has a completion date of October 2012.” Typically up till now, Kennetts work was in the $10-14 million range. “This one is bigger – the fundamental processes are the same and, with good staff managing the project, I am confident that the outcome will meet or exceed the client’s expectation.”

Less topical but another source of pride is the ForestrySA headquarters at Mount Gambier – Australia’s first 5-Star Green Star regional building, which was also a first for Kennetts in the Green Star field and contributed to the company being awarded the Master Builders Association Commercial Contractor of the Year award in 2008.

The company has done retail work for Woolworths – in petrol retailing, wine shops and supermarket upgrades, which “has been a source of work for us for some time. It’s competitive, of course, but they are a good client.” They are exceptionally stringent about what they require their builders to do, particularly around health and safety, “and that’s something we are very aware of. We make a constant effort to be in the front of the field and their insistence on that has helped us to achieve the standards we currently work to.” The company also has “steady work” for some motor vehicle dealers. “It’s not a high percentage of our work but they are high-profile jobs – because they are generally on main roads and are valued clients.”

Going forward, says Mr Kennett, “we see ourselves remaining in the aged care market, while areas such as retail, education and industrial and office buildings will also form part of our market. That’s very much where we are and where we see ourselves in our three-year plan.”

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

December 16, 2018, 3:54 PM AEDT