Alliance investing for future growth

THE decision to invest in more sophisticated management systems, and breaking into the oil and gas sector, have been two of the key strategies that have helped Alliance Contracting build its business.

Established 11 years ago by director Ian Phippard, the business started with little more than the experience of its founders.

“At that stage the business was basically just a telephone, a car and a computer and I hired some equipment and some people and went off and started,” Mr Phippard said.

It was good associations with suppliers and industry contacts that put the fledgling business on the right track. 

“I actually started the business from home in 1999, and then in 2000 we had our first big job with BHP, which was upgrading the access road to the Yandi mine site. While we were there, Rio Tinto saw what we were doing and asked us to come do (work for them.) That’s basically how we kicked the business off,” Mr Phippard told WA Business News.

Moves to build the management team and increase the capabilities of the business in 2006 proved pivotal. 

Part of that was the recruitment of chief executive officer Mark Breingan, who became one of five investors in the business.

His appointment was followed by some other big changes, including the purchase of more equipment.

“It was a bit of a turning point, we had a mining job, we had 18 months to go on that job and we had a bit of older equipment, it was a decision about who would bring the business forward,” Mr Breingan said.

“We had a bit more cash flow behind us at that stage so we could expand and buy some new equipment.”

It was a bold move to buy equipment before more work came in.

“It was a leap; it was (a decision) to find more customers, to move forward and secure more work,” Mr Breingan said.

Another change was the investment in a formal quality assurance process.

“It forced us to have management systems in place that are going to be third-party accredited ... it’s set a foundation to work from,” Mr Breingan said.

The GFC initially hit Alliance hard, after Rio Tinto chose to cancel a $1 million-per-month maintenance contract. 

“It just stopped overnight,” Mr Phippard said.

However, this was offset by an increase in work in the oil and gas sector, initially on the North West Shelf venture’s Karratha gas plant and subsequently on Woodside’s Pluto project.

The high safety and compliance standards in the oil and gas sector were a new challenge for Alliance, but they were helped by systems already in place.

“It’s a risky area to work in, it’s actually a barrier to entry for a lot of contractors,” Mr Breingan said. 

“A lot of contractors aren’t prepared to embrace that situation and make it work.

“Because we had the certifications to work off, it was relatively easy to qualify.”

The group’s strategy is to continue building the oil and gas business, while continuing to service the mining sector, where its clients have included Newmont and Integra Mining.

With 150 employees, Alliance has outgrown the time when it hired people it knew in the sector, and the importance of retaining and recruiting staff has driven the company to establish its own human resources department.

“That has been our biggest step of late, in the last two months or so,” Mr Breingan said.

“Strategy number one is getting practitioners in human resources ... and providing people with feedback, career paths, stuff like that. We wouldn’t even have considered that in 2006.”

The biggest staffing challenge for the business has been finding and retaining project managers for the oil and gas sector.

The most recent innovation has been the implementation of a new enterprise resource planning (ERP) system. 

Alliance spent 14 months looking for the right system before selecting US group IFS, which recently established an office in Perth.

The new investment will bring all accounting and reporting under one system. It will have a particular emphasis on project control and reporting, as well as covering processes such as finance, procurement, HR and recruitment, payroll, maintenance planning, tendering and project management. 

The IFS system is also scalable to cater for expected growth of the business. 

Mr Phippard said he was “old style” but recognised the importance for good management systems.

“More and more of our clients are going this way,” he said.

“Clients want to share in the risks and rewards so they need better reporting.”

Mr Breingan said the progressive investment in management and software systems had also helped in the recruitment of professional staff, because it spoke to the sophistication of the business.

“People want to deal with more sophisticated systems. An investment in software is also an investment with people,” he said.

With a letter of intent for a new three-year mining contract in the Mid West, the future is looking good.

If all goes to plan, annual turnover will be approaching $100 million next year, but that is not the focus for Mr Breingan.

“Turnover’s not he driver, profitability is, let’s consolidate and get that right.”