Bilfinger Berger Magazine 1/2009

Mr. Bodner, a lot of people are complaining about the crisis, and rightly so. What grounds do you have to be pessimistic?
None. We have good reason to be rather optimistic. Our business is diversified, we are not dependent on a single product. Nor do we have high fixed costs, so a possible downturn in sales would not dramatically impact on earnings. We also have an order backlog in our construction business that protects us from sudden surprises, and on the services side we have master contracts that ensure we will be kept busy for some time to come — even a plant working at reduced capacity still needs to be maintained. So we are cautiously optimistic that we will deal with the crisis relatively well.

Nevertheless, industrial clients will postpone investments, and the public sector will do the same as tax revenues decline. Which is more serious for Bilfinger Berger?
First of all, the public sector has actually increased its investments: The two economic stimulus programs in Germany will generate € 18 billion for the construction industry in 2009 and 2010. Some of that will go to small- and medium-sized businesses — for long-delayed renovation work and for new schools — but the stimulus programs are also attractive for large companies like Bilfinger Berger. Naturally, we hope that they will offset declining demand from industry and other investors to some extent. If, after these economic programs have been completed, the public sector were to stop making investments because of budget deficits, that would be irresponsible and would indeed present a problem, not only for the construction industry.

The mayor of Munich has calculated that of the billions that are being talked about, his city will receive barely enough to completely modernize two schools or update the energy concepts at a dozen. Are the programs adequate given the backlog of work to be done?
The question is, how will the states distribute the money that the federal government is providing: Will they spread it around, or concentrate on selected projects that really matter? The German Institute of Urban Affairs puts the backlog in local authority investments at € 70 billion, in addition to regular annual spending requirements in the order of € 40 to € 50 billion. It is obvious from the magnitude of these figures that the economic stimulus programs can only be a small part of the solution — even though they have an important macroeconomic function.

Bilfinger Berger is involved in some major road building projects outside Germany. In the country itself, however, hardly anyone is talking about expanding the road network. Why is that?
More is being invested in the national road network in 2009 and 2010 than was the case in the past. But the level of investment, which is elevated at this time, would have to be maintained over many years to meet demand. By international comparison we have fallen behind in recent years, even if the quality of Germany’s national highway network is still quite high. The words of warning that I regularly repeat refer to the fact that the traffic flows in Europe have altered entirely and are now also oriented in an east-west and not mainly a north-south direction. Our highway network is not equipped for this, so there are many places where we need extra lanes to be built and gaps closed.

If public-sector investments in infrastructure decline, could this be the time for private investors to step in and add fresh impetus for the public private partnership (PPP) model?
Certainly, there will be a growing interest in privatelyfinanced models such as PPP in order to make the necessary investments affordable. The federal government has a target of funding up to 15 percent of public-sector investments via this model, which is still something of a novelty in Germany ...

... a target that we are actually a long way from achieving ...
... indeed, we are up to just four percent. There are two reasons why PPP is finding it tough at present: On the one hand, there are those who believe that with government spending on the rise, there is so much cash available that we don’t need to bring private investors on board. While on the other hand, you have to appreciate that banks in their current state are reluctant to finance projects that require high levels of liquidity. Nevertheless, the federal government has not changed its positive attitude towards PPP. I believe it is only a question of time before demand begins to grow for PPP as a procurement model — simply because public sector funds will be in much shorter supply. Clearly the 15 percent target will not be met overnight. In the area of transport infrastructure, the experimental phase has yet to be concluded. But PPP has already proven quite successful in social infrastructure and there are a lot of satisfied municipal clients who would be happy to use this model again. There are plenty of upcoming projects in the pipeline.

What is it that really makes PPP a partnership? Isn’t the company just a contractor in the same way as for any other project?
It is the long-term nature of the relationship that makes the difference. The public client and its private partner must cooperate for years, even decades. So high priority is given to avoiding conflict; you can‘t have a minor argument over every detail. This long-term link brings a fundamentally different dimension to partnerships — one that goes beyond any given contract model. With projects like these our focus is not just on the cost of construction, but on design, financing and achieving the lowest possible lifecycle costs as well. If both sides can sit down and work out what their building will cost in total over 30 years rather than minimizing the initial investment and leaving their successors to worry about maintaining the building, that is a big step forward. Also in the interest of the taxpayer.

What other creative solutions does Bilfinger Berger have apart from PPP?
We offer a comprehensive range of services that includes maintenance and operation, even if we are not involved in the financing. Packages like these save the client substantial costs. This approach also means that CO₂ emissions generated by buildings can be reduced more easily. One intelligent instrument is energy contracting, because the owner recoups his investment through energy savings. The contractor, that is to say we, guarantee that. Anything that helps us to meet our climate targets can only be welcome. About 40 percent of CO₂ emissions are generated by buildings, twice as much as is generated by transportation. Climate protection is therefore primarily a construction issue.

The climate issue seems to have been pushed off the agenda by the financial and economic crisis.
For a while, the crisis may mask everything else, but reality will catch up with us: Climate change remains the issue of the 21st century. It also presents our industry with huge opportunities.

Interview: Stefan Scheytt, Photo: Christoph Püschner
Bilfinger Berger Magazine 1/2009