Business model

Business lines

BAM’s operating companies are active in the business lines Construction and Property and Civil engineering, as well as in Public-private partnerships. 

BAM’s European home markets are the Netherlands, Belgium, the United Kingdom, Ireland and Germany. Furthermore the Group delivers projects in Denmark, Luxembourg and Switzerland.

Construction and Property
BAM has non-residential construction activities in all its home markets, as well as in Switzerland and Denmark. In addition, BAM delivers residential construction projects, mainly in the Netherlands and Belgium. BAM International is undertaking the non-residential construction projects outside Europe, in the Middle East and Indonesia in particular. 

BAM’s non-residential property development activities are in the Netherlands, the United Kingdom, Ireland and Belgium. Family homes are mainly developed in the Netherlands. BAM integrates the development and construction of these projects. 
The business line Construction and Property employs approximately 9,000 staff.

Civil engineering
The civil engineering activities are in all BAM’s home markets, as well as in Luxembourg. BAM International carries out civil engineering works in niche markets worldwide. 
The business line employs approximately 10,000 staff.

Public Private Partnerships
BAM is present in the European public private partnerships market. These projects deliver construction and recurring maintenance revenue for the business lines. BAM operates concessions for roads, rail, education, health care and government buildings.
BAM PPP employs approximately 100 staff.

For the financial performance of BAM’s business lines see chapter 4.

New business models

BAM’s unique product market combination and broad geographical presence, as well as its relationship with clients and the supply chain and stakeholders enable BAM to continuously expand and increase its potential. BAM’s strategic agenda ‘Building the present, creating the future’ (focus project portfolio, shape business portfolio, create future portfolio) is reflected in BAM’s business model.

In line with BAM’s strategic objective to create a future portfolio, a startup programme was set up in 2016. This programme focuses on developing new business models at the edge of BAM’s existing organisation. Using the Lean Startup Methodology as a process guidance new business models based on digital opportunities are explored. 

Creating financial value

Shareholders and financial institutions provide funds which BAM uses in its business lines Construction and Property and Civil engineering, as well as in Public-private partnerships.

BAM’s strategic target 2020 is a >10 per cent ROCE. BAM invests free working capital from the (non) residential construction and civil engineering activities in selected property and PPP projects.
These projects generate a return on the investment and provide construction and recurring maintenance revenue for the business lines.

BAM uses capital in its business to continue with an extensive range of products and services in its construction and property, civil engineering and public private partnership  business lines. With the current product portfolio and expertise, presence in and cooperation between these business lines of BAM’s five home markets BAM is enabled to utilise free working capital from its operations to invest in selected property and PPP projects which again generates construction contracts. 

> Figure 7 illustrates the financial interaction between the business lines including the relevant financial metrics to assess BAM’s performance.

 07 Creating financial value

Creating environmental value

BAM aspires to have a net positive impact. In environmental terms we aim to be climate and resource positive. This is achieved through collaboration with our supply chain, encouraging innovative thinking through our products and realising the (social, economic and environmental) benefits of circular economic business models. This circular economic value proposition is enhanced in a market where materials and labour costs rise due to fluctuations in demand. BAM is therefore able to offer life cycle solutions to maintain higher residual values for key assets in the built environment.

Climate positive
BAM delivers products to the market or services to our clients which contribute to wider emissions reductions. This includes developing new assets which are low or zero carbon (or improving existing), deploying renewable energy systems or energy reduction measures for our clients or communities (e.g. as part of an esco offering) and delivering reductions in lifecycle carbon impact of buildings and infrastructure (through material selection, design or asset management). This way, BAM strives to reduce its own direct negative impact on natural capital as well as the impact in the use phase.

Resource positive
The use of raw materials and land, producing waste during the building process has a negative impact on natural capital. 

The Group has made progress on reducing construction waste through becoming more efficient, utilising offsite manufacture and by working with its supply chain (up and down stream) to eliminate waste through the life cycle of its developments. The ultimate goal is to produce zero construction waste. BAM’s ability to achieve this is partly determined by forces outside of its immediate control e.g. National and European waste legislation. However, acknowledging that the creation of waste costs money (in wasted materials and in processing / disposing / dealing with waste) and therefore by aiming to reduce BAM’s waste ‘budget’ to zero will lead to benefits across the value chain too.

BAM creates value by having the least amount of impact on natural capital and ideally contributing towards restoring natural resources. By adopting the principles of the circular economy, products and services should ensure that materials which are used to build buildings and infrastructure are either natural and renewable or recoverable at high value. This may include working with suppliers to develop a ‘circular’ material and building element, a new business model, as well as designs which allow assets to be used in different ways and therefore retain their value over a longer period of time. 

See environmental performance in chapter 4.3.  

Creating social value

This target is about making a real and positive difference to the lives of people we come into contact with through BAM’s work. This is about adding real value (through activities that would not happen without BAM’s support/intervention) and also supporting people through grass roots organisations as well as those with a wide reach. BAM's enhancing lives activities largely focus around employment, training, education, community and charity engagement. Outcomes support one or more of social, economic and environmental sustainability leading to a positive impact on social and human capital. This will involve direct support from BAM, but also through partnerships with its supply chain.

See social performance in chapter 4.2. 

Value chain

The Group’s value chain management and subcontractor engagement provide the opportunity to bring value to BAM’s clients from innovations and cross-fertilisation from the value chain. With lean planning techniques, BAM can incorporate schedules of supply chain partners, allowing for a reduction in labour and equipment costs. Value chain management requires sharing BAM’s business principles and policies on CSR, including our targets, and BAM requires its major value chain partners to share information on their CO2 emissions.

08 How BAM creates value 2016

BAM’s operating companies achieve most of their turnover in collaboration with their subcontractors and suppliers. More than 76 per cent of turnover is sourced from supply chain partners. Projects may also be carried out in collaboration with other construction companies (as part of a joint arrangement).

Natural, human and financial capital are typically sourced locally in BAM’s home markets. In the Netherlands, 97 per cent of BAM’s purchases were locally sourced in 2016. BAM expects comparable percentages in its other home countries. An exception to the rule is tropical timber (typically under FSC- or PEFC-labelling). BAM operates mainly in a business-to-business environment and in a business-to-government environment. Within all its European home countries, BAM works for national and local governments as well as property investment and development companies. Typical supply chain partners are mechanical and electrical suppliers, often in conjunction with local labour suppliers as well as local small and medium enterprises.

09 Key business activities

The construction industry provides services on a project-by-project basis. An increasing part of the design and engineering is done digitally in the concept of ‘make it before you make it’. A project is built in a digital form and the building process can be ‘played’ digitally, resulting in a reduction of among others failing costs.

The earlier BAM gets involved in a development the greater its ability to influence the sustainability of the development at a lower cost. When BAM is the property developer or where BAM is part of a public private partnership, BAM is in the best possible position to maximise sustainability outcomes, as the company can set sustainability ambitions in the early concept stages. This allows life cycle thinking to be taken into consideration at the early design stages, allowing for better use of capital investment to be considered against lower maintenance and operational costs.

Innovative solutions and intellectual capital are developed by BAM’s operating companies when developing sustainable solutions to meet its clients’ needs. BAM also supports a number of organisations in the research of specific technology and process innovations. BAM is also part of a number of international and industry leading forums sharing best practice on sustainability (see chapter 3.2 Stakeholder engagement and material themes).