March 2015

CONSULTANT REPORT

Dutch Construction Industry

Challenges and Solutions

Prepared for:
Prepared by:

Utrecht University, Big Four

Group 3-2

Preparedby:

PrimaryAuthor(s):
AnastasiaGuzova
ArmandoPeigh
FlorianLuttmann
HasanBilal
NodirbekPrimkulov
PietroFrabasille

AdamSmithHall,UniversityCollegeUtrecht
Utrecht,NL3584

www.uu.nl

ContractNumber:+31683672055

Preparedfor:

UtrechtUniversity,'BigFour'

J.P.C.Rigtering
Coordinator

BilgehanUzunca
Instructor

DISCLAIMER

This report was prepared as the result of work commissioned by the Utrecht University. It does not necessarily represent the
views of the institution, its employees. Utrecht University, its employees, contractors and subcontractors make no warrant,
express orimplied, and assume no legal liability for the information in this report nordoesanypartyrepresent that theusesof
thisinformation will not infringe upon privately owned rights. This report has not been approved or disapproved bythe Utrecht
UniversitynorhasUtrechtUniversitypassedupontheaccuracyoradequacyoftheinformationinthisreport.

KeyIssues
EconomicPretext
The global financial crisis of 2008 has sent shockwaves across all sectors of theglobal economy, particularly
hardhitwastheconstructionsectorintheEurozone,whichsufferedfromhousingmarketcrashandconsequently
fromthe tightausteritymeasures implementedbytheeconomies oftheEurozone,curbinginvestmentingeneral
and particularly in construction projects. The focus of this report is the big four of the Dutch construction
sector, Royal Bam Group, Heijmans, VolkerWessels, and Ballast Nedam. However,itisimportant tomention
that the current climate of the dutch construction sector is affecting all the participants of the industry of all
differentsizes.

ResidentialSubSectorDecline

Thelargestpartofthedutchconstructionsectorisresidentialhousing,whichmakesupapproximately55%ofthe
market. According to the CBS housing price index, the prices are 16 index pointsbelowthebaselinelevel of
2010. The current price levels indicate that thedemand has fallen since 2010 andremains at astablelow.The
trend is triggered by the economic climate, with consumer spending and investment remaining at a stable,
postcrisislow,afactthatisreflectedintheperformancesoftheconstructioncompanies.

FewerPermits

The construction sector in the Eurozone as a whole is beginning to recover from the aftershocks of the 2008
financial crisis and the Eurozone crisis, with an overall increase in infrastructure investment and issuance of
construction permits causinganairof optimismfora fullrecoveryto the precrisis levels.Afact thatcurrently
cannotbeattributedto theDutch construction sector where2013saw an issuanceofabout26,000construction
permits, a figure that is the lowest since 1953, indicating the large extent of the degree of stagnationthatthe
Dutchconstructionsectorisexperiencing.

WeakenedFinancialPosition

Anotherworryingindicator ofthe marketisthe 15%decrease incombinedrevenueofthebigfourwhichisin

line with the decrease intheoveralldeclineof thesectorturnover. Moreover thetotal EarningsBefore Income
Tax makeupapproximately 1% oftotalrevenues,a factthat puts theprofitabilityandthefinancialhealthofthe
big four under question and open to scrutiny. Furthermore, In the wake of decreasing revenues, increasing
operational costs and increasing competition with foreign construction companies trying to capitalize on the
Dutchconstructionsector,therearereasonsforconcern.

Analysis

VolkerWessels
VolkerWesselsaDutchgroupofcompanies,currentlyemployingaround14,500employees,with120
companiesintheNetherlands,CanadaandtheUnitedStates.ItisanunlistedDutchlimitedcompanytowhich
thesocalled'structureregulation'applies.ThismeansthatcertainrightsatVolkerWesselsfalltotheSupervisory
Board,nottothegeneralmeetingofshareholders.Itsshareholdersare(indirectly)theWesselsfamily,owning
roughly85%ofsharesandManagementholding15%ofshares.

VolkerWesselsis,asalargecompanyandasamajoremployer,apartythatisactivelyinvolvedinsocietyand
hasalargesocialinvolvement.Companyoperatesinadecentralizedorganizationalstructureindifferent
constructionsectors(constructionandpropertydevelopment,infrastructure,energyandtelecoms,suppliesand
maritime)intheNetherlandsandabroad.

Weworkinpartnershipwithourstakeholderstoshapingsocietyinthefieldofconstruction,mobility,
energyandcommunicationsprovisionanddevelopment,design,realisation,managementand
operations
(1)

ThecoremarketofthecompanyliesintheNetherlands(70%ofsalescomefromNetherlands)where
VolkerWesselshasarelativelystablepositionsothemainstrategyofthecompanyinDutchregionistoincrease
profitabilityandoverallcompanysperformance.Companyaimstosetupitsactivitiesbetter,smarterandat
lowercost.TheoverallstrategyofVolkerWesselsfortheupcomingyearsistoexpandthevaluechain,spread
theiractivitiesandtheregionstheyoperate.
Themarketisincreasinglydemandingprojectsthatareofferedascompletepackages.Buildersarethennotonly
responsiblefortheconstructionbutalsoforthedevelopment,design,maintenanceandfinancing.Qualityisthen
morethaneveranimportantcomponent.VolkerWesselsachieveshighqualitybyfocusingonproject
management,safetyduringtheworkandreductionoffailures.Investingininnovationremainsadefiningtrait
acrossthiscompany,whichalsocontributestothefinalproductquality.

Outlook
Companysperformanceafterthefinancialcrisishasdecreasedinallsectorsofitsoperations.Theconstruction
sectorisverysensitivetoeconomicfluctuations,asaresult,duringthefollowingyearstheprofitabilityofthe
VolkerWesselswasverycloselyrelatedtotheEconomicsituationintheregion.

MarketconditionsintheNetherlandsareverychallenginguptillnow.Manysectorswherecompanyoperatesare
affectedbyovercapacityandpricepressure.Asaresult,onlyinthe2013companyhasreachedpositivefigures
amongalloperatingspheres.2012wasatoughyearforthecompany,EBITDAhasdecreasedsignificantlyand
itsmarginwasonly2.8%comparedto5%in2013.In2013companywasleftfreefrombankdebt,which
actuallydidntresultinDebt/Equityratiowhichisstillextremelyhighcomparedtootherconstruction
companies.Currentratioin2013endedupat1.01whichisjustabovethesuggestedminimumfortheindustry,
whileahealthyconstructioncompanyshouldhaveacurrentrationaround1.44.

EBITDAmarginhasslightlyincreasedduringtheperiodandthecompanyexpectsahigherrecoveryinthe
followingyears.Asforreturnonequity,whichindicatescompanysprofitability,wecanseethat2012was
indeedaverytoughyearsincetheprofitabilityfortheyearamountedonlyfor3.7%comparedtoastrongfigures
of17.4%in2013.Inthecompanysreportwecanfindthat2013wasayearwithreducedworkamountandpoor
weatherbutitstillwasasuccessfulyear.Companyattributesitsresultstothecompanysdiversification,
expansionofactivitiesandgoodgeographicalspreadoftheirmarkets.Moreover,internationalmarketsandthe
Energy&TelecomssectoraccountedforalmosthalfofVolkerWesselsrevenueandapproximatelytwothirdsof
theresult.Itleadstoaconclusionthatcompaniessuccessisrelatedtoprojectsabroad.Wefurthersuggestthat
thisandothercompaniesshouldconcentrateonacquiringnewmarketsinthedevelopingcountries,wherethereis
ahighdemandforinfrastructuredevelopment,energyandtelecoms.Itwillbringafurthermajorgrowthofthe
companysincetheyhaveastablepositionintheNetherlandsmarket,becomingstrongerinUKandCanada.

BallastNedam

Ballast Nedam is a
Dutch
based construction and engineering companyheadquarteredin
Nieuwegein
..
It's the fourth biggest Dutch construction and engineering company after Royal BAM Group,
Heijmans and
VolkerWessels
. Ballast Nedam has aconcreteandwellearned reputation forindustrial construction in projects
that require civil engineering expertise. Thecompanyspecialisesin all combinations of design,build, finance,
maintainandoperate.
Their areas ofexpertiseincludehousing, mobility,energyand nature.Recent concentrationof thecompanyhas
been on major integrated complexprojects andrelatedactivitiesintheniche marketsof industrialconstruction,
offshorewindturbines,secondaryrawmaterialsandalternativefuels.
Historically, profit margins have have been worsening, as year on year Ballast Nedam had revenues fall by
4.32%, from1.29bnto1.24bn.Thedownward trendinrevenues from2009to2013and thenegativeoperating
result standsoutasaweaknessforthefirm.In linewithBallastNedampressreleaseof16June2014,operational
loss of 45 million was reported. Net result of 51millionloss,Orderbooktotalledto1.2billion.However,
financingpositionof116milliondebtremainsanegativeindicator.

Strategy20142016
The focus of Ballast Nedam strategy for upcoming yearsisonmajorintegratedcomplex projectsandrelated
activitiesindistinctmarkets.In2014BallastNedamhadacurrentratioof0.97.

This articulates that thecompanymayhave difficultymeeting itscurrentobligations. Lowvalues,however, do

notindicatea criticalproblem.IfBallast Nedamhasgoodlongtermprospects,it maybe abletoborrowagainst
those prospects to meet current obligations. Subsequently,Ballast Nedamispreciselytryingto achievethat by
focusing on design, construct and engineering projects. Other areas ofactivityincludePPPprojects,projectsin
offshorewindenergy,industrialconstruction,andmodularconstruction.

Theseprojects areforecasted toperformwellthroughoutthecycle.Themarket conditionsarecompellingBallast

Nedam to increase the pace of success plans and execution inthecomingperiod.The speed at whichBallast
Nedam is reducing exposure to lossmaking traditional markets, by matching up the key activities to major
complex projects, and structuring the organizationisbeingsteppedup.Ballast Nedam's track record combined
withmajorcomplexprojectsendorsesthecompanysstrategy.

Furtheron,BallastNedamdesires to diversify itsactivitiesfromthe slowly growing andlow margintraditional

contracting business towardshighermarginbusinesseslike property developmentand facilitymanagement.The
company aims to have revenues in property development activities. Relative to its main competitors, Ballast
Nedam has a DebtEquity ratio between 1.94 and 0.84which is considered asa financialstrength .Insuchan
industry, with such large capitalbasedfirms,itwould notbeconsidereda detrimentto maintainaDebt/Equity
ratiosuchasthis.

Ballast Nedams major loss on the MaasvlakteVaanplein project caused by considerable additional cost
overruns,hadanegativeeffectontheresults.Project outcomefromthe infrastructuredepartmenthavealsobeen
disappointing, includingthe A2MaastrichtProject.Moresatisfactoryresultswereachievedintheoffshoreniche
market. A numberof large complexbuildingprojectsalsoresultedinagoodcontribution.Inthe pastsixmonths,
nonewmajorprojectshavebeenacquiredinTheNetherlands.

Cost overrunshave considerablyaffectedthecompany'ssolvencyandliquidityposition.BallastNedamscurrent

solvency ratio is at 4% compared to 16% in 2013. This indicates that Ballast Nedams cash flow is not as
sufficient to meet itsshorttermandlongtermliabilitiesas itshouldbe. Theloweracompany'ssolvency ratio,
thegreatertheprobabilitythatitwilldefaultonitsdebtobligations.

Continuing poorconditions anddisappointingresultsin2013hasledBallastNedamtofocusitsstrategyonlarge

complex projects, construction companies in the regional sector will be merged into an integrated operating
construction company and several companies that no longer fit in the strategywill be sold. Therecent bribery
scandal shows thatcorporate governanceimprovementisalsosomething thefirm should focuson.Thecapital
shouldbestrengthenedandBallastNedamAndloansshouldbeacquired.

RoyalBAMGroup
Incorporatedin1869,theRoyalBAMGroupiscurrentlythebiggestconstructioncompanyintheNetherlands.
Theyhavearound25,000employees,andtheyoperateonabigscalewiththousandsofprojectsimplemented
eachyear.Totalrevenuewas7,042millionin2013.
TheRoyalBAMgroupisdividedintwodivisions,constructionandpropertyinvestments.Theyaremainly
activeintheNetherlands,GermanyandBelgium.Totalrevenueoftheconstructiondivisionfellby9.2%to
2,767million.Externaleffectsandmajorlossesmadefora7millionresultinthisdivision.Asforproperty
investments,totalrevenuefellby54%to236million.Thishugedropismainlybecauseofbigimpairment
lossesonpropertiesthathavesufferedfromthe2008financialcrisis.BAMCivilEngineering'stotalrevenue
wentupby10%to3,748millionin2013.Thisimprovementisanimpressiveaccomplishment.Italsoshowsus
theopportunitytheyhaveinthisdivision.RevenueintheNetherlandsfellby5%,offsetbythegrowthachieved
worldwide.Thisdropisnottoobad,consideringtheconditionsoftheDutchmarketatthistime.At1.3%the
EBITmarginremainedratherstable.

Therecourseleverageratio=Netdebt/EBITDA:1.08isbelowtheaverage,whichisapositiveaspect.However
theratiohasrisenby0.16from2012to2013,asignificantincreaseandatrendinanegativedirection.
Interestcoverageratio=EBITDA/interestpaid:7.62.Measurestheirabilitytocovertheinterestfromtheir
liabilities.3.62,afigureabovetheaverage,indicatingthecompanysabilitytoavoidbankruptcy.Furthermore,
theratiohasbeenmovinginapositivedirectionstartingfrom2012.Recoursesolvability=Capitalbase/balance
total:25%.Measureshowmuchofcashflowisfinancedbyequity.10%pointsabovethenorm.Currentratio=
currentassets/currentliabilities:1.11.Measuresifthecompanycanmeettheirshorttermliabilities.Asmall
increasesince2012,displayingagoodfinancialhealthofthecompany.

Outlook
TheroyalBAMgrouphasbeenhardhitbythe2008financialcrisis,similarlytotherestconstruction
market.IthasbeenobservedthattheRoyalBAMgroupisactivelytryingtofindsolutionstotheirchallenges,
howeveritisimportanttokeepinmindthattheimplementationprocessoftheirstrategicgoalswillnotbeeasy.
Thecompanyhasreportednegativecashflowin2013and2012,areasonforconcern,tobothinvestorsand
management.Domesticeconomicmarketsareexperiencinggrowthbutonlygradually,meaningthatarapid
improvementshouldntbeexpected.Therefore,thedecisionofthecompanytoexpandintoforeigngrowth
marketssuchasSoutheastAsiaandAfricaisaviableoption.Theirstrongestpointisspecializednichemarkets,
howeverfocusingsolelyonthosemarketswillnotbeenoughinordertoreversetheirchallenges.Werecommend
thatthecompanyputseffortintoexpansiontotheselectedgrowthmarketswheretheycanobtainpositionsin
specializednichemarkets,aswellashandlingprojectsinacostefficientmanner.

TheanalysisoftheAnnualReportsofRoyalBamGroupshowsthatithasthehighestOperatingrevenueinits
industryandthusthehighestoperatingresultamongallofthecompanies,puttingtheminabetterfinancial
positionwhichleadstoasubstantialcompetitiveadvantage.Analyzingthestrengthsandopportunitiesofthe
royalBAMgroupusingtheSWOTmodel(SeeAppendix),ithasbeenevidentthataddingtothefactthatthe
companyhasthelargestmarketshareintheNetherlands,thecompanyhasasignificantshareinotherforeign

constructionmarkets,notablytheRoyalBAMGrouphavebeenrankedintop3inconstruction,propertyand
civilengineeringintheUnitedKingdom.

HEIJMANS

Heijmans is acompanyfounded in1923byJanHeijmans whichoperatesinTheNetherlands,Germany

and Belgium and counts 7500 employees.The company focuses mainly on three market areas: residential,
employment and connections which are segmented into national and regional infrastructure, water and health
care, that are organised into five business flows: Property Development and Residential Building,
NonresidentialBuilding,RoadsandCivil.

The core activities of Property Development and Residential Buildingare focusedontheconstruction oflarge
andsmallerurbanprojects,developingoutoftown areas,buildingandrestoratedifferenttypesofhouses.These
activitiesare mainlyintheNetherlandsand inBelgium. Whilethe improvement ofmobilityinfrastructure,such
asroadsandthedesignofpublicspaces,ispresentalsoinGermany.
Heijmans emphasizesonthefuture, combininghightech knowledgeandcreativitytocreateinnovativeproducts
andconceptsmakingofimprovementandrenewaltwomainkeypointsofthecompanysstrategicdirection.

Strategy
Regarding thedecisionprocessabouttenders thecompanydecided touseadifferentpolicy.Insteadoffocusing
onmany projectsHeijmans concentrates on fewer projects,makingthemsmarterandincreasinglycostefficient,
enablingthecompanytoachieve alargermargin on theinvestment.Howeverforthestrategytobe effective,the
companyhastohaveadequatecostingmechanismsinplace.Moreoveritimproveditsengineeringandcontrolof
processestoavoidunprecedentedconsequences.
Heijmans is looking toanexpansioninto new marketswhereinvestmentscouldbemorefruitful.Astimepasses
the technologicaldevelopmentoffersmanyopportunities.Alternativematerials,renewableenergiesandmobility
will bring big changes in the industry. With the introduction of these resourcesit willbepossiblefor builtup
areas to add fossil fuels or energy to the environment rather than withdrawing them. The use of sustainable
energy will permit to buildings to provide theirownenergy contributingto theenvironment. Accordingto this
Heijmansisaimingtothefollowinggoalsrelatedtosustainabilityandrenewal:
Thecompanysproductswillprovideenergyinsteadofusingenergyin2020
Thebuildings,engineeringstructuresandroadswillbe100%recyclablein2020
Thepropertiesandsolutionswillcontributetoimprovedspatialquality
The company wants toachievethesegoals throughcooperativeagreementswithknowledgepartners,sellingthe
companys practical knowledge through concepts and licensing constantlycheckingthe level ofsatisfaction of
thecustomers.
Heijmans struggles to achieve EBIT marginsof atleast3%4%forits constructions operations, tomaintainits
capitalratios atagoodlevelandkeepthenetdebtataroundzeroateachyear. Andinordertooptimisetheuseof
itscapitalHeijmansmanagesandcontrol its operatingcapitalalwayskeepinganeyetotheinvestmentpolicy,to

avoidwasteofmoney.

Outlook
The entire market is not expected to grow untill the first months of 2015. The infrastructure market is still
challenging due to a strong competion and a lower level of investments. Thus Heijmans is still looking to
improveitsefficiencyinordertoreducerisksandcostswhicharethemaincausesofthelowprofitability.
Between 2012and2013Heijmansrevenuesdecreasedfrom2.3Beuroto2.1Beuroevenifthecompanywasable
to restore its net income from a negative 87.7M euro to 1.9M euro confirming the ability of the company to
controlitscosts.

Even if the market is showing some movement in a positive direction, resulting in higher sales inthe private
segment, overall sales declined by 37% in 2013. The main cause is devoted to an increase in the selling,
administrativeand generalcosts, moreovermanyhousingassociationspostponedtheirinvestmentsbringingtoa
lengthydecisionmakingprocessandtoheaviercompetitionthatputmorepressureonsales.
Despitethisthereisanimprovementfrom2012.Thenetmarginrosefroma3.8%toa0.2%,showingamore
efficientfinancialposition,asthecompanywasabletocompensateadecreaseinrevenueswithacutincosts,
reportinganoverallincreaseinnetincome.

The financial position of Heijmans has improved since 2012. As shown by the current ratio there is an
improvement in liquidity, in fact the companys current ratio is 1.22with animprovement of0.4% from 2012
which indicates that the companys ability topay shorttermobligations is increasing.Otherindicatorssuchas
ROEandthesolvency ratiohaveimprovedsignificantlyfrom2012.Thefirstisincreasedfroma0.27(2012)to
a0.06(2013),whilethe latterhasbeen amelioratedfroma0.06toapositive0.03,alittleimprovementthatstill
under the industry average but which shows that the cash flow of the company is getting better to meet the
liabilities.
Furthermore the debt to equity ratio isdecreasedby0.14%displayingthatthecompanysfinancial leverageis
improving, but on theotherhandthedebtratioisstilltoohigheventhoughtheslightimprovementfrom2012by
0.01%.

Recommendations,Risks&Remedies

Oneofthemajorbottlenecksoftheindustryistheheavycompetitiononprice.Mostdutchconstruction
firmsarepredominantlylimitedinsizeandscaleofoperationsincomparisontootherinternationalfirms.
Accordingly,Dutchconstructionfirmsarenotabletogetthehighesteconomiesofscalepossibleand
consequently,cannotofferthemostattractiveprices.Anotherreasonforthisaretheaforementionedhighlabor
costs,whicharethehighestintheEuropeanconstructionmarket.ItwouldbejudiciousforDutchconstruction
firmstofocusmoreonnationalandinternationalnichemarketsandtocapitalizeonqualityproducts,wherethe
abovementionedfactorsdonotplayasubstantialrole.Emergingcountrieshaveanaccrueddemandforquality
andnicheproducts.Constructioncompaniescouldthenenjoyatechnologicalorbrandadvantageoverlocal
competitors.
Risksarisewiththechoiceofthedestinationcountry.China,forexample,isarapidlygrowingdeveloping
countrywithanenormousconstructionmarket,servicedmostlybydomesticfirms.Nichemarketsareessentially
thesegmentwhereEuropeancompaniescanprosper,duetotherisingmiddleclass.Itsdemandcomprisesfor
instancehighqualityandsophisticatedproductswhichDutchconstructioncompaniesareabletooffer.Even
thoughgrowthratesarehigh,entrybarriers,evenfornichemarkets,arehighaswell.Lessdevelopedcountries
thatarenotmeetingthetechnologicalstandardsofacountrysuchasChina,butalsoenjoyinghighgrowthrates
(e.g.Sudan,SierraLeone,Turkmenistanetc.)becomemoredemandingandDutchconstructionfirmsareadvised
tocapitalizeonthesemarkets.

TheNetherlands,incomparisonwithotherEuropeancountries,havethehighestlaborcostsintheindustry.
Wagesaveragearound45.000ayear,whicharerelativelyhighwhenconsideringthefinancialstateofthe
sector.ItisproventobeoneofthemajorbottlenecksintheDutchconstructionsector.Inordertotacklethis
problem,topmanagementshouldbargainwithpersonnelbyensuringsaferjobopportunitieswithlowerwages
untiltheeconomicclimatechangesandtheconstructionmarketbecomeshealthyagain.

Problemswithintheorganizationofconstructionfirmsarealsoarecurrentconcerninthesector.Thereisan
inherentproblemofinformationtransferandcommunicationwithinandamongsttheconstructionfirms.Thisis
mostlyduetothehighnumberofSMEswhichrelyheavilyonpartnershipsandsubcontracting,wherethe
transferofinformationhastobemonitoredandexternalized,thusincreasingtheasymmetryofinformation.
Innovationregardingthecommunicationandtransferofinformationsystemswithinpartnershipsareawelcomed
solution,asthisissueisthemainbottleneckwithinthesector.Subcontractormonitoringandpushingformore
transparencyinhandlingsubcontractswillhaveseveraldesiredconsequences.Withperhapsthebiggest
advantageofimplementingsuchacorporatepolicybeinganimprovementinqualitycontrolofsuppliesand
operationshandledbysubcontractors.Qualitymanagementcouldbecomeaforcemajeureoftheconstruction
companieshelpingthemtodifferentiatethemselvesfromtheircompetitorsbothdomesticallyandabroad,
furthermoreenablingthemtocapitalizeinbothcurrentandprospectivemarkets.Anotherbenefitofsucha
schemeispotentialimprovementsinthecostingandsubsequentpricingpractices,asaresultofgreater
transparencyanddecreasingthedegreeofaprincipalagentproblem,afactorthatneedstobeconsideredbetween
contractorsandsubcontractors.Further,someconstructionfirmsimplementedPPS(PerformanceProcurement
System)orBestValueProcurement,whichisaprocurementmethodthataimstoselectthemostsuitable
contractorforthejob,tospurthiscontractorontohighestperformance,aswelltoreducetheclients
managementandcontroltasks(Kashiwagi,2004).Ithelpsimprovetherelationshipbetweenconstructionactors
andbetterintegratetheirprocesses.Despitethepostulatedeffectivenessofthismethod,itisbarelyusedinthe
Dutchconstructionsector.Thefollowingtableillustratestheproportionoftheappliedprocurementmethodsin
theNetherlands.

ThistabledisplaystherelativelylowutilizationofthePPSmethod,whichisonlyutilizedin4%ofall
procurementtransactions.Constructionfirmsinordertobemoreeffectiveandefficientarestronglyadvisedto
implementthePPSprocurementmethod.

TheDutchgovernmentcouldreducelegalcostsandtaxation,althoughbeingintheEuropeanaverage,by
reducinglegalfees,registrationcostsandtransfertaxes.
Reducingthesewouldallowlowercostsandproductprices,leadingtotheDutchconstructionindustrybeing
morecompetitive.ThegovernmentisthemajorcustomeroftheDutchconstructionindustry,followedby
corporations,anditsbuyingbehaviourismainlyaimedatlowestexecutioncosts.

Thetableillustrateshowmassivelythegovernmentandcorporationsbasetheirdecisionsandoperationson
lowestexecutioncosts,withrespectivelya74%and77%share.
Thehighervolumeofsalesresultingincuttingcostscouldpossiblyoutweighthelossthegovernmentmakes,
eventuallyleadingtoasituationbeneficialfortheindustryanditscustomers..
Theriskinvolvedisthattheadditionalrevenuegeneratedmightnotcompensateforthelowerlegalcosts.
Nonetheless,specializedgovernmentagenciescouldmonitorthecorrelationbetweenlegalcostsandthe
constructionsectorsperformance.Subsequently,adjustmentsconcerningtherateoflegalcostscanbemadeto
attainthehighestpossibleefficiency.

Asimpliedpreviously,strategicgeographicaldecisionscanbethedecisivekeytosuccessinthesector.The
optimizationofthesupplychainisofutmostimportanttotheconstructionindustry.Awelloptimizedsupply
chainencompassedvariousbenefits,rangingfromtheacquisitionofcheaperrawmaterialstofasterdelivery
timestoendcustomers.Delocalizingproductionplantstoregionswherelaborcostsarelow,legalcostsare

advantageousandclosetoforeigncustomerswouldallowdutchfirmstolowerproductioncostsconsiderablyand
giveacompetitiveadvantageintermsofpricelevels.
ConstructionfirmsoperatinginternationallyhavelowerEBITDAmarginsthatcompaniesoperatingonanational
level.Firmsshouldalsoconsiderthecostsofenteringnewmarkets,whichcanbetremendous.Inadditionto
that,abadplanning,falsetimingand/orthewrongbusinesspartnersislikelytoobliteratenewmarketentries.A
greatdealofresearchcanresolvethisissue,howeveratahighrice.Focusingonthedomesticconstruction
marketisaviableoption,astheaverageEBITDAmarginin2013forcompaniesoperatingonlydomesticallywas
11.3%incomparisontothe7%companiesoperatinginternationallymade.

Conclusion

Complexquestionscannotbeansweredwithsimpleanswers.TheDutchconstructionsectorisslowly
recoveringfromadownturncausedbythe2008FinancialCrisis,howeverthereareseveralchallengesthatstill
persistandneedtobetackledinanadequatemanner.Overall,theBigFourshouldconsiderexpandingtheir
businessoperationstoforeignmarketsandmorespecificallynichemarkets,duetothefactthatcostsof
operationsintheNetherlandsarerelativelyhigh.Firmsconsideringexpandingshouldalsobeawareofthecosts
andrisksrelatedtoenteringnewmarkets.Costscanbereducedthroughstrategicdecisionsenablingthe
companiestooperateinamoredynamicwayandbyutilizingmoreefficientprocurementsystems.The
recommendationsofthisreportarebasedontheanalysisoftheBigFourinthecontextofkeyissuesidentified
earlyintheresearchprocess
.
ThroughtheuseofanalyticalframeworkssuchastheSWOTanalysis,anemphasis
wasmadetohighlightthemostfragileelementsofthecompaniesstrategicandfinancialperformance,inorder
to

hedgepotentialrisksinvolvedwiththerecommendationsprovided
.

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APPENDIXA
Bam

APPENDIXB
BallastNedam

Incomestatement:

Cashflow:

APPENDIXC
HEIJMANS

APPENDIXD
VolkerWessels