Utility Week

UTILITY WEEK | 10TH - 16TH MAY 2019 | 19 Operations & Assets Talking point 3. Spreading the risk Tougher price determinations require fresh thinking and for utility companies to play a bigger role in the delivery of projects, speak- ers said. Yorkshire Water's Andy Clark said the company was moving from the current deliv- ery of using • ve or six large contractors for large contract works, to using as many as 80 in the next period. "That's because we think we need to break up our approach, rather than sit behind a very large contractor, to actually have a relationship with lots of di€ erent contractors, where we take on more risk our- selves. It's much more complicated for pro- curement, but it will deliver a better result for the client overall," he said. Clark said Yorkshire Water's switch to employing smaller and tier 2 contractors directly was nothing to do with the Carillion collapse and nervousness around tier 1 sup- pliers, some of which have been experienc- ing • nancial turbulence. "When you employ a management contractor, you normally expect to pay for the privilege of not having to worry so much or be so directly involved as a client with the relationship with the supply chain, so there is a premium for the lack of client interaction. "We can't a€ ord to have any more. We will have a very austere settlement for AMP7, so we have to look at where we can have a closer relationship with our supply chain." Talking point 2. Innovators are key So how do you bring in innovative • rms with no track record and perhaps with ideas that are not quite ready for market? Kieran Brocklebank, head of innovation, United Utilities, set out how his organisation had just done that, with an open competi- tion to engage more people. The initiative, dubbed Innovation Lab, was launched in February last year, and has now just closed its second round with 140 suppliers across four categories: future of water; connected customer; empowered knowledgeable col- leagues; and right information, right place at the right time. The Innovation Lab initiative scooped Utility Week's Supply Chain Excellence Award in 2018. And it saw United Utilities sign a framework agreement with a Cana- dian technology • rm to roll out arti• cial intelligence (AI) across its network – in a move believed to be a • rst for a UK water company. The deal, signed with Emagin, will see United Utilities introduce large-scale AI into its operational systems. Brocklebank said that in the • rst round United Utilities received 83 ideas, half of which were outside the UK and half of which were outside the water sector. He said that a key learning had been that "you need to go overboard describing the problem you are looking to solve. But the process meant that UU learnt a lot about the market and the innovative technology out there." Talking point 1. The need to be attractive to suppliers and investors The need for the water and electricity com- panies to make themselves attractive to investors, innovators and suppliers, was a reoccurring theme. "We have to move away from the idea that the client is the master, and the con- tractors and consultants are there to serve us. We have to look for mutual bene• t," said Andy Clark, head of procurement and con- tract management, Yorkshire Water. Clark said utilities need to look at the bar- riers to entry and the complexity they add to the procurement process and the delivery of contracts. "Whether that's complicated prerequisites or torturous reporting require- ments for contractors, we need to ask how we can make ourselves agile as clients, to attract di€ erent kinds of organisations to work with us." He said it was vital for utility companies to attract innovators. These are oœ en small and medium-sized enterprieses, which are oœ en locked out of procurement processes. He said utilities need to be "the voice of the innovators in the industry, and make it eas- ier for those organisations to get in". UKPN's Kotecha picked up on the idea: "There are new entrants to the market, com- ing through from spaces we would never have imagined before… We need to under- stand where the new dynamic disruptors are going to come from. We've got to make our- selves attractive to them." He also warned there could be conse- quences for procuring the best deals as the RIIO2 framework sees price controls for net- works switch from eight years to • ve: "It has consequences when you reduce it to • ve." Brought to you in association with

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