Utility Week

20 | 10TH - 16TH MAY 2019 | UTILITY WEEK Operations & Assets Event Talking point 5. Carillion changes everything The collapse of Carillion and problems faced by other tier 1 contractors, including Interserve, have created huge uncertainty for boards, speakers said. "It has certainly added a lot of nervous- ness to a business at a senior level," said Yorkshire Water's Clark. "We've looked at our procurement pro- cesses. We're looking to improve the way we manage credit risk particularly, and ensure that our contracts have protec- tion against what would happen in that scenario." EDF's Scott Fotheringham said EDF looked much more at the cash € ow and working capital of the supplier. "There's no point driving someone to bankruptcy. And also, in all of our approval papers we will write where we would go if it all went terribly wrong, how we could manage the fallout of the administration." For UKPN's Nirmal Kotecha, it is imperative for utility companies to move away from buying least-cost to buying on outcomes, which consider every aspect of the life-ownership of that asset, and keep a close watch on payment practices down the supply chain. He also pointed to the issue of banks toughening up thier lending regimes aˆ er the Carillion collapse, which had created cash-€ ow problems. "That has a huge impact, and therefore as a responsible client, what are we doing to make sure we pay our supply chain on time? Can we move to things like self-billing?" Dale Evans, chair of the Infrastructure Clients Group, which includes a number of utility ‹ rms in a group that represents 70 per cent of all UK infrastructure spend, is banking on an entirely new approach to procurement projects. Under the so-called Project 13 initiative, he said clients, includ- ing Anglian Water, are developing a new business model based on an enterprise, not on traditional transactional arrange- ments. The idea is the new type of arrange- ments will boost certainty and productivity in delivery, improve whole-life outcomes in operation and support a more sustainable, innovative, highly skilled industry. UKPN's Nirmal Kotecha said: "It is an absolute game-changer as far as construc- tion procurement delivery is concerned. Some of the things that have legiti- mised Project 13 – namely Carillion and Interserve – procurement had a role to play in all of that." Talking point 4. Brexit headaches No debate would be complete without reference to Brexit, and certainly the saga is engul‹ ng procurement and contract specialists. EDF's contracts and claims manager Scott Fotheringham said a combi- nation of Brexit and a shortage of renew- able technology was having an impact on costs. "Most of the stu˜ we buy comes from Europe, which is tari˜ free. We may be forced to pay WTO [World Trade Organi- sation] tari˜ s on a lot of kit, which will put the price up. So, what we're very conscious of is any draˆ ing that I or my predecessors have put in regarding change of law, or change of interpretation of law. "We are constantly on guard for price- reopening events… we're in a moment of very rapid change right now. So that for us is a big issue," he said. Fotheringham cited an example where EDF had recently procured 28,000 solar panels from China, which were being shipped to Southampton. Originally EDF was looking to negotiate a deal where the Chinese supplier would ship panels with duty paid, and EDF would take delivery in the UK. "We couldn't get them to actually sign that deal, so I've taken delivery of those things in Shanghai, because they don't want any timing issues or any legal issues about importing stu˜ into the UK," he explained. But the situation was also being exac- erbated by the shortages in renewables technology, he added. "What I'm ‹ nding is that as we change and move into new tech- nologies, suppliers have a huge amount of power. Suppliers tell you what you're going to have, when, and what's it's going to cost you. And if you don't like it, you can try somebody¡else. "Because we're working in a global market, where other players, like India, China, even Africa to a certain extent, are growing massively. And therefore, the tech that we want to buy, the low carbon tech, is in short supply" he said. Returning to Brexit, United Utilities' Nirmal Kotecha brought a positive note to the table: the opportunity the situation has brought to get procurement's voice heard at the top table. "Procurement has played a huge part in getting the business ready, and more assured, in terms of making sure the lights stay on in the event of disruption post-Brexit, through properly mapping out critical supply chains, and thereby actu- ally developing a new skillset." "What I'm fi nding is that as we change and move into new technologies, suppliers have a huge amount of power. Suppliers tell you what you're going to have, when, and what's it's going to cost you. And if you don't like it, you can try somebodyelse." Scott Fotheringham, contracts and claims manager, EDF "Huge change equals huge opportunity. And if procurement wants to demonstrate leadership, it needs to understand all of that, Nirmal Kotecha, director of capital programme & procurement, UK Power Networks (UKPN) Power Networks (UKPN)

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