Water & Wastewater Treatment

www.wwtonline.co.uk | WWT | july 2014 | 15 At the outset, a contract development team of specialists was appointed with the aim of developing a solution. With no restrictions placed on their thinking, these same people would eventually manage and operate the contract they would devise. According to Southern's water quality and strategy manager, Meyrick Gough, the team comprised three core members: "The leakage manager from the operations team, who has more than 20 years' experience of the leakage function within Southern Water; the leakage strategy manager from asset management with over 30 years' experience in the industry; and the purchasing manager, who again can boast more than 30 years of relevant experience." Two contractors, PN Daly and RPS Water, were appointed as partners. However, in a twist on convention, the performance of each contractor would be compared against the other on a monthly basis in order to drive improvement. Commencing in the summer of 2012, both contractors now work together to achieve a shared target; and in another change from previous terms, charge Southern a single, flat weekly fee with bonus payments awarded in relation to performance. The flat fee in itself is key to driving efficiencies. Because the weekly fee is static regardless of the number of personnel deployed, it makes sense for the contractors to get more efficient with fewer people as this will decrease direct costs and increase profitability The model also allows Southern Water to increase the bonus percentage paid to the service partners as their performance increases and their resources decrease. In the case of poor performance, it also allows Southern Water to eliminate the bonus and even apply a negative bonus. Although two-thirds of the bonus is paid on a monthly basis, one-third is paid at year-end provided the company achieves its leakage target. Therefore, the model increases the amount of profit to the contractors, while costs for Southern Water are reduced. In fact, the flat weekly fee plus bonus system is far more cost- effective that the 'one repair, one fee' model used previously. Under the old contract the company was paying approximately £6m per year, but with the new partnership, costs are around £4m. • Perspectives The water company "In putting together the partnership, Southern Wa- ter decided to partner with RPS Water, its best per- forming previous contrac- tor, which thus afforded a degree of stability and reli- ability, while PN Daly had leak-detection experience with three other water companies. Both partners also expressed a willing- ness to adopt Southern Water's new business processes, and both took well to the new contract. Initially some clarification was required but it was all very minor. Today, the contractors are achiev- ing their targets in terms of the number of leaks located and the overall leakage levels within the network. The incentive mechanism rewards and encourages the partners to complete this at the least possible cost and we have seen significant cost reductions over the period of the contract." Meyrick Gough, water quality and strategy manager at Southern Water Contractor #1 "There is a strong work- ing partnership between Southern Water, ourselves and PN Daly. This innova- tive contract model is allowing the partnership to exceed Ofwat's leakage targets, which will benefit customers as well as help- ing to conserve water." Mark Smith, business development director at RPS Water Contractor #2 "This close working partnership has made everybody very positive about their roles, and happy to challenge and to be challenged about convention." Frank Daly, managing director of PN Daly.

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