Utility Week

UTILITY Week 27th February 2015

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

Issue link: https://fhpublishing.uberflip.com/i/468496

Contents of this Issue


Page 19 of 31

utILIty WeeK | 27th February - 5th March 2015 | 19 Operations & Assets work in deep tunnels using breath- ing apparatus, have been working to seal and line sections of the tunnels, repair existing sewers and build new pipelines. The project will cost £20 million. If you have an asset or project you would like to see featured in this slot, please send your pictures and details of the project to: paul.newton@fav-house.com or call 01342 332085 Pipe up Keith Hayward Y ou get what you pay for. So goes the well-worn maxim and, as a relative newcomer to the water industry, I cannot deny that I have been surprised at what passes as acceptable procurement practice in the regulated market. Traditional arrangements, with contractors seeking "lowest cost" solutions for higher upfront capital spend, are still commonplace. The sheer inefficiency of the system is not just an issue for the supply chain, it inevitably transfers to utili- ties' bottom line – and from there to customer bills. With its eye on cost constraints in AMP6, Ofwat has made a smart move by shiing investment targets to a total expenditure (totex) model. Praise where praise is due – there is some exemplary best practice emerging, with groundbreaking alliances and partnerships between water companies and main contractors, such as Thames Water's Eight2O alliance. Further down the supply chain, though, early-engage- ment and strategic partnering can be the stuff of dreams. For example, our con- tract teams are oen tasked with repeat pre-qualification submissions to win a place on a water company equip- ment framework, only to have to complete several more rounds with each contractor before winning an order. Even aer the order is won, there can be more amendments and re-pricing. The process is both unwieldy and costly. Most importantly, these are structural constraints to innovation. What is needed is the whole-life costing of solutions through innovation in sourcing, investment and technology. Equipment with a higher upfront cost, but a shorter life, higher energy use or more demanding maintenance, should not cut it in AMP6's cost-sensitive landscape, but this is not always the case. There is also a surprising lack of standardisation in the way equipment is specified, packaged and tendered, even among differ- ent contractors working for the same water company. It makes perfect sense to ask suppliers to deliver a solution with, for example, an extended 25-year war- ranty, linked to a preventative service and maintenance programme – and for the utility to budget accordingly over the long term. Procurement and supply chain management in the water industry are still viewed as being well behind the curve when compared with other sectors. Let us hope the regulator's new outcomes-based incentives and cost- ing structures lay waste to that charge by the time AMP7 comes around. Keith Hayward, UK sales and marketing manager, Hydro International Wastewater Division "Water industry procurement too often concentrates on the headline, upfront cost rather than the whole-life cost." "The inefficiency of the system inevitably transfers to customer bills"

Articles in this issue

Archives of this issue

view archives of Utility Week - UTILITY Week 27th February 2015