Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/749133
22 | 11TH - 17TH NOVEMBER 2016 | UTILITY WEEK Operations & Assets Analysis A shake-up of procurement is taking hold across the water industry as the all too oen process-driven practices of yesteryear are swept away by a new gener- ation of more commercially minded procure- ment leaders. A function once characterised by form filling and box ticking is now more likely to be associated with visual management rooms and pain-gain mechanisms. And with Ofwat's Water 2020 guidance setting out markers for the regulator's direction of travel, some clear trends are shaping up for the remainder of AMP6 and AMP7 – the asset management programmes for delivering capex in the sector. The emerging picture is of a procurement culture that blends multiple models, and which can accommodate varying degrees of collaboration and risk-reward sharing, depending on the context. Soer issues such as behaviour and leadership skills are now highly valued, as agility and openness to change become crucial. There is a clear move away from deals based primarily on best price, and towards outcome-based mod- els of procurement that seek to ensure deliv- ery against a broader set of overall company objectives. The new thinking is neatly summed up by Mark Sneesby, chief operating officer at Thames Tideway, the project that can be seen as a bellwether in water procurement. He says: "The key with any procurement is what you want to get out the end of it. Tradition- ally it is lowest price, shortest time, but times have moved on. We were keen to push techni- cal over commercial, and from a behavioural point of view to get the right teams." The rhetoric from the water and sewer- age companies (WASCs) and water-only companies (WOCs) is that the new approach will help to keep bills low and deliver bet- ter overall value for customers. It is still early days. With procurement leaders having signed off on deals for AMP6, and in some cases beyond that, and for PR15 in Scotland, the immediate focus is on delivering value through the current regulatory cycle. The procurement tide turns Utility Week presents an executive summary of the latest quarterly report from its premium information service, Utility Week Intelligence, looking at procurement in the UK water market. "In the past we designed a supply chain that had lots of competition, but now we've gone away from that and for strategic partnering, collaborative working and allocation models." JOE ROWAN, GENERAL MANAGER, PROCUREMENT AND SUPPLY CHAIN, SCOTTISH WATER "The position of procurement has been elevated recently within Dee Valley Water, and is now viewed as a value-add function for the business, and that's exactly where it needs to be." NATALIE BALL, HEAD OF PROCUREMENT, DEE VALLEY WATER "Do we have to own everything? Do we have to do it all ourselves? I can look at procuring with the pump manufacturers that are paid by hour so that my pumps are maintained by somebody else, and they'll guarantee me a 98 per cent availability." MARTIN GEE, COMMERCIAL DIRECTOR, UNITED UTILITIES "We spend an awful lot of time making sure that the right companies are in the process, and then pretty much everything is based on behavioural assessments of the individuals." JON LOVEDAY, COMMERCIAL AND TRANSFORMATION DIRECTOR, THAMES WATER "We found that competition was driving habit: people were so focused on tendering, they just did the same thing over and over again. It wasn't driving innovation." JOE ROWAN, GENERAL MANAGER, PROCUREMENT AND SUPPLY CHAIN, SCOTTISH WATER Utility Week Intelligence This article provides a snapshot of the report on trends in procurement in the water sector, which is available via Utility Week Intelligence. To access the report, and other premium content, log into your Utility Week Intelligence account. For information on Utility Week Intelligence, including a free trial promotion, contact Peter Bissell, Utility Week Membership, on +44 (0)1342 332057 or email: PeterBissell@utilityweek.co.uk