Water & Wastewater Treatment Magazine
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10 | MAY 2018 | WWT | www.wwtonline.co.uk Peak procurement The Talk: interview A mid regulatory pressure and signif- icant internal ambition, Yorkshire Water is overhauling its procure- ment process as it looks ahead to AMP7. To drive affordability and innovation, the company is ready to take on more risk, embrace more complex arrangements and invest more time and effort in determin- ing whether bidders have what it takes to meet its requirements. Ofwat is making demands on afforda- bility, innovation, resilience and customer service and, when added to Yorkshire Water's own bold plans for the coming years - not least the announcement that it aims to reduce leakage by more than 40 per cent by 2025 - the old methods are no longer deemed adequate. "We need to change the way we procure," the company's head of procure- ment and contract management, Andy Clark, says. "We can't innovate and bring new services by charging our customers more, so that means we have to find new ways of doing things." Part of that change taps into the gen- eral trend away from a focus on building new assets and towards low-cost solu- tions, such as encouraging local industry or farmers to change their practices. "I need to find people who have inno- vative solutions, who can find me differ- ent ways of working," Clark says. "What that's meant for us is we've invested much more in the strategic thinking end, and we've looked at partnerships in that area rather than just investing at the delivery end." Strategic planning To facilitate that approach, Yorkshire Water has named Stantec as its strategic planning partner, with a £50 million contract running for an initial seven-year period from January 2018 until March 2025. "If you look at our strategic plan- ning, we have a model there that is very different from the usual consultant's model," Clark says. "What we have is an incentivisation model where the consult- ant is only paid when an idea that they generate turns into a contract that can be delivered. "When we did the market engagement, lots of consultants lost interest at the point when it wasn't a regular fee-based Yorkshire Water's Andy Clark tells Robin Hackett why the company is making major changes to its procurement strategy Typical waste settlement tanks found at Yorkshire Water's waste water treatment works "We have to value or- ganisations that invest in young people and devel- opment, because if we don't value it, they'll get outcompeted by compa- nies that don't value it." model. To me, that was fine." One major aspect of Yorkshire Water's new approach is risk management. "We are seeing an increasing range of risks we need to resolve so the only an- swer to that can be: We need to lower the cost of resolving risks," Clark says. "Risk- transfer contracts are really common but you have to pay a significant amount to be able to transfer that risk away. "If you're going to lower the cost of risk resolution, you have to take risk on as a client – that normally means you have to do more work, have to invest more in your own engineering ability, in order that you can understand the risks you face. "You can create contracts for more specific pieces of work, which means sup- pliers don't have to price as much risk into the contracts because you're not just say- ing to them: 'Solve a risk for me'. You're saying: 'Build me a treatment works' or 'Put in a main from here to here'. It's re- ally encouraging us to have a look at our approach to contracts and be much more specific about what we want." The company is therefore creating a larger number of more bespoke arrange- ments to deliver such work with reduced overheads.