Issue link: https://fhpublishing.uberflip.com/i/976659
THE DISRUPTION: THE FUTURE OF ALLIANCES What's the deal: Alliancing is a procurement route that solves many of the challenges caused by adversarial contracts, and as such becomes a useful approach for projects that have high levels of complexity and risk or urgency, as well as major capital programmes. The project alliance concept was first introduced in the early 1990s, in the North Sea offshore oil and gas industry. Perhaps one of the best-known, and certainly the largest, infrastructure alliances in the water sector is Thames Water's eight2O, which includes Thames Water, and two design-and-build joint ventures made up of Costain, Atkins, Black & Veatch (CABV); and Skanska, MWH and Balfour Bea y (SMB). Together, the alliance will carry out £1.75 billion of capital investment work during the AMP6 period (2015-2020), with the poten al to extend the contract to 2025. This includes a large mains replacement programme, with a required outcome of reducing leakage, bursts, flooding, and increasing capacity for growth. Why it ma ers: In recent years, alliance contrac ng has emerged as a popular procurement route for large complex infrastructure developments. In fact in our research, 60.8 per cent said they feel alliances are the most effec ve and efficient approach to the delivery of major capital programmes. Previously, partnering was the preferred method for enhancing collabora on, improving communica on, and encouraging innova on between project team members without relying on a contractual mechanism. Companies must have a plan for if and when the alliance will be unwound, including the dispersal of any shared resources. These can be sensi ve conversa ons, but failing to agree on these crucial points can jeopardise the partners entering into the alliance. Add to that the fact that our research found 21.6 per cent of supply chain respondents worry that working with some u li es could nega vely impact their own brand, and it becomes clear that these alliances must be chosen and formed carefully. THE DISRUPTION: PROCUREMENT TECHNOLOGIES What's the deal: New procurement technologies promise to open up new horizons for process efficiency and rela onship management with supply chain partners – or so vendors claim. The key advances in recent years which differen ate new procurement systems from old, relate to automa on which can strip cost out of core procurement processes as well as removing human error. And in a new round of technological progress, these system improvements will be overlaid with increasingly adept ar ficial intelligence (AI) that can help u li es make be er procurement choices and monitor supplier performance. In U lity Week Live's disrup on survey around 58 per cent of u lity respondents said new procurement technologies are changing the way they interact with their supply chain, with the highest levels of disrup on reported from water (59.4 per cent) and energy networks (55.4 per cent). Why it ma ers: U li es are under pressure to push the envelope on efficiency and innova on. Retailers need to cut out waste to relieve a ght squeeze on margins while regulated u li es must answer increasing demands for evidence they are improving the value for money that consumers get from their monopoly providers. Procurement is a key opportunity area for businesses seeking to respond to these pressures. It includes a range of business processes ripe for automa on – such as invoicing and genera ng contracts – as well as opportuni es to apply AI to the selec on of supply chain partners. In other industries, AI is already being used in this way, scanning disparate informa on about the past performance of viable firms for signs of strength and weakness which are relevant to a new contract, and shortlis ng the best companies for considera on. Furthermore, the cost of implemen ng such clever procurement technology is rela vely low thanks to many solu ons being cloud-based. U li es keen to take advantage can "plug and play" solu ons as and when they need them – par cularly useful for regulated monopolies who have cyclical peaks in contrac ng requirements. I N A S S O C I A T I O N W I T H NETWORK / 31 / MAY 2018