By Lila Thompson, Chief Executive, British Water
With Christmas around the corner and Ofwat’s final determinations due on 19 December, now is the time to discuss what the supply chain requires for the best possible outcomes in AMP8, says Lila Thompson, chief executive, British Water.
It is no secret that pressing challenges face the water sector going into 2025, and innovative ways of working and thinking are crucial to address the big issues, including population growth, climate change and affordability.
Innovation must be at the core of companies’ strategies and operations, with creative collaborations between water companies and the supplier community essential for inspiring new ideas and applications that will benefit customers.
In today’s resource and skill constrained market, failure to engage effectively could result in water companies underdelivering on the vast programmes of works anticipated in asset management plans (AMPs) running from 2025-2030, and in meeting Ofwat’s regulatory requirements.
Even where water companies voice their willingness to change their approach to procurement, when tender documents and contracts come out, they do not necessarily reflect the culture shift necessary to foster an effective ecosystem for supply chain companies.
Suppliers frequently receive contracts that can run to hundreds of pages and, some tell me, are not fit for purpose. For smaller companies, the time commitment required to process these requirements, before any agreement is reached, can be prohibitive.
In some cases, it is a seller’s market, where the sector is expecting the supply chain to adhere to unnecessarily onerous bureaucratic processes, which can act as a barrier to working collaboratively and effectively.
While there have been moves across the sector to standardise contract terms, which is welcome, this needs to move at a much faster pace. With just over three months to go before the start of AMP8, it is possible changes may not be universally implemented or seen until AMP9, or beyond.
To ensure AMP8 is a success, here is a suppliers’ Christmas wish-list for water sector procurement:
Greater consistency – Safeguards are needed to ensure water companies stick to their project plans and timeframes. This means that all stakeholders can ready themselves with the necessary resources, including staffing, materials and equipment, as well as budgeting and tender timelines.
Closer working – Water companies’ commercial teams, legal departments and risk teams need to improve their shared understanding of contract terms and acceptable levels of risk for the suppliers to absorb. Consistency in deadlines and terms and conditions will also help create a visible pipeline of projects.
Standardise terms – Contracts should have standard terms and conditions, wherever possible, to make the process more efficient and build trust right from the start of a project.
Streamline approvals – Complex approvals processes should be improved and technical standards and specifications made more accurate and precise by involving supply partners early in the tendering process. This will also build more realistic timeframes.
Focus on outcomes – To drive innovation and ensure the best possible solution to a challenge, tenders still need to be more focused on the outcomes required to meet regulatory requirements and public expectations. Making whole life cost assessment prerequisite would help open the process to new technologies and smaller innovative companies.
Strengthen communications – To minimise project delivery delays, maintain momentum and improve productivity, effective communication processes are vital. Partners need to ensure their agreed ways of working together are optimal to minimise the number of review rounds, slipped dates and risk of withdrawal.
Simplifying admin – Currently, each water company has its own procurement process with many different approaches from supplier approval though to invoicing and payment processing. Any streamlining of this process across multiple water companies would drive efficiency for suppliers, especially benefitting smaller companies with fewer employees.
Dive into data – Increasingly, the solutions available to water companies and their partners go beyond infrastructure and equipment. Leveraging data and connecting with customers can also deliver massive wins. These should be considered as part of wider plans to improve outcomes across water and wastewater, including water quality, leakage and sewer blockages.
The scale of capital spending in AMP8 is huge and there are many supply chain companies who are keen to collaborate and work with water companies and vice versa. However, unless the procurement processes of products and services creates an environment the supply chain can work with, it is going to cause and create problems and bottlenecks.
The next AMP period should see a big step change in behaviours and the way equipment and solutions are procured, which British Water, the leading water industry association representing the supplier community, would welcome. It is a massive opportunity for the sector to move forward with purpose and ambition.
British Water will continue to push for better terms for the supplier community as a way of driving efficiency across the sector, to represent the breadth of companies within its membership, and the focus groups on asset management and policy & regulation, to name just two, which will continue to meet throughout 2025.
British Water will also continue to support the work of its Supply Chain Task Force which will continue its work in 2025.
