As we near the end of the AMP8 bidding cycle, Sam White, managing director of natural resources at Costain, reflects on how water companies have structured tenders and, importantly, what this means for end-users.
The ‘back to school’ analogy is common (if not clichéd) at this time of year. Social media is flooded with professionals signalling their excitement to get back to work following the summer period.
There has been no such break for those in the water industry. From water asset operators to suppliers and contractors, the sector has been in a lengthy tendering-and-bidding process for the upcoming five-year asset management programme cycle (AMP8).
AMP8 is expected to see a doubling of investment in water and wastewater infrastructure and environmental protection. If done correctly, this could be transformational for end-users across the country.
And it can’t come soon enough. Most people are acutely aware of the scale of the challenge facing the water industry. Generations of underinvestment and population growth have led to an urgent need for upgrades and improvements. At the same time, our environmental and social standards have changed considerably from what was once considered acceptable when the Victorians built infrastructure systems that were transformational in their day.
The publication of Ofwat’s draft price determinations earlier in the summer provided fresh impetus for companies, campaigners and industry bodies to debate important issues such as the cleanliness of our rivers, the security of our drinking water and the impact of rising bills facing consumers.
These discussions revealed that the need to future-proof our water infrastructure has never been greater. The combined effects of ageing assets, rising populations and the growing threat of climate change has created a critical need for change. But these challenges cannot be solved in isolation. As we enter AMP8, the UK needs to foster world-class collaboration between the industry, policymakers, stakeholders and government agencies to deliver what’s needed.
Water companies are alive to this and are doing something about it. As a tier 1 contractor on one side of the tendering table during this AMP8 bidding cycle, we’ve seen more and more water companies looking to deliver AMP8 through new approaches that centre around collaboration, innovation and maintaining sustainable supply chain growth.
The trend that has been apparent with many of the AMP8 tenders is the formation of long-term ‘enterprises’ and ‘alliances’. Northumbrian Water has created the Living Water Enterprise, and United Utilities is bringing partners together through enterprise models that use the Project 13 principles for delivering infrastructure.
And it’s a model that is we have seen in other infrastructure programmes within the regulated private water sector. The successful Thames Tideway alliance, of which Costain is a part of, is a leading example of how this model can work to deliver complex but nationally critical wastewater infrastructure to benefit and improve the lives of millions.
Enterprise models such as these are an excellent way of incentivising the supply chain to pull in the same direction and create a positive culture as teams are mobilised. Previous AMP programmes would often take several months to get fully operational with mobilised teams and delivery schedules. But with AMP8, we’ve already started to see the benefits of the enterprise model – suppliers are already mobilising workforces, upskilling and developing talent and thinking about how to deliver using production thinking techniques and modern methods of construction. This means that delivery teams will be hitting the ground running when the cycle begins in 2025.
Not only is the enterprise model proving to be a breeding ground for innovation and efficiency, but it is an approach that is also forcing players to think more about their long term, strategic priorities. One observation from this latest bidding cycle is that water companies are thinking about AMP8 as a stepping-stone for future investment programmes, that extend well into the 2030s. This is because they recognise the need to be strategic about where to invest, ensuring value for money in a world of scarcity.
Reservoirs are a good example. Strategic resource options are essential for future water supply, but the UK hasn’t built a new reservoir for more than three decades, and building one can take many, many years. We’re helping some of the water companies investigate their strategic options in this space, but enterprises, partnerships and alliances, along with sensible, long-term decision making, could be crucial to successfully addressing the challenge.
A longer-term plan, supported by ambitious, collaborative enterprises across the country, would give water companies, suppliers and investors the consistency, continuity and confidence to do what needs to be done to improve water services and, in doing so, improve people’s lives.
