Lean time no bad thing for engineers
With AMP3 leading water companies to cut engineering budgets and seek more cost-effective plants, Biwater Engineering services believes success will be a matter of attitude.Some water companies’ reaction to AMP3 has been to undertake the kind of changes familiar to many businesses during the 1980s. In order to maintain profit levels in the face of Ofwat’s 12% cut in water prices, costs have been saved by shedding jobs, outsourcing services and reducing capital expenditure.
Biwater Engineering Services' response to the new trading environment has been to try and foster a far more cost-conscious approach to engineering projects, hoping to win the engineering work water companies are beginning to outsource rather than use in-house teams for. Because clients have less money to spend, Biwater is seeking to build-in the required savings when a plant is conceived instead of looking for ways to reduce expenditure once a project is under way or plant up and running.
As far as Biwater is concerned, AMP3 has led to a major re-appraisal of the way wastewater treatment works are designed. Under AMP2, engineering policy tended to err on the side of caution. Materials were often of a quality which exceeded the demands placed on them, components were not always the best suited for the job. Plants were built to handle far more capacity than was realistically necessary, making them incredibly robust, but as not efficient as they could be in terms of day-to-day operation. “Plants,” according to Mark Studholme, Biwater’s engineering director, “were built with a lot of spare capacity.” The driver behind this approach was peace of mind. Water companies sought plants capable of dealing instantly with any eventuality, regardless of how likely or unlikely. ‘Oversizing is safe’ was the prevailing mood.
Another factor was the number of contractors involved. Biwater Engineering Services manager Shaun Leonard pointed to the fact that contractors and consultants tended to incorporate excess safety margins and redundancy into their plans and costs. The greater the number of contractors involved, the greater the costs and redundancy tended to be.
Biwater envisages a two-fold path to achieving the capital expenditure reductions the water companies now seek; cut the number of contractors and consultants, ideally to a single company, and make efficiency the driver at every stage from conception to commissioning thinking which now dominates the company¹s Engineering Services division.
The new approach has been dubbed ‘lean thinking’. Engineering Services will offer the same services as before, Shaun Leonard said, “but with a different approach.” Mr Leonard cited duty standby as an example. In current plants back-up systems are installed for virtually every component, regardless of the likelihood of failure or the level of disruption it would cause. In the next generation of plants, risk analysis will need to be disci- plined, with back-up systems only installed where necessary.
By adopting a source-to-tap approach Biwater hopes to drive out waste early in a project. In the past, the company had inherited designs and concepts which hadn¹t necessarily taken cost into account, said Mr Leonard, and by the time Biwater was involved: “room for savings were negligible.” If the company is in charge of every element of the process this can be avoided, the value management work can be undertaken at the outset and Biwater believes it can deliver the level of savings it thinks water companies will be seeking during AMP3.
Mark Studholme thinks the appeal of such a holistic approach lies not just in the ability to reduce design and engineering costs, but in the fact that a plant conceived, built and commissioned by a single team will function more efficiently, lowering operating costs. Under AMP3, Mark believes engineers will have to think differently: “Engineering needs to be more flexible, long gone are the days when it can afford to be insular. You have to have people who have all disciplines to make savings.”
Biwater also hopes the lean engineering philosophy will win them process optimisation contracts, improving the operating efficiency of existing plants. In the quest to cut operation costs, Shaun Leonard is confident Engineering Services will be able to “sweat existing assets,” in some cases returning to plants it had a hand in constructing. As Biwater aligns itself with the industry's new demands, the company envisages great demand for process optimisation skills.
As the cost constraints and population demands of AMP3 take effect, Shaun Leonard believes there may even come a time when Engineering Services might overtake the company’s ‘turnkey’contracting business. Whether this happens or not is dependent on to what extent water companies continue to withdraw their in-house engineering functions. Whatever happens, the climate of change looks set to continue.