Past tense, future imperatives
Four process contractors assess the progress of AMP3 and consider what AMP4 has in store
Real work is flowing out of the water companies' programmes and most water companies have delivered their required outputs for year three.
This is a credit to all concerned - designers, contractors and suppliers. The early outputs were largely DWI compliance dates and work to date (for a change) has been predominantly potable water with Cryptosporidium and plumbo-solvency predominating. The emphasis in years four and five will be more on wastewater treatment and the question remains - will the supply chain be able to cope with this sudden upsurge in volumes for certain types of equipment? We have seen instances of specified framework suppliers becoming over-loaded during the past year and not being able to meet the delivery dates required of them.
This unfortunate situation increases project management time for the contractor and hence the out-turn cost of the work. There is still work to be done to match the supply chain's capacity to the programme requirements if we are to further maximise efficiency.
During the past year, the debate has continued as to whether a five-year regulatory cycle is appropriate for such a long-term industry as the water industry. In the meantime we have to live with what we have but it is encouraging to see a number of steps are being taken by the regulator and the water companies to realise the contribution the supply chain can make in driving efficiency. The inefficiencies of the previous compartmentalised AMP periods have been recognised and measures taken to ameliorate these by overlapping the last year of this AMP period with year one of the next. So here we are, only half-way through year four of AMP3 and we are already busy submitting pre-qualifications and questionnaires for selection as providers for AMP4. It is the declared strategy of most of the water companies to appoint their contractors and providers by second quarter of 2004 and to start design work on year six schemes by September.
This has to be a better way than last time round. And how crucial success in the selection process will prove to be. There is a growing realisation five-year frameworks or partnerships take perhaps more than a year to put into place and for them to reach the required efficiency of delivery.
This in turn represents considerable financial investment on the part of all involved. So we are already hearing talk of appointments for ten years this time round. The analogy of the market being like a chess board has been used - if you are on the white squares you get work and if you are on the black squares you do not. Ten years on, black does not bear thinking about. The other discernable change in AMP4 is the declared move by some water companies towards becoming more informed clients, with greater control of the solution definition - an admission, perhaps, that they see the role of their programme deliverers had become too powerful in AMP3 or that they were not delivering true value.
As always, however, there is a spectrum of opinions about the correct approach. So what will be important to secure selection for AMP4? Quality, health and safety and environmental performance are now taken for granted.
Until the draft determination and a clearer understanding of the real programme to be delivered, it is difficult to say. With change in the air, listening to the water companies stated needs and problems is a good starting point. After that, we must deliver real value.
Notwithstanding the move towards templated solutions, there will always be room for innovative engineering to reduce cost. And integration of the supply chain - surely an area ripe for more development in AMP4. What was that about interesting times?Peter Harvey, Development Director, Purac
AMP3 has been kinder to us than we had anticipated, we retained two top table framework agreements and added a new one. We also gained two more alliancing arrangements, as tier-two support to incumbent framework contractors. AMP3 started slowly but we had the advantage that two frameworks were extensions of existing arrangements.
In our experience it takes one to two years to get a framework really motoring, which makes people reluctant to change - providing things are going well. Visibility of future workload within frameworks has been more of a problem than anticipated, not always enabling us to get best use of resources. It has been interesting to see some of the PLCs changing procurement strategies mid-AMP, considering the bedding in time this must have proved a real problem. Interesting from Purac's perspective is how process contractors who were less successful in the partnering arena have either essentially disappeared or significantly changed their offering.
Contractors which have been successful in AMP3, and will no doubt be so in AMP4, are those which have become more rounded as organisations, capable of holding their own with the civil engineering fraternity. So as we jostle for position in AMP4, it is interesting to note different approaches the PLCs seem to be taking from the more collaborative to those who are going back to the past with a competitive tendering approach.
It is also apparent there are divisions and tensions within the client base as to which way to go and if the partnering style of working is adopted then how do we demonstrate best value?
Also, some of the PLCs are talking about longer-term partnering arrangements, no doubt with suitable break clauses, to build their relationships with the partners in pursuit of those benefits that will give them value-added and contractors a fair return. So on the partnering front, expect more workshops, local offices with empowered staff and companies prepared to align their ways of working with clients and their other partners, they will be successful.
As to the changes, I believe clients will be looking for more rounded offerings from partner groupings than some had in AMP3. There will be more second tier opportunities slotting in as a specialist provider within the partner groups. Working relationships between the supply chain and the water companies will be a definite area to concentrate with more integration and collaborative working between different tier partners and suppliers. There have certainly been issues in AMP3 where the relationship between client partners and the clients established supply chain have not matched, often due to the fact that these were negotiated and put in place by different parts of the client base. Obviously, with certain equipment, clients will be looking to reserve capacity in the supply chain, the resource issue is going to continue well into AMP4. Finally, I am sure there will be a move to pass main conditions farther down to the supply chain where this is appropriate. Having said this, you do get to a point where there is little benefit and any cost savings are lost by additional administration work. As for technologies for AMP4, it is pretty clear nutrient removal and tighter ammonia standards will be coming to the fore, along with improved disinfection. The only questions are how tight the various standards will be, particularly in relation to ammonia and to what extent they will be applied. This will no doubt be affected by the various companies' views on customers willingness to pay and to some extent how they view the run up into the water framework directive. Unfortunately for us, process contractors who still like to build the occasional large plant, it now seems unlikely the North Sea and Irish Sea will be designated sensitive for AMP4. There seems to be some interesting water work around, not only in relation to the supply demand balance but to taste and odour and removal of natural organic matter. Also, with a bit of luck we will get the odd nitrate removal plant to build, an opportunity to get the chemical engineers involved.
So, overall from Purac's perspective we are going into AMP4 marginally more optimistic than we went into AMP3, time will tell if we are rightRICHARD HALL, SALES AND MARKETING MANAGER, DEGRéMONT
Degrémont has radically re-structured its business. To understand why, we need to consider what has happened since 1989. Water prices in England and Wales have risen significantly over the past 15 years to offset under-investment and fund programmes required under EU and UK environmental legislation.
Since privatisation, massive capital investment has moved the industry forward but it is our view the time for major changes in the buying patterns of water and waste companies is nigh.
We are not predicting a cessation of capital investment at the end of AMP3 but what must be remembered is the plant and equipment that has been installed in the past ten years is of a far higher quality than that used previously.
It is more reliable and often of a modular design, which makes component replacement much easier. Over the past two or three years we have secured a number of contracts at sites where we installed equipment ten or 15 years ago. Only now are we returning to refurbish or upgrade the plant. We installed the original Ferazur filtration system, designed to filter out iron, at West Pinchbeck WwTW some 12 years ago. In 2003 we won the contract to provide an additional filter to increase the throughput by 9Ml/d and meet the upgraded standard of up to .02mg/l of iron. Pinchbeck was not a large contract but it is indicative of the types of activity we believe will become the foundation of a successful business in the next decade and beyond. This is not to say there will be no new WTWs or WwTWs under AMP4. Our assessment is the new focus is more likely to be on projects such as refurbishments and smaller, new projects designed to fill infrastructure gaps and meet new regulations.
Degrémont has worked with many partners on major projects and has received awards that reflect our partnering ethos. In talking to these partners and the water companies, we have identified four key issues we think govern the choice of process engineering equipment:
- the ability of customers to train staff on a specific range of equipment to give a continuity of service,
- the need to employ a narrower range of technologies to achieve the same end result,
- the benefits for spares holding and maintenance which standardisation brings,
- cost savings.
From the Degrémont standpoint, while still developing major projects and framework agreements, our approach to the new demands of the industry has been to establish a new type of business, our services division.
Initially focusing on England and Wales, our objective is to develop our capabilities to undertake smaller projects, upgrades and refurbishments of plants, so we can bring our experience as a major process contractor to provide knowledge, service and economy.
By adopting these approaches to business, the services division will operate on a reduced overhead basis brought about by a lesser involvement in design and project management and simplified contract management, which, in turn, will produce the savings the customer is seeking. There will continue to be situations where the frameworks will flourish. However, we have seen that under AMP3, there have been occasions where work has either been incorporated into the frameworks or has been secured following open tenders. Using open tenders, customers can be best assured of receiving the most financially beneficial solutions to their requirements. The water companies also rely heavily on their strong supply chain and the flexibility of the tendering system. The framework approach can ensure operational needs are met in a more efficient and timely manner. In establishing our new services division, alongside our tried-and-tested major contract work, we are sure we will be able to build on the successes achieved to date and, in doing so, provide our existing and new customers with the level of service and commitment that they requireRICHARD CLARKE, BUSINESS DEVELOPMENT MANAGER, BIWATER
As AMP4 is imminent, and with a further shift to focused investment and operational efficiency, companies must adapt to remain profitable. Biwater believes the key to success in AMP4 for both client and partner is the use of accurate information through effective knowledge management to make informed decisions on capital spend and operational resource management.
The priority in previous AMPs has been to improve quality of potable water and wastewater discharge to meet regulatory limits. The majority of capital spend has therefore been allocated to the above ground assets. With utilities' draft business plans now submitted, the message for AMP4 is spend wisely. To maintain current quality levels, AMP4 will involve two key issues:
- upgrade and improvement through considered capital spend,
- increased operational efficiency.
By working in partnership with the client, the approach to AMP4 capital spend is through a better understanding of the existing assets. The knowledge and understanding of the performance of below ground assets is especially important when predicting flows for the sizing of combined sewer overflows (CSOs) and small remote works. This is achieved through services such as network analysis, leakage detection, flow and load surveys, asset assessments and drainage investigations, which provide a higher level of information, enabling better understanding of process conditions. With our clients' level of operational experience, the combined knowledge enables more accurate whole-life costing models to be developed, which results in the most economical solution.
Better understanding of assets is not limited to flow and load conditions, but extends to products. Through improved supplier management, the knowledge of equipment and processes is increased. This reduces risk and increases efficiencies through better operation and maintenance.
Operational efficiency through improved understanding of plant operation is also key to maintaining performance and quality. With instrumentation and telemetry plant conditions are more closely monitored and changes quickly highlighted. The knowledge required to respond to changes in plant performance can be enhanced through training.
This, together with the new technology, puts more responsibility on suppliers to provide good training to plant operators. Sharing knowledge is paramount to efficient operation. The importance of knowledge management is critical to maintaining the knowledge pool and preventing it from being lost as staffing levels reduce. Biwater has developed its own in-house knowledge management (KM) system. The system, available to all staff, provides up-to-date information and feedback on past and current projects, enabling designs to be produced more quickly and to a higher degree of accuracy. The KM system strategy is carefully split 80:20 between codification and personalisation to ensure the knowledge transfer between staff is maximised.
New knowledge is placed in a holding area and must be authorised before being added. Biwater places a high importance on the continuous development of the system and believes it is a sustainable strategy to maintain a competitive edge for both Biwater and its clients in AMP4 period