The way to better practice
A white paper from the SBWWI sets out an agenda that could improve communication and cut costs in the supply chain. SBWWI chairman, Martyn Hopkinson, and John Batty, director of Bluejohn Marketing, explain
The group believes that procurement practices that eliminate duplication, minimise bureaucracy, and deliver better outcomes at lower unit cost would benefit all parties, as well as meeting with the approval of Ofwat. 'Procuring for the Future' defines a series of challenges, such as 'improving communications' and 'minimising waste' and then suggests some initial steps which could be taken to address them. The challenges and suggestions are borne out of a consultation process undertaken by the SBWWI with its members with input from the wider water industry.
A consultation involving a questionnaire, seminar and workshop was undertaken by SBWWI in 2010 and the challenge was to step out of a deep bunker mentality and focus on collective benefit for the future. One of the first challenges to reveal itself was the need for improved communications between buyer and seller. Water company procurement has a strategic framework provided by the Strategic Direction Statements published in December 2008. In turn, many procurement processes are couched in a strategic language which becomes harder to relate to the further down the supply chain you go.
The white paper suggests that a combination of water companies adopting simpler and clearer English, and SBWWI members seeking to gain a greater understanding of the language used by procurement professionals, would go a long way to finding an acceptable middle ground. SBWWI has proposed that it hosts a series of seminars for its members addressed by water industry procurement specialists. A more radical proposal, which would address both the challenges of 'improved communications' and 'increased understanding', is the creation of a short course water industry procurement qualification valid for both water company and supply chain executives.
Mutual understanding could also be improved through the introduction of exchanges or secondments, with water company personnel placed in supply chain companies and vice-versa. Some of those that read the draft 'Procuring for the Future' document would have liked to have seen more statistics relating to, for example, the cost burden of AMP5 procurement on the supply chain. There is no doubt that AMP5 procurement did place a heavy cost burden on many SBWWI members. Some large infrastructure contractors reported that tendering costs in 2009 reached 5% of turnover or more: the pips definitely squeaked!
Statistics are absent from the white paper for two reasons. From the practical perspective, SBWWI membership is eclectic in terms of scale and function, so finding common and convenient criteria through which the cost burden could be compared was difficult. Philosophically, as has already been said, the emphasis of the report is on the future, rather than past pain. However, all parties would, SBWWI believes, accept that current pre-qualification procedures are overly bureaucratic, repetitive and deliver very little by way of added value. Far better, surely, that the energy and resource absorbed in pre-qualification be focussed on identifying more creative and innovative answers to technical, operational and financial challenges. Amongst its suggestions, 'Procuring for the Future' proposes the universal acceptance and endorsement of Achilles Verify by water companies in return for a major reduction in Verify costs for suppliers and water companies alike. Universal standard procurement documentation for each major product/service category would also be worth considering with, for example, Water UK playing a key co-ordinating role.
The white paper calls on water industry representative bodies, including Ofwat, to create a forum in which issues relating to procurement can be addressed and resolved well in advance of PR06. For example, the forum could debate and agree a set of fundamental procurement principles which all parties could adopt.
'Procuring for the future' puts forward suggestions as to what some of these principles might be. Whilst they are classified in the document under the grand headings of clarity, equity and engagement, the majority of them could equally feature in a single category under the rubric of
Finally, 'Procuring for the Future' touches on the hot topic of innovation. Each year SBWWI runs a Water Dragons event where members have ten minutes to pitch their product, service or process to a panel of senior water company executives.
This is followed by a 20-minute grilling, which provides invaluable feedback for the participants. Water Dragons has highlighted that supply chain members need to build better and more financially robust business cases for their innovations. By the same token, whilst the Water Dragons themselves are steadfast advocates of innovation, water companies are often perceived as being too conservative, stifling the entrepreneurial spirit. More opportunities for innovators to present their ideas to senior managers would help, as would Ofwat ensuring that innovation is valued and promoted in the price review process.
Water industry procurement practices have frequently left all parties dissatisfied with the outcome as well as the process: a lose-lose scenario. SBWWI believes that 'Procuring for the Future' provides a stepping stone to a more productive use of the water industry's finite procurement resources.