Scotland looks beyond 2010

Scottish Water has started the search for its 2010 partner to deliver an £800M investment programme.

As a result, ten utility, design and construction companies have formed three consortia to tender for the next phase of Scottish Water’s infrastructure programme.

The investment programme starts in 2010 and will be delivered by new joint venture Scottish Water Solutions Mark 2 (SWS-2).

The approach follows the success of Scottish Water Solutions Mark 1, says Paul Kerr, head of capital procurement at Scottish Water. “We’ll be engaging with these potential partners through our procurement process to identify the right partnership to assist us in outperforming the delivery of our 2010 to 2014 capital programme, and subject to the selected consortium performing well, possibly beyond into Q&S4 [Quality and Standards 4],” he says.

“We are building an organisation to last potentially between eight and ten years,” Kerr adds. SWS-2 is a distinct package of work from that allocated to SWS Mark 1, he says. “Our in-house delivery team, CID, [Capital Investment Delivery] will continue to provide continuity between the two programmes. One difference between SWS Mark 1 and 2 is that the new model has more flexibility, for example, if the selected partners perform well on the Q&S 3b (2010-14) programme that they could continue to deliver part of the following four-year programme, [Q&S4a for 2014-18].”

Best practice

Scottish Water is in the process of evaluating the responses of the consortia to the pre-qualification questionnaire.

The successful bid will be expected to outperform Scottish Water’s targets set by the Water Industry Commission for Scotland (WICS). Although wholly owned by the Scottish government, Scottish Water must meet standards set by the commission for lowest overall reasonable costs, which are determined by benchmarking Scottish Water’s performance against that of the private water companies in England and Wales.

“Being publicly owned, the main driver for this kind of partnership is to deliver the best value for money for the Scottish public,” Kerr says. “As well as delivering value for money solutions on time, the consortia are expected to bring best industry practice and innovative responses to the challenges a programme of this scale produces.

“They are also expected to share their knowledge with Scottish Water, allowing us to work closely and develop our own people.

Some existing Scottish Water partners, looking to build on the achievements of Scottish Water Solutions Mark 1, have formed the new alliances. “Combined with interest from some new potential partners, this presents an excellent opportunity to bring innovative thinking to capital delivery,” he adds.

According to Kerr, the Mark 2 solution has a stronger focus on design and build delivery, and is aligned to Scottish Water’s strategy to deliver a more even cycle of design and construction through the ‘break the cycle’ initiative.

The capital investment programme for Scottish Water includes the renewal, upgrade, extension and maintenance of networks and assets for the treatment and distribution of water, and for the collection and treatment of wastewater.

Kerr comments: “The multimillion pound programme will be divided between an in-house delivery team called the Capital Investment Delivery [CID] team, and the Mark 2 version of Scottish Water Solutions called SWS-2. The in-house team will focus on less clearly definable aspects of the programme, leaving SWS Mark 2 the works that can be clearly defined in advance.”

This should lead to roughly a 50:50 split in terms of delivering the investment, giving SWS-2 work to the value of around £800M over the four years, Kerr says.

The principle objective is to deliver the programme on time and within budget, with a manageable impact on Scottish Water’s consequent asset operating costs, explains Kerr. Secondary objectives focus on sustainability, capacity, performance and development of our employees. Potential delivery partners are also asked to consider any impact on Scottish Water’s customers, reputation and operating costs when determining the investment options and prioritisation; and give due regard to whole life costs and risk.

Kerr says: “A close dialogue will be opened between bidding consortia and Scottish Water to allow a bidder to best understand our needs and make a submission that addresses them.”

Contractor list

It is expected that two consortia will be invited to submit a Best and Final Offer. “For the current procurement, over 20 companies submitted an expression of interest to the OJEU [Official Journal of the European Union] notice. Some have either realised they are too small to play a part, have other commitments, or have failed to group successfully with complementary companies able to cover the full set of skills Scottish Water requires,” Kerr says.

Scottish Water has a 51% stake in SWS-1 and it will continue to play an active role in delivering the current capital delivery programme role along with the incumbent SWS Mark 1 partners, Kerr says.

Scottish Water is renewing its capital delivery partner (CDP) framework alongside recruiting its strategic partner for SWS-2. “The CDP is the approved list of contractors that can work with Scottish Water. The two procurement processes are being run in parallel by the same team to ensure continuity. Both CID and SWS Mark 2 will use approved capital delivery partners for sourcing any external contracting requirements,” Kerr says.

A percentage of the SWS-2 work allocation will be tendered to the open market.

The scale of the programme and the breadth of expertise Scottish Water is expecting of potential partners means that in this case it makes sense for the potential delivery partners to form consortia to address Scottish Water’s requirement.

Scottish Water has, over the four years up to 2006, delivered “significant improvements in service” and nearly £1B worth of operational and capital efficiencies. Its average household charge for 2006-2007 is lower than in England and Wales at £287 against £294.