Tendering at a faster pace

Contractors and equipment suppliers north of the border are set to benefit from Scottish Water Solutions' early start agreement. Dean Stiles reports.

Scottish Water Solutions (SWS), a joint venture company delivering £450M of new capital investment as part of Scottish Waters 2010 to 2015 programme, expects to have approaching half the work out to tender by the end of this year, according to its chief operating officer, Nigel Earnshaw.

He is meeting with contractors to update them on when tenders are coming out and what packages of work they can bid for. “The market place is very hungry and we are working as fast as we can to get these tenders out, building on all the design work we have been doing as preferred bidder under an early start agreement,” Earnshaw says.

“One package has already been awarded and there are several that are going to be going out in the next few weeks for people to price up. There is still hard work to be done to make sure we get these projects out,” he says.

Legally, contracts could only be awarded after April 6, 2010 when the formal contract with the joint venture company was signed.

The Thistle Water consortium, made up of Jacobs UK, Laing O’Rourke Infrastructure, and Veolia Water UK, has formed a joint venture with Scottish Water to work on water and wastewater treatment facilities during the 2010 to 2015 investment period, when Scottish Water is investing £2.5B. Scottish Water is the majority owner with 51% of the shares in Solutions with the balance held by the consortia.

Earnshaw says: “We are delighted that Scottish Water has put their trust in us to deliver a substantial part of their capital programme and we look forward to working in partnership with them to improve the water services infrastructure for the benefit of Scottish Water customers.”

Historic dip
An Early Start agreement was entered into following the announcement of preferred bidder in August 2009. This enabled the partners to start development work on the projects and has helped Scottish Water mitigate the historic dip in investment associated with the start of large-scale delivery programmes.

This will help contractors and equipment suppliers by keeping order volumes reasonably stable.

Lorna McGregor, head of commercial capital projects at Scottish Water, describes this as a “win-win” for contractors and Scottish Water. “There’s a benefit for contractors and at the same time a benefit for us delivering to our customers because we will be in a better position to hit the regulatory milestones early or on time,” she says.

“It allowed us to hit the ground running in terms of getting the work out to sites and that helps contractors in terms of the peaks and troughs; it helps smooth their work profile, as well as allowing us to also better manage our investment profile,” McGregor says.

Geoff Aitkenhead, Scottish Water’s asset management director and Solutions’ chairman says: “Work that Scottish Water promoted in the Early Start programme has enabled us to clearly define the programme of works to be delivered by Solutions, and this initiative has played a significant part in allowing us to continue delivering tangible benefits to our customers.”

During the 2010-2015 delivery plan, Scottish Water’s £2.5B investment will continue to focus on driving up performance in drinking water quality and protecting the natural environment, along with service improvements such as reducing interruptions to supply.

Aitkenhead says: “It is the key to the success of this new investment programme that we have shared objectives with our partners. It is also important that we clearly understand how we will meet the efficiency challenge using leading edge delivery practices and that our new investment programme gets off to a good start.”

SWS is in its second life, first created in September 2003 by Scottish Water to deliver the Quality and Standards (Q&S) II programme and Q&S IIIa non-infrastructure programme.

Under the current programme for the regulatory period (2010 to 2015), 40% of work by value will go to tender, 40% will be delivered by framework contractors and the remaining 20% will be delivered in-house by the consortium.

“Depending on what prices we get we can flex those percentages so that the 20%, with the agreement of Scottish Water, can vary to allow us to make the most effective decisions. If we find we are getting very good tenders from the marketplace we might decide to do less work in house, or conversely if the market is giving high prices,” Earnshaw says.

“But the idea of having those three routes for the construction work is that we can flex to a certain extent between them depending on which contractors are best placed to deliver the work for us,” he adds.

Hard work
Jacobs and Veolia will carry design work on roughly half the 280 projects. Consultants that are on Scottish Water’s framework list will design the remainder, but Thistle will manage that as part of its overall programme management.

The key difference for contractors in Scotland, compared with those in England and Wales, is the Early Start Agreement. This is essentially a professional services contract between Scottish Water and the consortium agreed once it achieved preferred bidder status, says McGregor.

It provided total continuity for the consortium selection in September 2009, up to and until the consortia took ownership under the contract in April 2010. The key to this successful Early Start Agreement was the hard work Scottish Water undertook two years back to define its programme.

“To arrive at preferred bidder at August of the previous year, seven or eight months ahead of when the regulatory period starts, was possible because Scottish Water had a good understanding of its programme,” Earnshaw says.

Scottish Water was in a position to know enough about its programme to decide what sort of vehicle it required of its partner. “We got documents in late 2008 and although we knew this was not the definitive programme, it was close enough for us to start pricing it up,” Earnshaw adds.

“The key to it was the Water Industry Commission and Scottish Water getting together pretty early in the planning stage and agreeing the programme in outline.

Strategically, it’s easy for everyone to say its a good idea to start the planning as early as you can, but actually making it happen is the thing that Scottish Water and WIC rightly need to be congratulated on. It has set us on a very good path,” Earnshaw says.

Unlike England and Wales, the water industry in Scotland is proportionally a far larger part of the construction industry accounting, on some estimates, for as much as 40% of Scottish construction activity.

Scottish Water’s current capital investment programme at £2.5B is one of the largest in the UK water industry and the company has a massive influence over the supply chain.

Crucially, the wider economic picture for Scotland allowed the Scottish government, which owns Scottish Water, to encourage the “joined-up thinking” critical for the early start agreement to work, Earnshaw concludes.

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