Entec
Bulletin
Cater for AMP4 Success
Wessex Water is clearly a different kind of water company. Formerly owned by Enron, it was purchased by YTL Power International of Kuala Lumpur, a family-owned construction business, in 2002. It is renowned in the industry for its commitment to sustainability and recognised by Ofwat as the most efficient operator in England and Wales. Now it is going to be the only major water company to carry out much of its asset provision programme in-house. To examine this new approach in more detail, we took the opportunity to interview Sean Cater, general manager of Wessex Engineering & Construction Services, who has responsibility for delivering the £550m AMP4 workload.
So how does this new arrangement work?
We started by trying to get a better understanding of what we spend on asset development and the impact of that spending at a detail level. In the past we have maybe outsourced things we didn't understand and that can be costly. This is not a short-term programme, so it makes sense to put the effort into doing this effectively. Our plans are to carry out 50% of the construction phase of our AMP4 programme of work in-house. The programme is split into two sections: treatment and process on one side, and networks on the other. Our aim is to do half of each in-house, and go outside for the rest.
What is the rationale behind your new approach to asset provision?
As you'd expect, saving money is the main driver, without compromising the quality of the outcomes we achieve. On the scale we're doing this, we believe we can do this cheaper and better than our previous joint-venture or pure contracting arrangements. And by doing some work ourselves but still contracting out the rest, we can benchmark ourselves against the market, and keep our ideas fresh. What we learn from our contractors, we pass on to our people. The same management team for each element (treatment and networks) looks after both the internal and external workload, which allows us to centralise our knowledge and make the most of the arrangement. It's also a way of hedging against workforce issues with third parties. Plus we're able to be more selective about what we choose to do ourselves: for instance, we often keep the jobs that are more difficult to scope in-house. Likewise, we achieve better results with those we take to the market when we play to our contractors' strengths.
How is this approach supported by your Malaysian parent?
They are very proud to own Wessex. Their investment was not for short-term gain. A typical UK business plan looks at five years…they talk about five generations. The idea of that really smacks you between the eyes, but shows you that they really are the perfect owners for a water business. In that context, they see the value in protecting the value of their assets by managing them correctly. If that means giving up short-term profits for long-term gain, then that's the way they look at it. With a strong contracting history, they clearly understand the dynamics of what we're trying to do, and have been very supportive of our plans to bring control back in-house. But importantly, they don't confuse ownership with management.
How do Wessex's very public sustainability aims influence your capital investment programme?
We don't just want to be seen to be sustainable, we actually want it. You often see token gestures towards sustainability, but with the long-term philosophy of our owners, it really does permeate our business. In the past, it was easy to make short-term decisions to save money and satisfy a shareholder, now we take long-term ones looking at the bigger picture. And guess what? We save money, just over a different timescale, and that usually means less resource use too. It certainly also permeates our relationships with contractors and consultants - we want a mature relationship where ideas are shared and everyone makes a profit. If our business model is sustainable then it helps them achieve that too. It's all about taking responsibility for your part of the picture, and seeing the influence that has in the rest.
How will you measure your success?
We try to keep things simple, so we set four clear objectives for the construction business. In order of importance, safety is the first one. If we can't deliver the programme safely then we shouldn't be doing it. The second objective is quality: what we build has to do what we said it would do. There's nothing more frustrating for contractors than building something that doesn't work. Time comes next: we need to deliver our projects when we said they would be delivered and achieve the deadlines that Wessex has agreed with the regulator. The last of the four is cost. Yes last - people often don't believe it when I say this as I'm a real cost-cutting junkie, but it's true: if you get the first three right then the cost will be right. If the design is wrong, or if supplies arrive late on site, costs can escalate very quickly. One year into the AMP4 programme, we've been getting the first three right so the cost has been spot on too. And if we get all four right, we're helping Wessex achieve the broader aims of satisfying our customers and of course our owners, and building a sustainable water company for generations to come.
For
more information on Wessex Water and its capital programme, visit
www.wessexwater.co.uk.
To discuss Entec's environmental and engineering
capabilities and our experience
working within the UK water sector, contact Ian Gray on 07710 703950.
Alternatively visit www.entecuk.com to download examples of our project experience
or a
capability statement.
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