COMPLETE AMP6 CONTRACTS AND TIER 1 CONTRACTORS REPORT 2015

Transcription

1 COMPLETE AMP6 CONTRACTS AND TIER 1 CONTRACTORS REPORT 2015

2 Lifting the lid on AMP 6

3 What the report covers An overview of key drivers in AMP6 -e.g. Totex, increased emphasis on maintenance The Alliances put in place to deliver the 44bn AMP6 Totex investment between and beyond The Tier 1 contractors who make up the Alliancejoint ventures/ consortia Key Alliance contracts already in place Other AMP6 contracts in place The water companies -upcoming projects, carbon and energy use, named contacts at operational level

4 An overview of AMP6 -key changes Move away from Capex and Opex to Totex Move from outputs to outcomes Contracts are getting longer -AMP7 contracts are already being lined up Customer is king -AMP6 Business Plans have been driven by this Some work has to be done under the National Environmental Programme Innovation, energy, carbon are ongoing drivers Competition in 2017 likely to herald significant change - competition and innovation seen as key to driving down prices

5 What will AMP6 look like? Likely to see less capital-intensive schemes Increased levels of control and automation Use of Big Data and Internet of Things More standardisation Off-site products and BIM Groups of smaller projects bundled together Significant shift in emphasis on maintenance and optimisation of existing asset base

6 Service Incentive Mechanism is a real driver with financial and reputational impacts Increased levels of operational maintenance are key Poor maintenance will threat serviceability Water companies will look to supply chain to help with maintenance regime optimisation Find efficiencies in smaller upgrade projects

7 Essential to understand what the Alliances are doing - including: How they work with the water company How they procure goods and services needed Have they got their own Alliance procurement portal Their own individual company portal Preferred suppliers list What opportunities they offer to Tier 2 companies to talk to them Other portals like Competefor, Achilles UVDB, the ConstructionLine where you need to be registered to access the tenders Buyers will also be using the portals to identify the potential companies they want to work with

8 What are the opportunities? Looming skills gap and upcoming projects like the Tideway Tunnel, HS2 will put pressure on the marketplace for skills, capability & manpower Water companies' changing business models-e.g. they are becoming significant energy generators in their own right, wholesale and retail activities Less tightly defined outcomes could increase flexibility in terms of what they look for from suppliers -not tied in to one single solution

9 AMP6 will see a move away from defined outputs e.g. upgrading a wastewater treatment works to defined outcomes e.g. improved environmental targets, lower carbon emissions Water companies have proposed a total of 171 outcomes, 515 performance commitments & 312 financial delivery incentives Important to understand how this impacts on how they do business

10 What does this mean in practice? A move away from defined outputs e.g upgrading a wastewater treatment works to broader outcomes e.g. 33% reduction in internal sewer flooding incidents -by 1450 per year 22% reduction in pollution incidents 5% leakage reduction from 3.281m litres a day to 3.123m a day if they don't meet performance commitments they face big financial penalties running into 100s of millions

11 Outcomes instead of outputs doesn't mean projects are not identified A significant number are set out in the Business Plans tech summaries -some are included in the report Other projects are flagged up in other key documents e.g. Strategic Direction Statements, Water Resource Management plans, financial and environmental reports A long-term horizon to identify a pipeline of sales opportunities

12 Opportunities for Tier 2s include: a shift away to greater number of small schemes and projects offers more opportunities for different types of work the possibility of more and smaller projects may enable Tier 2 suppliers to bid for work they were previously excluded from Many of the Alliances now have explicit commitments to sub-contract work to regional and local suppliers

13 How can the supply chain help? Contractors may be better placed to help the water cos and Tier 1 Alliances to Identify how to bundle or group projects into sub-programmes This could help achieve economies of scale, more efficient resource management, better procurement decision on specialist plant purchases Fill in the gaps in the Tier 1s service offering Workload capacity and capability a key area where water cos and the Alliances will look to bring skills of Tier 2/3 companies on board Nothing to stop Tier2/3 companies putting their own mini-alliances in place to tender for projects

14 Some key questions What are the ongoing problems/ barriers for Tier 2/3 firms in the supply chain? How much time do they spend identifying opportunities/tenders/ preparing bids? How have things changed in the run-up to AMP6? Have they already changed tack to reflect the Totex/outcomes based approach? What else would help?