Water Industry Forum

Matt StaffordHead of Capital Delivery & Supply ChainAnglian Water

The Brief…

• What has worked well, and what hasn’t worked so well in AMP5 in terms of helping to deliver water company investment efficiencies (referring to case studies/examples where appropriate)?

• What are the areas of improvement that you expect to feature or you would like to see feature in AMP6?

• What are the blockers or inhibitors (if any) to progress?

• What action(s) are required to remove the blockers/inhibitors?

AMP5 Design Principles

• Common commercial and risk management processes across the programme

• Risk and value embedded across the programme

• An integrated supply chain, with clear alignment (back to back)

• Incentivesed commercial models, focused on delivery of the AWS business plan

• Reduced overhead, duplication and man marking

• Appropriate comparators and competition throughout the supply chain

• Extensive use of standard products across the programme

• A programme wide approach to reducing all forms of waste

AMP5 Initiatives

Business Drivers

Internal Benchmarking

ExternalBenchmarking

Business Drivers

Internal Benchmarking

ExternalBenchmarking

• Common project delivery process• Common commercial and planning process• Single governance and performance f ramework

Common Delivery Processes

• Removal of waste throughout the supply chain by on-going applicat ion of lean principles.Waste

• Development of standard products across the investment programme (Alliance led)

ProductDevelopment

Total

%OPPORTUNITYINITIATIVE

• Scale across AMP5 Programme• Further integrat ion of t ier 2 and 3 partners• Contract and performance management

Supply Chain

• Applicat ion of risk and value across the programme • Development of minimum asset standardsRisk and Value

• Rat ionalised overhead structure and removal of fee on fee. • Common insurance• Back to Back target costs

Commercial & Overhead

• Common project delivery process• Common commercial and planning process• Single governance and performance f ramework

Common Delivery Processes

• Removal of waste throughout the supply chain by on-going applicat ion of lean principles.Waste

• Development of standard products across the investment programme (Alliance led)

ProductDevelopment

Total

%OPPORTUNITYINITIATIVE

• Scale across AMP5 Programme• Further integrat ion of t ier 2 and 3 partners• Contract and performance management

Supply Chain

• Applicat ion of risk and value across the programme • Development of minimum asset standardsRisk and Value

• Rat ionalised overhead structure and removal of fee on fee. • Common insurance• Back to Back target costs

Commercial & Overhead

AMP5 Approach

Rationalised Delivery Routes

• Rationalised delivery routes with clear differentiators

W IWN IWWN I WW I

Water Local

DeliveryAlliance (II)

W/Water Local

DeliverySpecial Projects CS

Common processes and initiatives applied across the programme

Programme Management

Programme Management

Special Projects

AllianceWater Ops

Capital

WW Ops Capital

CSDeveloper Services Network

PartnersAM

CS

5

AMP4

AMP5

Evolving Models

AMP5 Model

TENDER – FRAMEWORK – PARTNERING – ALLIANCE I – ALLIANCE II – NEW ALLIANCES

AMP2 AMP6

AMP5 outperformance is Delivered by:

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Waste

Supply Chain

Risk and Value

Product Development

Common Process

Commercial

Target value of initiative

Extent of initiatives in place to achieve saving

Forecast efficiency value

Delivered efficiency

The Carbon Journey

Drop C02 : Embodied Carbon Saving Saves money

Don’t build

Build less

Use materials with lower embodied carbon

Use fewer materials/reduce waste

Don’t build

Build less

Use materials with lower embodied carbon

Use fewer materials/reduce waste

Over 20% reduction in embodied carbon

achieved in 2010-11 & improving

Use fewer materials/reduce waste

Standard Products

• Rationalised the AMP4 design

• Now has 1 tank and a reduced footprint

• Manufactured off‐site

• Savings on the Product ‘core’will be ~40%

• Embodied carbon savings are in the region of 55%

• ~29 projects will require this Standard Product

Use materials with lower embodied carbon

Precast concrete

Precast concrete units provide a more cost effective solution than plastic for certain ground conditions.28% cost saving19% reduction in embodied carbon(50% reduction with cement replacement)

Structured plastic with conventional bedding

Lower cost solution with lower embodied carbon, but still requires bedding and surround to be craned into position.34% cost saving39% reduction in embodied carbon

Build less

At Bedford Wastewater Treatment works we are expanding our treatment capacity to the equivalent of an additional 30,000 population.By using new innovative technologies the @one Alliance have risen to the challenge of low Carbon, low cost and has provided the business with a very sustainable solution.

Project Requirements

New processes using less oxygen that traditional methods means that we can treat the greater volumes and concentrations of effluent largelywith existing structures at the works. This cutsout the need for new building, reduces our embodied carbon and as the processes use less energy we have lowered our operating carbon emissions; further reducing costs.

Solutions

Build nothing

@one Alliance Carbon Results, year 1

13

% of Baseline Embodied and Operational Carbon

-40

-20

0

20

40

60

80

10001

-Apr

-10

01-J

ul-1

0

01-O

ct-1

0

01-J

an-1

1

01-A

pr-1

1

Perc

ent

( %

)

Embodied

Operat ional

Year 1-5 operat ional target

Year 5 Embodied target

Baseline - AMP4 Best pract ice

The future - AMP6 Business Drivers

Efficiency and commercial targetsConsistent business plan out-performance, and cost base reductionsPredictable expenditure and cash flow performance

Whole life asset performanceDeliver truly least whole life cost solutions in a TOTEX modelDelivery of a programme that supports AWS serviceability targets

CustomerSolutions that customers agree to as part of AMP6 consultation processDelivered so as to enhance AWS reputation mindful of future growthEnhanced customer experience

SustainabilityDelivering ongoing reductions in investment programme carbon and water footprintDelivering low carbon off site solutions to investment requirements

Health and Safety and EnvironmentDelivering the programme with a zero tolerance health and safety culture

Even Better if…. (1)

• An integrated strategic approach for all Asset Delivery

• All capital works delivered through collaborative delivery models

• Flexibility to deal with uncertainty such as the Capital Expenditure Incentive Scheme and the approach to Totex

• Potential for up to 15 years of work with us, with an ability to innovate and challenge beyond AMP6

• Programme wide initiatives helping us move to an even more integrated approach

• Co-author the AMP6 Initiatives as a joint team through this process and into transition

Even Better if…. (2)

• Reward is funded from out-performance against affordability and whole life cost back-to-back with the AWS business plan, and this will include the supply chain

• Sharing lean common processes and non-core functions for all asset delivery across all alliances

• Developing ‘expert’ client role provides the right environment

• Common supply chain for all alliances, paid on fair and sustainable terms

• Customer, carbon and water management will be at the heart of delivery

AMP6 Delivery Model – A fifteen year strategy

ASSET DELIVERY Common Processes & Systems

ASSET DELIVERY Common Processes & Systems

Metering

Alliance

Metering

Alliance

Medium Works

Alliance(@one

currently)

Medium Works

Alliance(@one

currently)

Small WorksAlliance

Small WorksAlliance

Repair & Maintain Alliance

SUB-CONTRACT TIER

Specialist Processes

AW PURCHASE AGREEMENTS

SPECIALIST PARTNERS

ANGLIAN WATER

TEN

DER

TEN

DER

DAYS WEEKS MONTHS YEAR(S)Common Processes

Alliances for specific

work types

Specific Processes

framework management

Aggregation of spend benefits

Consistent Supply chain

What else makes a difference?

• Removal of waste associated with the cyclical

nature of the investment cycle - early awards

• Its motivational being part of making a difference

• Maintaining long term collaborative partnerships

• Working in an integrated team environment with

clients

• Visibility of workload and spend profiles

• Earlier engagement in the value chain

• Prompt and fair payment terms & visibility of

reward mechanisms

Blockers/inhibitors?

WLC commercial Models are data hungry

Understand TOTEX? CIS impacts?

Early start programme?Recognition of existing investment commitments?

Fair balance of risk and financial profiles?

Cross border strategies immature

Engineering education

Sustainable technologies?

External inflation

AW Actions

We have smoothed profiles whereWe can

We are going to have a WLC incentivised model…the extent of which depends on clarity

We aim to be ready at the start of year 5 to deliver work early if we can and/or smooth the transition

We will continue to work with others to find a solution to remove waste elsewhere

Our new model is designed for flexibility……Long term call for competition reduceslikelihood of waste in the future