Accelerating delivery for the UK water sector with AMP7
Asset Management Plan 7 (AMP7), the 2020-2025 regulatory period for the UK water sector, was almost immediately blown off course by the COVID-19 pandemic. The capital expenditure programmes for the period were designed to improve resilience, efficiency, and customer service along with reduced environmental impact and leakage and set a course for net zero. Early disruption stalled the rate of delivery with some of the Ofwat regulated water companies missing their targets for 2020–2021.
On top of this, the water companies have been challenged by the government to identify ways to support the country’s green economic recovery. As a result, the sector is set to invest £2.8 billion with Ofwat outlining plans to support £850 million of new, green investment projects, and a further £1.9 billion of future planned environmental projects being brought forward.
The pressure is now on to clear backlogs from year one and achieve the significant increase in levels of spending planned for year two and beyond. A step change in performance is necessary for them to achieve an optimal approach and accelerate the pace of delivery, while underpinning it with the control required to balance expenditure, efficiency, outcomes, and risk.
Capital delivery at pace
The rate at which asset management decision-making functions capture, prioritise and promote interventions must increase across the sector. This will provide the work bank of projects at the rate needed by the capital delivery functions. Enabling this will require:
- Understanding and sourcing the necessary asset planning capability and capacity to deal with the shift to a larger number of smaller value intervention outcomes compared with previous AMPs. Increased input at the promotion stage can be driven by the adoption of Intelligent Client.
- An evidence based, end-to-end approach to decision-making integrating need capture, planning, affordability, outcome delivery and benefits realisation. This will help understand and balance risk appetite, using the common currency of a value framework to deliver continual improvement.
- Full clarity and consistency of the deliverables, outcome definition, data, and level of detail to be provided to capital delivery teams at the hand over point. This must be underpinned by robust and agreed delivery baselines in terms of schedule, budget, scope, and risk; along with aligned performance measures to avoid silo type behaviour between functions.
- A strong sponsor capability with end-to-end accountability for projects – empowered and enabled so that required trade-offs to balance affordability and outcomes can be made quickly.
A value focussed approach to design
Projects can too often get stuck in the design phase when outcomes are not balanced, the project meets affordability challenges or where issues arise from a transfer of design responsibility to the supply chain part way through delivery. There are significant benefits to focussing on values and this approach to design is already reaping benefits for the sector.
A bottom-up review by one company of design deliverables enabled a three-month reduction in time to site for a critical project with key regulatory outcomes. Similarly, a major residential development’s use of collaborative planning saw document submission rates increase by 160 percent, reducing a projected five-month design programme to just eight weeks.
This was achieved by working smarter rather than harder, utilising the same number of people and without any deterioration in the quality of work.
Key levers available to drive delivery include:
- Deployment of lean design processes – Focus on reducing options as early as possible using integrated risk and value-based techniques, clearly defining the minimum deliverables specifically required during each project phase. Decision making should be underpinned by streamlined, risk based, governance.
- Affordability challenges – Identify these early to enable a collaborative approach to efficiency on each project, underpinned by programme wide efficiency initiatives and early engagement with the supply chain to unlock innovation and to enable clean hand overs in Design and Construct models.
- Collaborative planning – Use this to schedule deliverables and activities optimally to compress the programme. This should be complemented by Production Control to drive the performance and productivity of teams. The benefits of these techniques are increasingly being demonstrated earlier in the project life cycle.
- Framework technical consultants – Engage strategically to provide pipeline visibility and appointments for tranches of work. This will deliver time and cost efficiencies by building high performing teams that are fully focussed and aligned with the needs of the programme, avoiding repeated learning curves.
De-risking project consents and approvals
Timescales to obtain the statutory consents and stakeholder approvals for projects mean that such activities are often on the critical path. In the transport sector a national infrastructure provider is targeting time savings of up to 75 percent based on a more flexible approach to design and governance through an initiative driven by the government’s Project Speed.
Given the need to accelerate delivery, companies in the water sector can de-risk projects and get them taken off the critical path by:
- Screening potential projects now to identify long lead time activities and moving the critical ones forward even before formal project promotion. While this may risk some abortive work, key quality and supply demand projects and the major capital maintenance investments with a high degree of certainty will be identified by final business plans.
- Adopting proactive, risk-based stakeholder management strategies with clear owners and engagement plans.
- Establishing specialist multi-disciplinary integrated teams responsible for enabling the delivery of the consents/approvals on an end-to-end basis. This should include initial screening of projects, managing any necessary environmental investigations/reviews, and providing specialist technical advice to support project teams.
Aligning costing data and commercial models
A disconnect between data used by companies to set project budgets, tendered framework prices and market rates, reflecting the current buoyant market, must be avoided. Where this does not happen efficiency and affordability issues arise when the supply chain is engaged to confirm prices either by negotiation or competition. This can lead to significant delays as the scope of the solution developed needs revisiting and alternate procurement options are assessed.
The best performance is seen by companies with commercial arrangements which integrate project budget setting and supply chain price setting.
This needs a top-down approach, using a single data set with a level of granularity of pricing. It also needs to be aligned to the level of definition of the solution when the supply chain takes on any design responsibility.
Enabling a digital programme management office
Establishing and embedding a digitally enabled programme management office (PMO), incorporating an integrated controls and performance management approach, is critical to providing insights to project progress and identifying necessary improvement interventions. This approach enables:
- Foresight and effective decision making through standard, reliable, unbiased performance reporting data with built-in ‘predict and prevent’ capability;
- Proactive risk management and robust performance management baselines, increasing confidence in successful project delivery;
- Collaboration and the formation of a trust-based relationship within the client and supply chain;
- High-performance proactive and responsive culture focussed on delivering at pace and continuously optimising the ways of working;
- Transparency of information and effective communication across both internal and external stakeholder environments.
Mapping the value stream
Addressing each of the factors above individually will significantly reduce the time taken to get to site, but perhaps the biggest impact can be achieved by value stream mapping. One UK water company is targeting a 50 percent saving in time to site and a 30 percent cost reduction through value stream mapping.
By considering the activities required to enable a start on site as a single, integrated process rather than individual functional processes, significant time and cost benefits will be achieved. Not only does this process ensure a reduction in time by minimising ineffective handoffs, but applying an end-to-end lean approach challenges the value provided by each activity so that any non-value adding ‘waste’ can be identified and eliminated and efficiency and productivity increased.
The water sector has a critical role to play in the country’s green recovery and in the drive to achieving our net zero targets.
Making up for lost time on AMP7 is the first step, but the industry needs to look at how it can accelerate delivery and optimise its approach to achieve this and much more.