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AMP6 frameworks: Getting shovel ready

More than a year ahead of the start of the next regulatory period in the water industry, most of the big players are already gearing up to start work.

Earlier this summer, water regulator Ofwat published details of the methodology it intends to use to assess water companies’ business plans for the next asset management plan period, AMP6, which starts in 2015. The methodology relates to water supply and sewerage in England and Wales and makes it clear that the water industry’s emphasis is shifting from the “ticking regulatory boxes” approach of previous AMPs to focusing on value for money for customers.

For the first four AMP periods, water companies’ business plans were dominated by the need to meet tough European Union legislation covering issues like wastewater quality and wildlife habitats. This resulted in a focus on building new facilities, including treatment works, interceptor sewers and outfalls, that would contribute to cleaning up wastewater discharge.

Although there is still a handful of large capital projects to be completed – the Thames Tideway being the highest profile example – the current regulatory period, AMP5, has seen the start of a shift that is set to continue into AMP6 and beyond. They will see water companies trying to get the most out of their existing assets and finding ways to minimise total costs of operation.

Ofwat’s methodology document made it clear that water companies should be focusing on what it called “long term outcomes”, which it hopes will encourage innovative ways of working that will deliver services for less money, and with less impact on the environment. As a result, the regulator expects to see substantial efficiency savings being delivered during the five year AMP6 period.

At the same time, Ofwat wants to encourage companies to manage water supplies more sustainably. It believes this will happen because the companies will no longer have a bias toward capital intensive and resource intensive solutions, and because it is introducing incentives to encourage the water companies to trade water and to source it from areas that do not damage the natural environment.

This shift in emphasis is leading to water companies looking for different skill sets from their supply chains – expertise that will help them make more of existing assets.

The focus on long term thinking is also being reflected in the way some water companies are looking to procure the firms that will deliver work during AMP6, with many opting for alliances, or for frameworks that run beyond the traditional five year AMP period.

Although AMP6 is not set to start until 2015, many have already started appointing delivery teams so that they can hit the ground running when Ofwat signs off the funding.

Severn Trent Water

Atkins, MWH and Jacobs have already started working on a 10 year engineering consultancy framework for Severn Trent Water that will span AMP6 and AMP7. The contract started in August, and is worth between £8M and £25M a year.

The three consultants are working alongside Severn Trent’s staff during the feasibility stages of the company’s investment programme.

“These new partnerships are about being an integrated team, delivering our objectives to achieve common goals,” says Severn Trent water services director Andy Smith. 

Ofwat has made it clear that water companies should be focusing on what it calls ‘long term outcomes’

United Utilities

United Utilities (UU) currently spends around £600M a year maintaining and improving its water and wastewater networks. It has started the process of letting contracts and framework agreements for AMP6, some of which will be awarded for up to 12 years, taking them into AMP7.

Applications for the role of engineering services partner to help develop and implement its AMP6 capital programme closed in August. It is possible that the role could be extended into AMP7.

While this process is underway, UU has shortlisted 11 possible suppliers for the construction delivery partner framework, and is currently in negotiations with them.

The shortlist is:

  • Balfour Beatty/MWH
  • Black & Veatch/Farrrans Carillion
  • Costain
  • Enterprise/Jacobs
  • Galliford Try/Aecom
  • Kier/Veolia
  • Laing O’Rourke/Atkins/Imtech
  • Murphy/Interserve
  • Mott MacDonald Bentley
  • Nomenca/Barhale
  • Volker Stevin/CH2M Hill 

Southern Water

Southern Water has opened prequalifation for delivery partners for its AMP6 investment programme, with the successful firms likely to be sharing between £600M and £1.1bn of work. The company is looking for up to four delivery partners, and contractors have until 14 October to express an interest.

The company is also looking for a strategic solutions partner (or partners) to provide support during the definition, feasibility, preferred option identification and outline design stages of AMP6 projects. This contract is valued at between £100M and £200M.

Dwr Cymru Welsh Water

Tenders closed earlier this month for the role of capital delivery alliance partner for Dwr Cymru Welsh Water. 

The company is looking for up to eight partners to deliver the consultancy and construction aspects of its £600M AMP6 programme.

Dwr Cymru Welsh Water plans to award the contract for six years, with an option to extend for another five years to cover the AMP7 period from 2020 to 2025. This extension would take the total contract value to around £1.5bn. 

Thames Water

Thames Water is the most advanced of the water companies in its procurement for AMP6, having announced in May the list of firms in its “super-alliance”.

Thames Water asset director Lawrence Gosden has described the decision to appoint an alliance for AMP6 as a “complete transformation” of the way the company delivers capital investment.

“The tender process started with an extensive consultation with our supply chain to form a delivery strategy with collaboration at its heart, and it ended with us joining forces with the some of the leading names in the industry,” he said.

“We have a significant amount of work to do, upgrading our deteriorating infrastructure over the next 25 years and beyond, while keeping customers’ bills affordable. If we are to achieve this, a different approach is required.”          

Thames Water’s AMP6 alliance is made up of two design and build consortiums, a programme manager and a technology and innovation provider. The winning bidders are:

  • Design and build: Costain Veolia Water Atkins (CVA) and Skanska MWH Balfour Beatty (SMB)
  • Programme manager: MWH
  • Technology and innovation provider: IBM

The alliance is set to carry out between £2bn and £3bn of work, and has already started on some parts of the programme.

We’re committed to working in a more integrated way to further boost collaboration and efficiency.

Nevil Muncaster, Yorkshire Water

Anglian Water

Anglian is in the middle of procuring contractors for its AMP6 framework.

The 2015-2020 investment programme is likely to be worth around £2bn, but the successful bidders could find their contracts extended into AMP7 and even AMP8 investment periods to 2030, which would take this figure to between £6bn and £9bn.

Yorkshire Water

Yorkshire Water has named the eight contract partners and three framework consultants that will deliver its £1bn AMP6 programme.

The contractors are:

  • Byzak Entec
  • Earthtech Morrison
  • Morgan Sindall Grontmij
  • Barhale WSP
  • Mott MacDonald Bentley
  • Black & Veatch
  • Morrison
  • Balfour Beatty

The consultants are:

  • Arup
  • MWH
  • Turner and Townsend

“The next step is to review the AMP6 programme with our partners, optimising AMP6 investment so we are well placed to deliver the best value asset solutions,” says Yorkshire Water director of asset delivery Nevil Muncaster. “We’re committed to working in a more integrated way to further boost collaboration and efficiency and are now in the best possible shape to plan ahead for AMP6.”

Scotland

In Scotland, drinking water and sewerage services are provided by public sector Scottish Water, which is accountable to the Scottish Parliament.

Scottish Water operates within a regulatory framework established by the parliament in which ministers set the objectives for the industry.

As in England and Wales, the regulatory framework in Scotland is based on five year periods, in this case known as Quality and Standards (Q&S) periods. Q&S IV is set to start in 2015.

Six consortiums are believed to be in the race for two alliance roles for Scottish Water’s Q&S IV capital investment programme, which could be worth up to £1.5bn. One contract is for clean water infrastructure and the other for wastewater infrastructure.

The bidders are:

  • Aqua 4 (Graham Construction, Grontmij, Mace and Volker Stevin)
  • Galliford Try, Atkins, Farrans and George Leslie
  • Morgan Sindall, Carillion and MWH
  • Morrison Utility Services and Aecom
  • Uisge Alliance (Balfour Beatty, Barhale and CH2M Hill)

The wastewater infrastructure alliance bidders are:

  • Aqua 4 (Graham Construction, Grontmij, Mace and Volker Stevin)
  • Galliford Try, Atkins, Farrans and George Leslie
  • Morgan Sindall, Carillion and MWH
  • Uisge Alliance (Balfour Beatty, Barhale and CH2M Hill)
  • Black & Veatch with Byzak

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