The Thames Tideway project will begin in earnest next year. In an exclusive interview, chief executive Andy Mitchell explains how he has challenged the three contracting teams to deliver the project two years earlier than planned.
You have to sympathise with the construction firms who will deliver the three main sections of work for the Thames Tideway Tunnel. Just as they were congratulating themselves on successfully securing the tunnelling and construction contracts for the £4.2bn project, Tideway chief executive Andy Mitchell has told them to go away and work out how to complete the project two years earlier than planned.
Speaking to New Civil Engineer just months before construction begins in earnest for the Super Sewer, the former programme director for Crossrail certainly appears to be living up to his reputation for confronting complacency and redefining the parameters of a project.
He explains that as part of the overlying alliance arrangement that sits on top of the three separate NEC contracts, all six alliance parties have been challenged to do the job better.
”There was a prescribed six-month optimised contractor involvement period to discuss thoughts that had come up during the tendering process,” he says. “At the very beginning of that phase, we laid out a challenge to our team to ask if we could do the job significantly faster.”
It probably arrived as a shock to the six companies involved to find out that by ‘faster’ Mitchell meant that he wanted the project to begin six months earlier and for the tunnel to be turned on two years ahead of schedule.
However, Mitchell argues that all of this ought to be possible, even without changing the amount of time it takes to excavate the 25km tunnel.
“If we start earlier, finish earlier and knock anything like that amount of time off, it’s highly likely to be less expensive to build.”
Andy Mitchell, Tideway
“We didn’t see much opportunity to compress the tunnelling duration. The truth is, the long run average rates that were in the tenders and were in our programme were about right and there was no justification for thinking somehow miraculously we’re going to tunnel faster,” he says. “But by starting tunnelling early and finishing tunnelling early with more overlapping at the beginning and the end, we think we can commission two years early.”
When he’s asked how the alliance partners reacted to the challenge, Mitchell denies that they asked for more money, or rather he denies that they will need more money.
“They all understand the rationale. If we start earlier, finish earlier and knock anything like that amount of time off, it’s highly likely to be less expensive to build,” he says.
“At the end of the day, the tunnel hasn’t got any longer, the scope hasn’t got any bigger; it’s only about sequencing and there are only so many work hours in a job.”
All of this makes Mitchell sounds like a tough taskmaster – although rowing back slightly on the new deadline, he argues that the whole point of the challenge is to encourage radical thinking.
“The truth is, even if we start off with a two year earlier programme and we only end up one year early, that’s still a result. If you’re going to have that kind of radical ambition, there’s only one time to call it and that’s at the very beginning. You don’t get two years down the line and say ’blimey, I wish we’d thought of being a bit more radical!’
So how exactly does he propose that the joint venture teams go about delivering the project more radically? First of all, Mitchell argues that efficiencies can be generated by pooling the marine operations of the three contractors.
“We’ve got a marine planning capability but you don’t need three and you certainly don’t need four marine logistics regimes,” he says. “So we’re looking at how we pool those.”
Neither, Mitchell argues, will the tunnel, the segments and the linings have to be designed three times. “Because they’ve all got design and build contracts, they do have different designers, but those designers are working closer and closer together,” he says.
Warming to a popular theme, and reminding everyone of the coup that Tideway pulled off in securing his services, he also talks about how the project will learn from Crossrail.
“The whole innovation programme that Crossrail has, we’ve not replicated it, we’ve just joined it,” he says.
“So all of the innovation ideas, all of the thoughts and proposals, successful or otherwise, that exist in Crossrail’s Innovate 18 system are now available to us, which I think is a big step forward.”
Unlike Crossrail, though, Mitchell points out that Tideway is being delivered using the alliance framework that he has already alluded to. He argues that this provides a more positive environment for the contractors to work more collaboratively.
“I’m not saying they didn’t [work collaboratively] on Crossrail,” he says. “I’m just saying we have a structured framework that incentivises it.”
Each of the alliance parties sits on the Tideway alliance board which Mitchell describes as the project’s ’monthly oversight decision board’. Above that, CEO representatives from all of the parties involved in delivering the project sit on a CEO forum. In the early days of the project, contractors collocated with Tideway in offices in Paddington but as soon as it became a separate company, independent of Thames Water, they all moved with it to a new 400-desk office in Aldgate.
“We’re now collocated there with all of our contractors and we’re working hard with some of the councils to collocate with us as well,” says Mitchell.
He reveals that it wasn’t clear who the project’s funders and owners were going to be until very close to the 24 August date when Tideway became an independent licensed water company. But he thinks the funding model established with investment company Bazalgette Tunnels Ltd represents value for bill payers.
“The funding model is like a lot of the utilities and the railways. It’s an asset value based model where the money the investor puts into the asset as long as it’s accepted as valid spend creates a growing value of asset and on an annual basis that asset value entitles you, through the bidding process, to a return.”
Each of the consortia bidding for the Tideway contract had to submit the rate of return that they wanted on the ever growing asset base, all the way through construction and until the spending had stopped. Mitchell says Bazalgette’s 2.497% rate of return compares favourably with an industry average of 3.8%.
“That’s a major part of why the bill increase for every Thames Water domestic bill payer is now seen to be between £20 and £25 rather than the previously stated £80 per year,” he says.
Another aspect of the funding model is the way the risks and rewards are shared between the investors and bill payers.
“If we spend less than the 2015 [construction] figure of £3.144bn on getting the job built, 70% of that benefit goes to the bill payer and 30% goes to the investor,” explains Mitchell.
“If we overspend, and for a figure of 30% more than the £3.144bn, that overspend is born 60% by the bill payer and 40% by our shareholder-investors.” Beyond a 30% overspend, Mitchell explains that a government support package would probably be triggered. However, he thinks such an outcome is unlikely and the main purpose of this package is to reassure the investors.
“It would have been very difficult for a private investor to come into this facing, albeit notionally, an uncapped downside. What the government support package allows them to do is understand that no matter how bad it gets, it doesn’t get any worse than that.”
Bearing in mind the steps the alliance partners are already taking to bring project close forward, such an eventuality sounds unlikely. So the other question is whether Mitchell will be there at the end this time to see the project through.
“I came here to get this job done,” he says. “If I were to be sat here in seven years’ time, cutting the ribbon, or whatever one does on a project like this, I’d be okay with that.”