The water industry is entering a period that will focus on achieving better value. Whilst previous programmes of work have focused on choices around capital expenditure on networks and infrastructure, the focus for AMP 5 will be a drive for efficiency in the face of increased operating costs.
This will mean finding greater balance between capital expenditure and operating expenditure. Efficiency targets will be tightened, stiffer regulatory outputs must be achieved and customer service levels must be improved, whilst shareholder value is maintained in the face of a bleak economic climate.
With energy the second largest cost behind payroll, the water industry will be forced to pay increasing attention to its carbon footprint and accounting. There will also be big questions to be considered concerning risk management and the appropriate level of expenditure to maintain operating systems at the level desired. Longer-term risk assessment must also take climate change into account. The vulnerability of utility assets was highlighted during recent flood events, along with the need for better management of storm sewers. Water companies will be required to be more proactive and resilient to extreme weather events and decision-making must take into account climate modelling.
Going beyond the ‘project-by-project’ role of traditional consultants, Atkins water team is offering its services to water companies at strategic level, providing advanced data management. With a strategic overview of the whole data system, its role as partner to a water company is enhanced, enabling it to provide insight and innovation very early in the process.
Such a strategy is underpinned by data quality and an audit trail that links data with operational delivery. Projects and programmes can then be risk assessed effectively and verified data used to provide a sound foundation from which innovative solutions can be compared. As purse-strings tighten and water companies face ever greater challenges, fresh approaches that go beyond traditional boundaries, redefining and restructuring systems for decision-making will be extremely valuable.
Engaging the supply chain
Emphasis must be placed on obtaining value from the supply chain. In the current economic climate it is crucial that all companies involved in a project seek to address both direct and indirect costs. It will become increasingly important to engage with the supply chain and challenge the process in order to obtain greater value and avoid duplication of effort.
With Ofwat now encouraging water companies to use risk-based techniques and methodologies to help them meet their obligations for the PR09 period, strategic planning is now more important than ever, reducing the need for expensive, reactive, operational fixes. This puts greater emphasis on the need for accurate data in a format that is accessible. Without this it is impossible to monitor the impact of interventions. Advanced tools now exist to allow the best engineering consultancies to take on this role, ensuring that decisions on spending are based on robust science and are well-planned, avoiding unhelpful spending peaks during the PRO9 period.
Delivering visibility and accountability
In the current climate, water companies need to understand more about how their business is performing, taking into account operational data and planned capital interventions. The water industry has vast amounts of data, much of which is untapped due to a history of poor data management and collation. In such instances it is important that visibility and accountability is improved. Levels of service can be raised considerably by increasing the quality of data and ownership of that data within a water company.
In order to manage risk effectively water companies need to have a clear picture of the assets they have at their disposal. With a legacy of large gaps in data across different systems, water companies often have a very poor understanding of the assets they possess and the risks associated with them. New technology can enable water companies to gather this data and so make better decisions on operating expenditure earlier.
Multi-discipline asset management tool
Water companies need to understand the assets they have at their disposal, how operating costs stack-up, and where failures are occurring. Advanced asset management tools allow managers to control risk by measuring the impact of changes in operational behaviour, enabling them to assess whether problems are getting better or worse over time.
Such processes use the existing information management systems that the customer has and initially screens the data for erroneous information. The consultant will then use a range of data management tools to ensure that the data may be accessed and utilised successfully to address various performance criteria. With the data processes managed effectively, an annual performance target can then be agreed.
Priorities can be addressed
With all of the data at its fingertips, a company is better empowered to make decisions which will prioritise expenditure, not based on who shouts the loudest, but on sound science and careful risk assessment. This creates a culture change that is fundamental to strategic, risk-based planning.
Such tools can also present scenarios in geospatial format. This helps to quantify risk in a particular location, ensuring that poor or inefficient decisions are not replicated. Work flow management systems can map out a process from end-to-end and critical asset management information can be collated and used to monitor how the business is performing, enabling the water company to make comparisons and prioritise where performance can be improved on a monthly basis.
Many water companies are currently data rich but information poor. At this critical period for companies, planning and asset management is the basis of any progress. Proactive management is required to help water companies achieve their potential in turbulent times.
Paul Whatley is a director within water and environment at Atkins.