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Reaching for the water mark

Despite talk of ironing out the peaks and troughs in water industry spending, firms are still feeling pinched as they wait for AMP4 work to come through, says Paul Mullord.

For many companies in the water industry supply chain, the last year has been one of déjà vu. Despite hopes that Ofwat's early start programme, among other things, would have a real impact, expenditure from the water companies in England and Wales has followed a disappointingly similar pattern to that seen five years ago.

Anecdotal evidence suggests that the shortfall in water company spending has been less prolonged and less pronounced than previously, but this is little comfort to suppliers with depleted order books, struggling to retain an efficient workforce or to even stay in business.

There has been much talk at the start of AMP4 about the importance of 'supply chain management' - of extending the principles and practices of collaborative working that are now commonplace at the top end of the supply chain, down to the lower reaches. But those companies at the bottom end of the supply chain will tell you there is little sign of this happening.

Instead, they say that in their dealings with many of the water companies and their partners, a culture of bullying and intimidation prevails; where purchasing decisions are made on the basis of lowest price alone and where pressure is brought to bear on suppliers to lower prices by reducing margins.

This may be the way it has always been, but it should also be recognised that the industry has delivered considerable efficiency savings year on year since privatisation.

Although some of these efficiency gains may be attributable to collaborative working, much of the improvement is due to suppliers' margins being continuously eroded to the point where there is little or no scope for further reduction.

Change in the industry is necessary but will take time.

And the situation is not helped by continuing and often frequent changes to water company management structures, personnel and partners.

Supplier companies change too, with many having to lose and then re-engage resources in response to fluctuating and sporadic workloads. The need for individuals to understand the principles of what they do and the consequences of their actions is, of course, important.

But perhaps more important in an ever-changing environment is the presence of a corporate structure that defines the way things are done and ensures a degree of consistency and uniformity, coupled with a culture that enables that to happen. Suppliers agree that some commonality of approach and methodology between the water companies would help them become more effi cient and responsive. They also recognise, though, that however desirable from their perspective, there is unlikely to be any substantial progress towards this in the near future.

One of British Water's aims is to promote best practice, and historically this has led to a focus on technical issues. British Water still retains that focus, but more recently has looked increasingly at commercial issues, with the launch of its Business Best Practice Panel a little over a year ago. The Panel now consists of six working groups (one of which will shortly be disbanded, its work being completed) looking at issues ranging from health and safety to regulation.

Procurement is an important part of the Panel's interest and four of the working groups aim to publish guides to best practice, drawing on British Water's wide membership and asking for the water companies' input where this is appropriate. The guides will identify best practice, and without being prescriptive will aim to provide a better understanding of the issues and ultimately to improve performance.

The rst of these guides - Cost forecasting and reporting - will be launched on 15 November with others on framework agreements, partnering and key performance indicators expected next year.

Paul Mullord is director of British Water, contact pmullord@britishwater. co. uk

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