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Water under the bridge

British Water director John Aldridge has witnessed huge changes during his 40 years in the UK water sector.

When Mrs Thatcher removed the water industry's capital programme from the government's balance sheet 15 years ago, could anyone have guessed it would have such a profound effect on the way consultants and contractors conduct their businesses, and the roles these organisations would take on?

Before privatisation, engineers still designed complex structures using slide rules. Draughtsmen went to work in collars and ties, wore white coats and drew with pencils on plastic film. Record drawings were traced in ink onto linen sheets for longevity.

Few capital projects were carried out before the industry was privatised (there were no votes in sewage). Water industry clients were probably best described as uninformed when it came to procuring capital works. Clients would employ a consulting engineer as the employer's representative to carry out feasibility studies and design the entire project.

This representative would then prepare contract documents for a number of discrete contract packages, administer the tendering process, assess the tenders and recommend to the client who they should be awarded to. Further, he would assume the role of Resident Engineer to oversee the work and its technical adequacy before certifying payment.

Somehow it all seemed to work, although the progress of the works was somewhat stately, with many activities being performed consecutively.

For example, the civil design would not start until the process M&E (mechanical and electrical) requirements were known, and tenders for the civil works would not be called until the design was complete, and quantities established. Overall contract periods of three to four years to construct water industry assets, under lump sum contracts, were the norm. Today these same assets would be built in 18 months.

The fact that this model worked at all, and served the water industry for many years, is testament to the professional integrity of the consulting engineering firms, and their diligence and attention to detail.

Who carried the overall risk on the project was uncertain. The consultant was on reimbursable ACE terms, and could spend as many hours as it took to do the job. With so many interfaces between the various contractors, apportioning blame for an occurrence was difficult, to say the least. It was usually the client who ended up with the overall contract risk.

And then design-build contracting arrived. This model of project delivery was pioneered in the UK by Degremont-Laing, starting with the Hampton Loade water treatment works for Severn Trent Water. Severn Trent had paid to have a conventional set of tender documents prepared, but an alternative design-build turnkey tender for DegremontLaing was deemed to be more economically advantageous by the client. Further design-build contracts were done in Scotland at Glenfarg and Glen Devon (by Paterson Candy-Holst) kicking off a big change in the way that the industry worked and procured construction of its assets.

But privatisation in 1999 was the biggest catalyst for change. The first AMP period was characterised by the water companies having, at all costs, to spend - to demonstrate that investment in new infrastructure was taking place and so prove to consumers that their large water charge increases were being invested in the system.

The traditional procurement methods simply could not cope with the increased volume of work, and the resulting pressure on contract completion periods. The move towards design-build accelerated, and clients started to look at other novel arrangements such as frameworks. Thames Water's 'extended arm' arrangement, where Taylor Woodrow was retained by the company and employed as required, was an innovative way to secure staff resources and fast-track capital works projects with a dedicated, knowledgeable team.

Suddenly, most of the construction work in the water industry was contractor-led.

Contractors were now procuring and managing design services from consulting engineers.

Design had become a commodity and new conditions of contract were being applied, such as the IChemE cost reimbursable model, which was modified to incorporate a target cost. Design costs were no longer necessarily fully reimbursed. ACE terms were largely a thing of the past.

One outcome of this radical change was the pressure to produce tighter and tighter designs, at ever cheaper prices.

Consulting practices began to seek lower cost bases from which to produce the 'grunt engineering' aspects of the project. The spread of the internet, and software to enable web-based collaborative workspaces, enabled companies to send large amounts of engineering data and drawings to offices in parts of the world with lower wage rates for further elaboration and detailing. The era of the Mumbai reinforcing bar detailing office had begun.

But although privatisation had driven consultants towards being low cost commodity providers, it also created opportunities to provide higher value-added services. The economic activity of acquisitions in the privatised industry has created a healthy need for consultants to work for banks and investment funds as advisers. Economic regulation of the privatised water company has also provided opportunities for consultants to work for Ofwat as reporters, scrutinising the company's asset management plans and their implementation, and reporting back to the regulator on progress and costs.

We have seen drastic change over the last 15 years, as the water industry has reacted to the challenge to increase capital investment and renew worn out Victorian assets. It is a credit to all concerned that we have risen to the challenge, and made the UK water industry a world leader.

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