Construction teams on three separate projects had to work together to drive down costs on Anglian Water’s Wing project. Margo Cole reports.
There is no doubt about it, Anglian Water’s “Wing” project is unusual. Ingeniously, the company has managed to bring together three disparate contractors and one consultant, working on three separate construction projects, in such a way that they are commercially obligated to each other and have together achieved a 15% reduction in the total cost.
Wing is the umbrella name for Anglian Water’s £116M scheme to provide infrastructure that will enable it to abstract 25% more water from its Rutland Water reservoir to meet the growing demand of Corby and Milton Keynes to the south and Peterborough to the east.
Three projects come under that umbrella:
- a new treatment works at Wing plus a raw water pumping station at the east end of the reservoir
- 7km of raw water pipeline and 34km of potable water pipeline to take treated water to Hannington Reservoir in Northamptonshire
- nine lagoons, covering 85ha, to provide new habitats for birds that may be affected by the increased abstraction.
Each project was procured individually, and is being carried out by a different contractor, and yet, as one project manager told NCE, “I’m involved in Wing − not just one bit of it”.
This attitude extends across all three contractors, as well as the client’s representatives and consultant − in part because they have all voluntarily entered into a commercial model that means they are each financially dependent on the success of the others.
How bright ideas drive down costs
One of the things Anglian Water director of asset management Chris Newsome wanted to see from contractors on Wing was a commitment to innovation.
“Innovation means taking something from somewhere else and using it for the first time, or in a different way,” he says. “You’ve got to be able to put a string of innovations together to drive costs down.”
Examples include GTM’s decision to install its own concrete batching plant on the treatment works site − something that is “unusual on this scale of project in the water industry”, according to Newsome. “The unit cost for the concrete is not very different, but when you apply risks on it you get a huge difference.”
The biggest risk eliminated by having a batching plant on site was disruption to the large pours, which required up to 450m3 of concrete. If this was delivered by wagon, each pour would have needed up to 75 wagons, and an accident on the local road network could have caused major disruption to the pour, with knock-on effects on cost (as well as dry joints in the concrete).
The batching plant also offered savings to pipeline contractor JN Bentley. “When we needed concrete we used that batching plant,” explains the company’s general manager Richard Risdon. “During winter GTM made sure their plant stayed open in the cold weather, so we always had access to concrete.”
Bentley introduced some innovations of its own, including using a “processing bucket” that processes the as dug material so that it can be re-used as fill. This minimised the amount of material that had to go off site or be redistributed, and also reduced the amount of new material brought onto site.
When it came to the pipe bedding material, Bentley chose a supplier that was willing to deposit it at 10m intervals along the pipeline easement, rather than leaving it at one end for Bentley to double handle.
A major cost saving in the treatment works contract came about through looking innovatively at the hydraulic profile and realising it was possible to build the new system without a planned interstage pumping station. This not only saves on the capital cost of the pumping station itself (in excess of £1M), but also on the operational costs.
“To create that position we had to raise the profile of the works above the ground,” explains GTM operations director Mick Ogden. “Originally we thought that material would have to be brought in, but it became obvious that we would have surplus material within the project.”
The treatment works sits on piles, so these had to be lengthened. “It made it more expensive from a piling point of view, but from a whole life cost and overall capital cost point of view there were significant cost savings,” says Ogden. “At the time it felt very innovative.”
But how has this been achieved? Anglian Water director of asset management Chris Newsome says collaborative working was always high on the agenda when it came to choosing contractors for its AMP4 Special Projects portfolio, which includes Wing. “I felt we had to put some markers in the ground of the issues we thought would differentiate how we select and deliver AMP4 special schemes, so I started setting challenges as part of the final selection process that would eventually become part of the delivery process,” he says.
These included “What does collaborative working mean?” and “What would ‘good’ look like in collaborative working?” But Newsome was also keen to test contractors’ attitudes to innovation and risk.
“I wanted to know what innovations they could bring − not just technical innovations, but in processes and people working differently,” he says. “And also if they genuinely had enough commitment or were just saying what they thought I wanted to hear.”
“Innovation means taking something from somewhere else and using it for the first time, or in a different way.”
Chris Newsome, Anglian Water
The result of this tough challenge was the appointment of three contractors: GTM − a joint venture of Galliford Try and Imtech Process − for the treatment works and pumping station; JN Bentley for the pipelines; and Carillion for the habitat mitigation works.
All three demonstrated they weren’t just paying lip service to collaborative working, and had a track record to back up those claims.
But when the three companies came to price their individual projects, the total came to considerably more than the £116M Anglian Water had to spend.
“We had a big, big gap between what was viewed as affordable and the cost of the scheme, so they had to start working collectively on that,” says Newsome.
He knew how much Anglian could afford to spend on the scheme (and what Ofwat would accept), and challenged the contractors jointly to find a way of reducing their costs by at least 15% to meet that threshold.
“I wasn’t going to tell them how to get there,” he says, but the answer, he felt, lay in getting a real handle on the amounts that each contractor (and the client) had allocated for risk.
Developing the commercial model that drives Wing involved tough decisions at the top of the organisations involved. So how do they feel about it now the scheme is well under way?
Managing director, Imtech Process (part of the GTM JV)
“Anglian Water has pulled everyone together by looking at this commercial model in which everyone is incentivised by the output of the whole programme. It has resulted in sensible decisions being made.
“Everybody’s working together to find the best way of eliminating risk. With that transparency and the way the programme pool works, and the way everyone’s incentivised, when a risk arises everybody’s issues are put on the table, so you’ve got more people looking at it in a constructive manner.
“One of the issues that came up was when to buy the sheet piles for Carillion [for one of the in-reservoir dams]. There was a lot of debate about that because one of the phases is not until 2010. It went to the principals group to decide whether they should buy or sit tight and hope the price didn’t go up. Everybody was able to put their view into that, and the agreement was not to buy them, which resulted in a significant cost saving.
“Like most things in life, everyone has to come to the party. Anglian Water drive it hard, but in a very structured and fair way.”
Water director, Mott MacDonald
“The way Wing’s been delivered and the way all the partners have worked together has been unique. By working collaboratively we’ve been able to deliver greater value and greater efficiency.
“The starting point for all that was the commercial model. In order to get all of the partners working collaboratively there had to be a starting point, something that acted as a catalyst for the way collaboration was built.
“There’s nothing easy about developing a commercial model of this type that ties up contractors, consultants and clients equitably and encourages all the right behaviours. It did take time; it’s not something you can just sit around a table and agree in one go.
“Those initial discussions were clearly challenging. All of us were being set a challenge in terms of cost and time which appeared to be very difficult to achieve. What was developed was an understanding, and a commercial model that supported that understanding, that we were going to deliver this project to cost and on time.”
Managing director (water), Galliford Try Water (part of the GTM JV)
“It was a challenge for everyone at the time. The partners spent many months working as individual contractors, doing their best to value engineer the projects to reduce the cost. We spent a lot of time trying to come up with innovations.
“At that stage the costs of the partners collectively were still blowing the budget. We had all worked hard and put in innovations, and we were at the limit of what was possible, but it still didn’t compute. The only way to bring the price down was to say what all the risks were and see if any were overlapping or could be taken out. “In isolation something might seem like a big risk, but after discussion with the other parties, you can take a more holistic approach to it.
“Our approach was “cards on the table − these are the issues for us”. Anglian Water joined in and we all said what were our challenges and opportunities. The model we ultimately came up with was about getting as far as we could individually, but coming up with an incentivisation/shared risk model. It wasn’t pre-prepared − it was very much something we all worked on together.”
And he was right. A series of tough discussions over the course of months, between Anglian, its programme manager Mott MacDonald and the three contractors led to an understanding of risk and the way it was allocated that none of the parties had experienced before.
“We got to a level of understanding and apportioning who should take responsibility for that risk above anything that anyone else has done before,” says Newsome.
“It brought everyone back together again to a heightened level of collaborative working, and they were incentivised to make that risk go away and to drive innovation.
“I had to truly believe these people could do it − that they could take us through the five years of Special Projects and deliver. There was a level of trust and belief that collectively that group could do it.”
“We got to a level of understanding and apportioning who should take responsibility for that risk above anything that anyone else has done before.”
Chris Newsome, Anglian Water
Most people in construction would doubt that it is ever possible to take risk out of a contract. The traditional view is that the client always ends up paying for it − either through the contractor’s price or by accepting it directly. But in this instance the parties involved in Wing really have managed risk collectively.
Getting to that point involved each party revealing what risks they had priced for and how much money they had allocated to those risks. But once all the figures were out in the open, everyone could discuss ways of reducing or eliminating the risks − either by managing them out or by another party taking responsibility for them.
The result was a reduction in the overall project cost that brought it within Anglian Water’s affordability threshold. The mechanism for making sure it works is a commercial model developed by the contractors, client and consultant that ensures they are all incentivised by the success of the other parties.
Getting to that point was far from comfortable, but the result is a contract like no other in which all the parties are bound together for the project’s good.