British Water calls for urgent change if AMP8 is to be delivered

British Water has issued a call to action in the sector for a new approach to delivery, if AMP8 is to fulfil its promise.

Its new A framework for change in AMP8 report doubles as a practical guide and urgent prompt for water companies, supply chain companies and regulators to collaborate, take a more programmatic approach and tackle persistent issues. The backdrop is the enormous £104bn five-year programme, as well as under-delivery in AMP7 (£150m of penalties), falling customer satisfaction, increased public scrutiny, higher operational targets, new types of infrastructure projects, and higher penalties for non-performance.

Four key focus areas are identified and recommendations made: 

• Market capacity – The report starkly stated: “There is currently perceived to be an insufficient market appetite and capacity to deliver the requirements for AMP8.” Reasons include a perceived imbalance of risk and reward; competition for resources with other sectors' major programmes; and skills gaps, given over 35% of skilled water sector roles struggle to be filled. British Water recommended that a more collaborative approach to working with suppliers that supports long-term contracting be implemented. Moreover, it urged that new suppliers be encouraged to enter the water sector; that water companies should clearly communicate their plans; and that targeted actions be taken to boost capacity and capability where there is particular need. 

• Client capability – where there is a lack of expertise in complex capital programmes, this threatens the ability to deliver. The report called for capable client teams to be created that can handle large programmes of work. 

• Operational efficiency – Problems here included a lack of digitalisation/automation; siloed and under-resourced teams; ineffective co-ordination between asset management and capital delivery leading to inconsistent approaches to project prioritisation and benefits realisation; inefficient, complex or inconsistent governance and reporting leading to extended approval durations or a lack of key decisions being made; and a misalignment between commercial agreements and forecast volumes leading to missed opportunities to realise cost reductions based on the increased demand levels. Against that backdrop, project management, governance and assurance should be streamlined; suppliers involved early; and rewards reaped from the economies of scale available from increased AMP8 work volumes. 

• Regulatory alignment – There is misalignment between the performance targets set for water companies and the contractual obligations of the supply chain. Further issues arise from reactive approaches in the context of five-year investment cycles. The report urged that suppliers be supported to understand AMP8 objectives; that benefits be more accurately tracked; and that lead indicators be closely monitored and plans put in place as necessary to address any performance issues.