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ACE’s Water Sector Interest Group met on 29 March 2011 to discuss recent developments in the water sector and to explore ACE’s focus in 2011.
The AMP cycle has been criticised for creating a feast and famine effect within the water sector. One year into AMP 5 the effects of the current cycle are beginning to show. Appointments to the majority of frameworks have been completed and the supply chain is now focusing firmly on bidding for work. Whilst tendering will provide some relief following the slow transition period from AMP 4 to AMP 5, there are some signs that resources are starting to be squeezed.
As with previous AMP cycles, this is likely to result in the employment of thousands of staff only to see their skills lost towards the end of the cycle as the workload subsides. The resulting impact of this cycle is the loss of skills to other international competitors and an increased likelihood of offshoring. This subsequently results in a reduction in the UK skill set, with the associated risk of another skills shortage. This, in the long run, will increase costs and reduce efficiency despite current attempts to reduce costs and increase efficiency.
Due to the nature of the regulatory structure, it is unlikely that projects much beyond essential works will receive funding, resulting in very little scope for additional projects. This will fuel some concerns amongst those in the industry given the early stage we are at in the AMP cycle. The implications of such actions could be a particularly severe downturn in workload in two years’ time at the end of the AMP cycle.
Taking all of this into consideration, what have we learned from AMP 4? There will always be talk of improving efficiency, reducing cost and promoting responsible investment, but how much of this has actually occurred? Although regulation exists primarily to protect consumers, inefficiencies in the delivery process result in less incentive to innovate and less long-term thinking. This ultimately means poorer outcomes and higher prices for consumers.
While there is some good procurement practice in the sector, the variability across the water industry is significant. Poor project specification, inefficient communication, unrealistic insurance requirements and unsuitable terms and conditions all add to the cost of delivery. This takes up time and money that could be used more effectively on the delivery of a better water system and lower prices for consumers.
For this reason ACE’s Water Sector Interest Group is looking for examples of projects that prove both the efficiencies and inefficiencies with AMP 4 and its effectiveness in promoting efficient long-term investment. The project aims to develop a base of knowledge and intelligence to support water companies in developing their commissioning processes.
Building a base of knowledge will also aim to highlight the challenges and opportunities for consultants operating in the water sector, as well as contributing to the national debate on efficiency and value for money.
If you wish to submit information to help develop the debate in this area please email Graham Pontin on gpontin@acenet.co.uk.
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