MWH UK

Utilities hope water infrastructure upgrades in the U.K., now set for a new round of capital investment, will benefit from new contractor "alliances."

With nearly $70 billion of construction and maintenance needed over the next five years for U.K. water infrastructure, including a seemingly countless array of individual projects, water utilities there have adopted new collaborative arrangements with contractors to expedite bidding and project completion.

Thames Water Utilities Ltd., the Reading, England, mega-utility that serves 15 million customers in greater London, has signed the country’s largest-ever water alliance with a contractor group called eight2O, which has started work on $3.9 billion of new construction and upgrades on networks.

A potential five-year extension would raise the work volume to nearly $7 billion.

Thames is “taking alliancing to the fullest extent,” says Graham Keegan, who recently stepped down as eight2O’s chief operating office after having led the successful bid for the contract that will cover 800 to 900 projects, valued from $450,000 to $300 million.

Creating alliances is "the only way to … create an environment where innovation flourishes," adds Lawrence Gosden, Thames’s head of wastewater services.

Thames is the largest of 10 river-catchment-based privatized water and wastewater companies that dominate the industry in England and Wales. They operate under regulated five-year investment cycles that are constrained by caps on allowed tariff hikes.

For the utilities' sixth investment cycle since 1989, which began last month, regulators' focus has shifted from capital investment to whole-life planning in a concept called "TOTEX," which combines capital and operating cost over the five-year period, says Keegan.

Regulators also have moved away from defining required outputs to "outcomes," adds Keegan, such as measuring impacts of wastewater schemes on the receiving waters, rather than setting effluent standards. These changes allow the utilities greater flexibility in planning investments, says a spokesman for the water regulatory agency.

To implement programs involving numerous or disparate projects, U.K utilities traditionally have worked collaboratively with their supply chains, broadly using two procurement models, says Richard Ratcliff, water-sector director for Europe and Africa at MWH (U.K.) Ltd., Warrington.

Some utilities use the “expert client” model, in which they hire design support to develop schemes that are allocated to design-build contractors from a pre-selected list.

But Huntingdon-based Anglian Water Services Ltd. broke the mold by using alliancing for the previous two investment cycles. It now has set up four alliances for the current investment cycle that will include $2 billion of capital projects, with work extendable to 15 years.

“The idea is to develop a strong alliance and delivery partner,” says Ratcliff. MWH has current investment-cycle contracts with Anglian and Thames as well as other English and Welsh utilities.

For its large current program, Thames has followed Anglian’s lead with its eight2O alliance, which includes two design-build joint ventures: Costain Group plc. with W.S. Atkins plc, and Skanska U.K. Ltd. with MWH Treatment Ltd. and Balfour Beatty Construction Ltd.

Also in the alliance are MWH (U.K.) Ltd. as program manager and IBM U.K. Ltd. as “technology innovator."