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Trader is involved in the pipeline side of the ‘water’ business taken as a whole, the question was asked of all the main WaSC (Water and Sewerage Company) operations in England and Wales ‘what works are planned and at what projected cost for sewer replacements, renewals and renovations, water main replacement and other works and rising main renewals, renovations and replacements?’.


Having presented business plans on which OFWAT has based the individual charging outcomes of the Water Companies for the AMP 6 period it would be thought this was information that would be readily available. It is not! Whilst one or two Water Companies responded with limited information, what did arrive was generally in the form of ‘this is the size of the network we have under our control and this is what we have committed to spend over AMP 6’ or there was no response at all. One Water Company, that shall remain nameless, even went so far as to say that, even with over a week’s notice to generate this rather small amount of information, the timeframe was insufficient to produce meaningful data. Actually, just one Water Company provided solid figures for its pipeline commitments over the next five years.


It would be rather pointless to try to do any sort of comparison on the various projected spends of each of the England and Wales Water and Sewerage Companies over AMP 6 because they all have such varied networks, populations served and individual works commitments. The fact that there are those that have very specific high spend projects on their books for the period for example Thames Tideway Tunnel, would also distort any direct comparison of the underlying pattern of spend.


What may be an interesting way to look at the forthcoming AMP however is why they are not apparently coming forward with specific ‘ground metres’ targets as they have in the past and seem to be focussing on the projected spend this time around. Talking again to some industry specialists there are a number of views on this that when brought together may provide some answers to various questions, although ultimately it is more likely there will be more new questions than useful answers.


So what might be happening? Due to the lack of useful information from the WaSCs themselves some of this may simply be speculation but also some of the questions asked here may be those that some in the industry are asking but not publicly.


With what appears to be a ‘fixed’ spend from each of the WaSCs they will of course be looking to get real value for money. There also appears to be a move in general away from presenting the projected AMP period costs as divided between Capital Expenditure (CapEx) and Operating Expenditure (OpEx) towards Total Expenditure (TotEx).


The question that arises here is what form the TotEx is taking. Over the past decade or so, particularly amongst the trenchless fraternity, there has been a call for more project assessment in terms of TotEx, looking at the cost of a project from concept to end of life as a whole cost centre or ‘life cost’. Why? Because often the use of this costing format highlights that whilst installation costs may be higher (but not always) overall the life cost actually turns out to be less than separating CapEx and OpEx costs because a cheaper CapEx construction may not lead to a system that is cheaper to run over the rest of its life span. If this is type of ‘TotEx’ that is being proposed by the WaSCs, then all well and good.


What does not seem to be being made clear in the information that is publicly available is if this is the TotEx that is being purported. If the WaSCs are simply referring to their overall commitment spend as their ‘TotEx’ this could be a whole other world, for reasons that will be discussed in the following. It may even be that the engineers in the field implementing these spends are using the more traditional view of TotEx and that it is the


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accountants presenting the ‘fixed spends’ to the world that are using a ‘new’ view of the meaning of TotEx. We will probably not get to work that one out until well into, if not the end, of the AMP 6 period.


WHAT COULD LIMITED ‘TARGET’ INFORMATION MEAN?


Whilst the Water Companies have stated their financial commitment to the AMP period this does not always provide the sort of information that those expected to fulfil those commitments need. Due again to the lack of information, some of the following may again be questioned as speculation but it does give rise to some interesting questions that may yet have to find an answer.


Given projected spend over the next five years and that the major projects within this spend, in most WaSC scenarios, still passes through the Tier 1 contractors, for those preferred contractors and subcontractors that have made it onto ‘the lists’ this time around there should be a significant level of expectation that work will be coming their way.


However, what this workload might be is perhaps open to question. As previously mooted the lack of physical targets for the next five years could mean that more difficult, less accessible and potentially more costly projects will be undertaken that were set aside when there were ‘length’ targets to be reached. This could mean that whilst spend targets may be significant the amount of work that can be achieved within that spend may be limited in a manner not previously seen.


For contractors this could mean several things, not least of which is the question do they gear up, train staff, order equipment etc. that ultimately may not be required because fewer projects means less overall workloads for contractors? Or, do the contractors wait it out to see if they will be required on works that would at first have appeared to forthcoming with the degree of spend committed and then have to rush the gearing up process and hope the order lead times for equipment and materials is not too long?


For preferred contractors there is probably not too much of a problem as they can expect much of the work ultimately undertaken to come their way. As for the specialists that may pick up certain parts of broader spectrum works, like specialist tunnel contractors and renovation installers, there may be a big question mark over which way to jump.


There has been talk amongst some contractors | September 2015 | drain TRADER 5


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