Client Activity:

Water Utility

Headline:

£25 million cost avoidance

Background:

A large water utility company contracted sewer maintenance and renewal work to a prominent UK civil engineering operation. The contract was worth almost £100 million.
Although the water utility company maintained a detailed database containing data on every aspect of their operation, its construction and the means by which they extracted and manipulated data to produce performance reports, was very poor indeed.
An accurate picture of how their business and contractors were performing was almost impossible to produce. No one seemed to know what was happening on either side.
Against this background, contracts were extremely complex, containing up to 27 measures and very few clear key performance indicators.
The prevailing situation of uncertainty and confusion led to numerous serious disputes between client and contractor.
Contractors spent much of their time trying to defend themselves instead of focussing their effort on delivering against a clearly defined and well reported set of targets.

Action:

Using existing data, the contract was scrutinised and the 27 measures reduced to 6 key measures in regulated areas. These were rolled up into 1 K.P.I. (Key Performance Indicator) and a baseline established.
The database was then cleaned up and a method for data extraction / report formatting, relevant to the contract, agreed.
Daily measures were rolled up into weekly reports and distributed to teams so that they knew how they were doing against the key measures.
Based on the reports, a weekly de brief was introduced to discuss what had gone well, what had not and what should be changed to make things better. These meetings occurred locally at team and management level and proved a very useful forum for idea sharing.
Very quickly, the contractor’s position changed from one of defending themselves to identifying ‘blockers’ which, if removed would further improve performance in contract.

Result:

- The cost of ‘man marking’ contractors was removed completely.
- Costs associated with mismatches and variations in invoicing production totalling £1.3 million were removed.
- Fine avoidance resulting from improved compliance with completion dates delivered £3 million of benefits.
- Provision of better quality information to OFWAT derived from accurate contractor feedback resulted in more informed investment decisions and £25 million cost avoidance on unnecessary work.