Delivering under pressure: Water companies prepare for AMP8

Our recent roundtable with Autodesk explored the role innovation will play in asset management and project delivery during the next price control. Roi Otero, Autodesk water industry strategy manager, explains why the demands on the sector are unprecedented (and we’ve gathered key insights from the event itself for you below).

I had the pleasure of attending a water industry roundtable, impeccably hosted by Utility Week in London, as a side event to Utility Week Forum. As I was reflecting on some key points, I realised that despite the enormous challenges ahead, there is wide recognition of opportunity among thought leaders in the industry. While recognising complexity, optimism prevails among those tasked with leading the capital investment charge.

The water sector in England and Wales is on the cusp of a transformative journey in AMP8, with higher stakes than ever and an acute need for accelerated digitalisation and innovation as key driving forces shaping capital programmes. The ask is no mean feat; to achieve a balance between deliverability, affordability, and sustainability, requiring a mindset shift and a more proactive approach to managing risk and uncertainty.

As the sector prepares for PR24, there is growing recognition of the need for fresh perspectives and more effective, forward-thinking regulation. Navigating the regulatory review process requires maintaining rigour while streamlining decision-making to expedite progress, and aligning performance commitments with flexibility to incentivise innovation in capital delivery is imperative, at a time where needs outstrip capacity.

To top it all, there is mounting pressure on water companies to develop stronger partnership ecosystems that can bolster supply chain confidence and readiness. The sector recognises the importance of integrating principles of innovation, circularity, and sustainability to streamline procurement and contracting processes, and make the industry easier to do business with.

Now more than ever, it is vital to embrace wider adoption of digital tools and data management practices, getting one step closer to water companies’ longstanding ambition of informed, data-driven decisions from the planning stages and throughout the asset lifecycle, minimising information losses at handover points into operations. This is a key ingredient for optimising project outcomes and unlocking the potential of a digital-first, BIM (building information modelling) based approach, underpinned by an effective digital project delivery experience.

Negotiations are underway to strike the right balance between ambitious plans and practicality. By leveraging the power of technology, water companies and their stakeholders can identify best practices, overcome challenges, and accelerate the delivery of key interventions, enabling more transparency and stronger alignment with the customers and communities they serve, helping them to rebuild much needed trust.

The UK water sector has achieved extraordinary progress over the past 30 years, and at a time of unprecedented demand, Autodesk remains committed as a partner building a more sustainable and resilient future for our industry.

Water sector innovation in AMP8: Ramping up delivery amid uncertainty

Water company plans for PR24 and AMP8 can be summed up in one word: big.

Programmes that might ordinarily have taken decades will be accomplished in a matter of years – and that means unprecedented change for the sector. It also means effective capital delivery will rely on innovation as water strives to become more sustainable while keeping costs down.

Digital technology will help ease the strain and unlock efficiency. Novel infrastructure solutions will play their part. And collaboration in the supply chain will be essential for project success.

That’s against a backdrop of inflationary pressure, chronic shortages of skills, and a huge job in terms of rebuilding faith in the industry among the public. Our recent Utility Week Intelligence / Autodesk roundtable, Design and deliver: The scope for innovation in water sector capital delivery, found delegates in a sanguine but realistic mood about the challenges ahead.

Or as a regulatory and asset management specialist at one utility puts it: “We’ve delivered reliability, resilience and environmental improvements, spending £200 billion over the last 30 years. We need to spend nearly half of that again in the next five. So that’s the step up.

“But that will deliver the outcomes communities want: net zero, and clean rivers and beaches.”

Roundtable attendees agreed innovation has an important role to play in delivering on this grand project in AMP8. But there are barriers.

“The ambition is for innovation to solve beefy problems, but the reality is that people are so stretched in their day-to-day jobs there is a block. The innovation landscape externally also needs to change,” says the chief innovation officer at one water company.

They add that in the race to build new infrastructure, innovation could become an afterthought. “My frustration is that innovation is always engaged at the wrong part of the journey. We innovate when we can’t afford the plan, rather than asking at the beginning what delivery needs to look like to enhance innovation.

“I would like to see some capital delivery schemes delayed to take a proper look at innovation and where it can make a fundamental difference to the programme, rather than innovation just being used to increase efficiency.”

Indeed, some utilities are modelling their entire business around innovation. “The idea we do more of the same in our organisation doesn’t exist,” points out a senior figure at one water company. “The rules of engagement are radically different in AMP8. Through the lens of innovation, we can’t just throw bodies at the problem; it’s got to be digital, it’s got to be data-led.”

An asset strategy director at another utility expands on the point: “AMP8 for us is doing a lot more of what we’ve already done – but also going further than we’ve ever gone before.” He adds that when it comes to the supply chain, water companies are typically “terrible clients”. “We need to be better. There is more work now in the market than capacity to do it, so we’re going to have to compete.

“And, yes, we need to be more innovative. We are not going to get a 50% reduction in leakage by 2050 by doing the same thing.”

The best laid plans…

Then there’s a particularly uncertain environment with plenty of risk to contend with. “The day after PR24 was submitted, we were asking, ‘how do we change it’? Is it a plan we’re going to deliver?” says the chief engineer at one water company. A colleague adds: “We really wish we hadn’t accepted PR19, which was utterly undeliverable. How do we avoid making that mistake again? A lot of that is about assessing risks and understanding what they are.”

The engineer says: “The riskiness of projects means stakeholders can be nervous about committing. The haunting by Carillion is out there. A contractor will not own a risk that they can’t quantify – quite rightly.”

The risk burden has been added to by price control deliverables (PCDs), which set out the key outcomes or outputs of enhancement expenditure, experts say. One industry figure says: “There is a huge amount of uncertainty over PCDs, but also unintended consequences. We were looking at bulk purchasing of kit and the carbon impact of switching from Scope 3 to Scope 1. Fortunately, we caught it. But we could have had a penalty of upwards of £200 million in terms of the carbon PCD.”

The head of strategic asset management at one water company adds: “Price control deliverables bring a whole new type of risk to construction projects that we are grappling with. How do you set up that framework? How do you share that risk with your supply chain? I do find myself worrying we will have levels of risk we just can’t tolerate.”

A senior manager at a water industry mega-project says the playing field in terms of contractors and risk is constantly changing. “Constructors and managing contractors are incentivised not to overspend, but they are always coming back to me with amendments to agreements, for which the Government has to give consent. I am constantly writing to government about variations to the contract.

“That means contracts need to be managed very carefully, and you need to work out in detail what you want delivered. And you have to have a clear understanding and arrangement for what triggers change of that contract.”

New ways of thinking, new ways of working

One form of innovation will be in quick, temporary, standardised solutions, rather than projects that take a long time to deliver. One of the attendees says: “HS2 goes through our patch and you don’t need a permanent solution: you need a solution for five years, which forced us down that route. The solution is modular and reusable, and that has challenged how we approach our designs.”

An asset management director chips in: “We’ve traditionally always thought about permanent solutions, and permanent solutions are delivering concrete and chemicals, and they take a long time. One of the things we are looking at is how we get ahead of the game and put in temporary solutions, standardising them as much as possible to drive efficiency.”

Other changes will mean innovation when it comes to management of information, points out the strategy director at one water company. “There are a lot of unknowns,” he concedes. “But there is potential for technology and data to help. Exchange of data is the key one.

“We have already made a start around open data, and open data in the construction process for us will be crucial. We are also looking at AI holistically, because during the AMP period, I see AI having a big influence.”

Technology vendors can help by bridging some of the current gaps. The head of strategic asset management says: “In the price control process we were using a lot of very intelligent digital tools. But we were really struggling when it came to providing a compelling well-evidenced argument to the regulator. We need more capability in that space.”

But there is huge will in the sector to make these kinds of advances, says the chief engineer. “Across the industry there is passion and commitment. People are trying hard, and there will be some great success stories around working together and driving innovation.”

“The people who innovate the best will be the people who come out of AMP8 the best, and set new benchmarks,” a colleague concludes.

Want to learn more? Meet the Autodesk water sector team here.